<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission File No. 1-5029
----------------
TRUE NORTH COMMUNICATIONS INC.
(Exact name of registrant as specified in its charter)
Delaware 36-1088161
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identifiction No.)
101 East Erie Street, Chicago, 60611-2897
Illinois (Zip code)
(Address of principal executive
offices)
Registrant's telephone number: (312) 425-6500
Securities Registered Pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
<S> <C>
Common Stock, par value 33
1/3 cents per share New York Stock Exchange
</TABLE>
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. YES [_] NO [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, 2000 was $1,890,833,910.
The number of shares of Common Stock, 33 1/3 cents par value, outstanding as
of March 24, 2000 was 49,135,945.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the year
ended December 31, 1999 are incorporated by reference into Parts I and II of
this Form 10-K.
Portions of the Registrant's Proxy Statement relating to its annual meeting
of stockholders scheduled to be held on May 17, 2000 are incorporated by
reference into Part III of this Form 10-K.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
Certain statements contained in Registrant's 1999 Annual Report To
Stockholders constitute "forward-looking statements" within the meaning of
Section 21E(i)(1) of the Securities Exchange Act of 1934. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results of True North to be materially different
from any future results expressed or implied by these statements. Such factors
include, among other things, the following: general economic and business
conditions, changes in demand for True North's services, changes in
competition, the ability of True North to integrate acquisitions or complete
future acquisitions, interest rate fluctuations, dependence upon and
availability of qualified personnel, and changes in government regulation. In
light of these and other uncertainties, the forward-looking statements
included in this document should not be regarded as a representation by True
North that True North's plans and objectives will be achieved.
PART I
ITEM 1. BUSINESS
General--True North Communications Inc. ("True North"), is a holding company
which, through its subsidiaries, provides advertising and communication
services on a global basis. True North operates from offices in more than 90
countries and territories through wholly-owned subsidiaries, affiliates and
other servicing capabilities. True North's clients are primarily commercial
enterprises, including industrial, consumer products, automotive,
transportation, financial, service and other businesses. Clients also include
government and governmental agencies and not-for-profit organizations.
The services offered by True North include the planning, creation and
production of advertising programs and the purchase and placement of such
advertising in various media such as television, radio, newspapers, magazines,
direct mail and the internet. Other ancillary services include specialty
advertising, public relations, promotional services, directory advertising,
marketing services and interactive digital media development.
True North was incorporated under the laws of the State of Delaware in 1992
and is the successor to the advertising agency of Lord & Thomas founded in
1873.
True North is a global advertising and communications holding company. It
has three major advertising agencies: FCB Worldwide L.L.C., a top-ten global
agency and the largest agency brand in the United States; and two national
agencies, Bozell Group, Inc. and Temerlin McClain LP. In addition, True North
Diversified Companies L.L.C. group is comprised of leading communications
services brands, including: BSMG Worldwide, Inc. (public relations), Marketing
Drive Worldwide, Inc. (global marketing services), R/GA Media Group, Inc.
(interactive design and development), Tierney & Partners, Inc. (advertising
and public relations), TN Media, Inc. (media placement), and New America
Strategies Group L.L.C. (multicultural marketer). True North also holds an
approximately 46% interest in Modem Media . Poppe Tyson, Inc., an internet
marketing company.
In September 1999, True North announced the realignment of its worldwide
agency operation. As a result of the realignment, Bozell's international
operations, together with its Bozell Detroit and Costa Mesa offices, were
combined with FCB Worldwide and operate under the FCB Worldwide brand. With
combined estimated billings of approximately $8 billion, FCB Worldwide is one
of the ten largest global agency brand by billings, as well as the largest
agency in the U.S. The new FCB Worldwide has a significantly more global
profile, with approximately 40% of its billings internationally. In the
realignment, Bozell continues as a strong national agency. The new Bozell
agency is one of the top 20 agency brands in the U.S., with approximately $1.5
billion in billings and is now comprised of Bozell's New York operation, its
Chicago, Seattle, Silicon Valley and Toronto agencies, as well as its original
Omaha office. It also includes freestanding agencies Avrett, Free & Ginsberg,
Berenter Greenhouse & Webster and Bozell Kamstra.
Revenues--True North's principal source of revenues is from its agency
brands, which receive commissions and fees earned on advertising placed with
the various media, and commissions and fees earned for the
2
<PAGE>
production and preparation of advertising. In addition, True North's agency
brands receive fees for various other services performed in connection with
advertising, research and marketing studies. True North's revenues generally
reflect the media buying patterns of its clients and are concentrated in the
second and fourth quarters of the year.
During 1999, the ten largest clients accounted for approximately 23% of
consolidated revenues; one client accounted for approximately 9% of
consolidated revenues.
Clients--True North and its subsidiaries 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 True North. Representation of a client does not necessarily mean that
all advertising for that client is handled by True North exclusively. In many
cases, True North 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 60 to 90 days. Clients may also reduce
advertising and marketing budgets at any time. An agency's ability to compete
for clients is sometimes affected by the policy, followed by many clients, of
not permitting their agencies to represent competitive accounts in the same
market. As a result, increasing size can impact an agency's ability to secure
some new clients. In most cases, however, True North's separate agency groups
have enabled True North to represent competing clients.
Employees--At December 31, 1999, True North employed approximately 12,200
people in its majority-owned offices, including approximately 7,600 in the
U.S. As part of the third quarter 1999 restructuring plan, True North
implemented workforce reductions involving approximately 640 people, primarily
in international locations.
There is significant competition among advertising agencies for talented and
qualified personnel. The ability to attract and retain such people is a key
element of True North's personnel policies. True North believes its
compensation, benefits and training policies are competitive with industry
peers. Overall, True North considers relations with its employees to be
satisfactory.
For financial information concerning True North's segment reporting and
geographical concentrations, see Management's Discussion and Analysis of
Financial Condition and Results of Operations ("MD&A") starting on page 18 of
the 1999 Annual Report and Note 10 of Notes to Consolidated Financial
Statements on page 36 of the 1999 Annual Report.
Regulation--True North's business is subject to government regulation, both
domestic and foreign. Federal, state and local governments and governmental
agencies 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") and various State
Attorneys General have also required proof of accuracy of advertising claims
with respect to various products and, in their enforcement policies, are
seeking to establish more stringent standards with respect to advertising
practices. The FTC and State Attorneys General have the authority to
investigate and to institute proceedings against advertisers and their
advertising agencies for false or misleading advertising. Proposals have also
been made for the adoption of additional statutes and regulations which would
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 Note 10 of Notes to Consolidated
Financial Statements on page 36 of the 1999 Annual Report.
3
<PAGE>
ITEM 2. PROPERTIES
Substantially all of True North's operations are conducted in leased
premises located in various cities in which True North does business
throughout the world. True North's physical property consists primarily of
leasehold improvements, furniture, fixtures and equipment. No difficulty is
anticipated in negotiating lease renewals or in finding other satisfactory
space if premises become unavailable. True North owns office buildings in
Puerto Rico and the Dominican Republic, neither of which is material to True
North's consolidated financial statements.
For further information regarding True North's obligations under capital
leases and noncancellable operating leases, see Notes 5 and 12 of Notes to
Consolidated Financial Statements on pages 32 and 38 of the 1999 Annual
Report.
ITEM 3. LEGAL PROCEEDINGS
On December 2, 1997, Mazda Motor of America, Inc. ("Mazda"), a former client
of True North's subsidiary, Foote, Cone & Belding Advertising, Inc. ("FCB"),
initiated an arbitration against FCB before the American Arbitration
Association in Los Angeles, California. Mazda seeks indemnity and
reimbursement for liabilities it incurred or expects to incur in connection
with automobile lease advertising that aired in 1996 and 1997. Mazda is
currently seeking from FCB approximately $9.0 million in damages, exclusive of
interest, costs and attorneys' fees, arising from (a) Mazda's settlement of
false advertising claims asserted by the Federal Trade Commission ("FTC"),
various state attorneys general, and a class of consumers and (b) Mazda's
settlement on or about September 30, 1999, of claims asserted by the FTC and
various state attorneys general, which allege that Mazda violated the consent
orders entered in previous FTC and state attorneys general actions. FCB
intends to defend Mazda's claims vigorously. In addition, FCB has filed a
counterclaim in the arbitration seeking approximately $5.5 million in unpaid
commissions for planning and placing advertising during the final months of
FCB's relationship with Mazda. The arbitration hearing is being rescheduled
for a date to be determined.
True North is a party to several other lawsuits incidental to its business.
It is not possible at the present time to estimate the ultimate liability, if
any, of True North with respect to such litigation; however, management
believes that any ultimate liability will not be material in relation to True
North's consolidated results of operations or financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
True North's Common Stock is listed on the New York Stock Exchange. Its
trading symbol is "TNO." At December 31, 1999 True North had 2,479
shareholders of record. In addition, response to this item is incorporated by
reference to page 40 of the 1999 Annual Report.
ITEM 6. SELECTED FINANCIAL DATA
Response to this item is incorporated by reference to page 24 of the 1999
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 18 through 24 of
the 1999 Annual Report.
4
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Response to this item is incorporated by reference to page 24 of the 1999
Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Response to this item is incorporated by reference to pages 25 through 41 of
the 1999 Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 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 True North contained under
the heading "Proposal 1--Election of Directors" in True North's Proxy
Statement for the Annual Meeting of Stockholders to be held on May 17, 2000
(the "Proxy Statement") is incorporated herein by reference. Information with
respect to executive officers of True North who are not also Directors or
nominees to the Board of Directors is included below.
Kenneth Ashley Mr. Ashley has served as Vice President,
Age 57 Treasurer of True North since October 1997 and
Chief Credit Officer since December 1999. Prior
thereto he was Chief Investment Officer and
Treasurer of Thorndale Farm L.L.C. (a private
investment company) from 1996 to 1997, and
Secretary and Treasurer of CCH Incorporated
from 1993 to 1996.
Gene Bartley Mr. Bartley has served as Chairman of Bozell
Age 54 Group, Inc. (formerly Bozell Worldwide, Inc.),
a subsidiary of the Company, since September
1999 and Chief Executive Officer since December
1999. Prior thereto he was Vice Chairman of
Bozell Worldwide North America from April 1999
to September 1999, served as President, Bozell
Worldwide North America from January 1998 to
April 1999, and served as President of Bozell
Worldwide New York Operations from July 1994 to
January 1998.
Suzanne S. Bettman Ms. Bettman has served as Executive Vice
Age 35 President, General Counsel of True North since
December 1999. From October 1997 to December
1999 she was Vice President, Assistant General
Counsel. From 1995 to 1997 she was a partner at
Kirkland & Ellis (a law firm) where she had
been an associate since 1989.
Harris Diamond Mr. Diamond has served as Chairman, True North
Age 47 Diversified Companies LLC since August 1, 1999,
and President and Chief Executive Officer, BSMG
Worldwide, Inc. since 1995 (subsidiaries of
True North).
5
<PAGE>
Edward Harrigan
Age 56 Mr. Harrigan has served as Chief Financial
Officer, FCB Worldwide LLC (a subsidiary of
True North) since July, 1998. Prior thereto he
was a Regional Operating Officer of Baker &
McKenzie (a law firm) from May 1997 to July
1998 and was Chief Financial Officer, North
America, for Ogilvy & Mather (an advertising
agency) from 1986 to May 1997.
Terry D. Peigh Mr. Peigh has served as Executive Vice
Age 46 President, Director of TN Services since 1998.
Prior thereto he was a Senior Vice President
and a Worldwide Account Director of FCB
Worldwide, Inc. (formerly Foote, Cone & Belding
Advertising, Inc.), a subsidiary of the
Company.
Dale F. Perona Mr. Perona has served as Senior Vice President
Age 54 and Secretary of True North since May 1994.
Prior thereto Mr. Perona held other senior
executive positions with the Company.
Ramesh Rajan Mr. Rajan has served as Executive Vice
Age 44 President, Operations and Business Development,
since March 3, 2000 and since September 1999
has been Executive Vice President of True
North. Prior thereto he was Executive Vice
President and Chief Financial Officer of Bozell
Group, Inc. (formerly Bozell Worldwide, Inc.),
a subsidiary of the Company, from April 1996 to
December 1999, and served as Senior Vice
President and Chief Financial Officer,
international operations, of Bozell Group, Inc.
from February 1990 to March 1996.
Kevin J. Smith Mr. Smith has served as Executive Vice
Age 45 President, Chief Financial Officer of True
North since March 15, 2000. From July 1998 to
March 15, 2000 he was Senior Vice President,
Chief Accounting Officer of True North. From
1997 to July 1998, he was Executive Vice
President, Chief Financial Officer and Chief
Executive Officer of Midcom Communications Inc.
(a telecommunications company) and was Chief
Executive Officer of Alexsis, Inc. (an
insurance services company) from 1992 to 1996.
Richard P. Sneeder, Jr. Mr. Sneeder has served as Vice President,
Age 50 Controller of True North since January 1999.
From 1994 to 1997 he was Vice President and
Controller, and from 1985 to 1994 he was
Assistant Controller, of Alexander & Alexander
Services Inc. (an international risk
management, insurance brokerage and human
resources management consulting company).
6
<PAGE>
Valentine J. Zammit
Age 52 Mr. Zammit has served as President and Chief
Executive Officer, True North Diversified
Companies LLC (a subsidiary of True North)
since April 1999. From January 1998 to April
1999, he was Executive Vice President and Chief
Operating Officer of the Diversified Companies
division of True North. Prior thereto he held
other senior executive positions with Bozell
Group, Inc., (formerly Bozell Worldwide, Inc.)
including Vice Chairman and Chief Financial
Officer.
There are no family relationships between any of True North's executive
officers.
Information concerning compliance with Section 16(a) of the Securities and
Exchange Act of 1934 required by Item 10 contained under the heading
"Additional Information--Section 16(a) Beneficial Ownership Reporting
Compliance" in the Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Except for information referred to in Item 402(a)(8) of Regulation S-K, the
information contained under the headings "Executive Compensation" and "Board
Structure and Compensation" in the Proxy Statement is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the heading "Stock Ownership" in the Proxy
Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the heading "Certain Relationships and
Related Transactions" in the Proxy Statement is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
Item 14(a)(1)--List of Financial Statements: The following Consolidated
Financial Statements of the Registrant and the Independent Public Accountant's
Report covering these financial statements, appearing in the 1999 Annual
Report on pages 25 through 41, are incorporated herein by reference in Item 8:
Consolidated Balance Sheets--December 31, 1999 and 1998
Consolidated Statements of Income--Years ended December 31, 1999, 1998 and
1997
Consolidated Statements of Stockholders' Equity--Years ended December 31,
1999, 1998 and 1997
Consolidated Statements of Cash Flows--Years ended December 31, 1999, 1998
and 1997
Notes to Consolidated Financial Statements
Reports of Independent Public Accountants
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.
7
<PAGE>
Item 14(a)(3)--Index of Exhibits:
INDEX OF EXHIBITS
4.1 Registrant's Restated Certificate of Incorporation, as amended
(incorporated by reference to Exhibit 3(i) to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1994).
4.2 Certificate of Ownership and Merger changing Registrant's name to True
North Communications Inc. (incorporated by reference to Exhibit (3)(i)
to Registrant's Current Report on Form 8-K filed December 9, 1994).
4.3 Certificate of Designation of Series B Junior Participating Preferred
Stock of True North Communications Inc., filed in Delaware on November
5, 1998 (incorporated by reference to Exhibit 4.3 to Registrant's
Registration Statement on Form S-3 filed December 7, 1998 (File No.
333-68485)).
4.4* Registrant's Bylaws, as restated on March 2, 2000.
4.5 Certificate of Amendment of Restated Certificate of Incorporation,
filed in Delaware on December 30, 1997 (incorporated by reference to
Exhibit 4.6 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997).
4.6 Rights Agreement dated as of November 4, 1998 between Registrant and
the First Chicago Trust Company of New York, as Rights Agent
(incorporated by reference to Exhibit 4 to Registrant's Current Report
on Form 8-K dated November 4, 1998).
4.7 First Amendment dated as of April 12, 1999 to the Rights Agreement
dated as of November 4, 1998 between the Registrant and First Chicago
Trust Company of New York, as Rights Agent (incorporated by reference
to Exhibit 4.1 to Registrant's Registration Statement on Form 8-A12/A
filed April 16, 1999).
10.1# Registrant's Stock Option Plan (incorporated by reference to Exhibit
10.1 to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998).
10.2# The Bozell, Jacobs, Kenyon & Eckhardt, Inc. Stock Option Plan,
established effective March 30, 1992, as amended (incorporated by
reference to Exhibit 4.5 to Registrant's Post-Effective Amendment No.
1 on Form S-8 dated March 17, 1998 to Registrant's Registration
Statement on Form S-4, filed November 26, 1997).
10.3# Amendment to the Bozell, Jacobs, Kenyon & Eckhardt, Inc. Stock Option
Plan effective as of August 1, 1998 (incorporated by reference to
Exhibit 10.3 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998).
10.4# Registrant's Outside Directors Stock Option Plan (incorporated by
reference to Appendix A to Registrant's Definitive Proxy Statement for
its Annual Meeting of Stockholders held on May 30, 1992).
10.5# Amendment to Registrant's Outside Director Stock Option Plan
(incorporated by reference to Exhibit 4.11 to Registrant's
Registration Statement on Form S-8 filed May 19, 1998 (File No. 333-
52989)).
10.6#* Registrant's Executive Deferred Compensation Plan.
10.7 Registration Rights Agreement Between Registrant and The Northwestern
Mutual Life Insurance Company, dated as of July 30, 1997 (incorporated
by reference to Exhibit 10.20 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1997).
8
<PAGE>
10.8 Five-Year Credit Agreement, dated as of May 29, 1998 among Registrant,
the initial lenders named therein and Citibank, N.A., as
Administrative Agent (incorporated by reference to Exhibit 10.2 to
Registrant's Registration Statement on Form S-3 filed June 23, 1998
(File No. 333-57495)).
10.9 Amended and Restated 364-Day Credit Agreement, dated May 27, 1999, by
and among Registrant, the banks, financial institutions and other
institutional lenders party thereto and Citibank, N.A., as
administrative agent (incorporated by reference to Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1999).
10.10 Stockholders Agreement dated as of May 4, 1999, by and among True
North Communications Inc., Modem Media. Poppe Tyson, Inc., Gerald M.
O'Connell and Robert C. Allen, II (incorporated by reference to
Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1999).
10.11 Registration Rights Agreement dated as of August 1, 1999, by and among
Modem Media. Poppe Tyson, Inc., the holders of Class A Common Stock
listed on the signature page thereto and the holders of Class B Common
Stock listed on the signature page thereto (incorporated by reference
to Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1999).
10.12#* Employment Agreement between Bruce Mason and Registrant dated
February, 1999, amending the Employment Agreement between Bruce Mason
and Registrant effective as of December 1, 1997.
10.13# Employment Agreement between J. Brendan Ryan and Registrant, dated as
of December 31, 1996 (incorporated by reference to Exhibit 10.4 to
Registrant's Current Report on Form 8-K dated June 10, 1997).
10.14#* Amendment to Employment Agreement between J. Brendan Ryan and
Registrant dated as of July 30, 1997.
10.15# Asset Protection Plan between J. Brendan Ryan and Registrant dated
June 5, 1996 (incorporated by reference to Exhibit 10.11 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1996).
10.16#* Employment Agreement between Gene Bartley and Registrant, dated April
1, 1993, as amended as of April 1, 1995 and July 30, 1997.
10.17#* Employment Agreement between Harris Diamond and Registrant, dated as
of March 1, 1993, as amended on December 13, 1996 and January 1, 2000.
10.18#* Employment Agreement between Leo-Arthur Kelmenson and Registrant,
dated August 1, 1999.
10.19#* Employment Agreement between David A. Bell and Registrant, dated
January 1, 2000.
10.20# Employment Agreement between Donald L. Seeley and Registrant, dated
May 1, 1998 (incorporated by reference to Exhibit 10.3 to Registrant's
Registration Statement on Form S-3 filed June 23, 1998 (File No. 333-
57495)).
10.21# Employment Agreement between Charles D. Peebler, Jr. and Registrant,
dated as of July 30, 1997 (incorporated by reference to Exhibit 10.12
to Registrant's Annual Report on Form 10-K for the year ended December
31, 1997).
10.22# Amendment to Employment Agreement dated as of July 30, 1997 by and
between Registrant and Charles D. Peebler, Jr. entered into as of May
1, 1999 (incorporated by reference to Exhibit 10.2 to Registrant's
Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1999).
9
<PAGE>
10.23# Employment Agreement between Valentine J. Zammit and Registrant, dated
June 26, 1997, as amended on July 25, 1997 (incorporated by reference
to Exhibit 10.14 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997).
10.24# Employment Agreement between Terry D. Peigh and Registrant dated as of
April 16, 1998 (incorporated by reference to Exhibit 10.25 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1998).
10.25# Employment Agreement between Theodore J. Theophilos and Registrant,
dated as of May 1, 1998 (incorporated by reference to Exhibit 10.4 to
Registrant's Registration Statement on Form S-3 filed June 23, 1998
(File No. 333-57495)).
11.1* Statement re Computation of Per Share Earnings.
13.1* Portions of Registrant's Annual Report to Shareholders incorporated by
reference into this Annual Report on Form 10-K.
21.1* Subsidiaries of Registrant.
23.1* Consent of Arthur Andersen LLP.
24.1* Power of Attorney.
27.1* Financial Data Schedule.
- --------
* Filed herewith.
#Management contract or compensatory plan or arrangement.
Item 14(b)--Reports on Form 8-K: None.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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 30, 2000
True North Communications Inc.
/s/ David A. Bell
By: _________________________________
David A. Bell
Chief Executive Officer
(Principal Executive Officer)
/s/ Kevin J. Smith
By: _________________________________
Kevin J. Smith
Senior Vice President
Chief Financial Officer
/s/ Richard P. Sneeder, Jr.
By: _________________________________
Richard P. Sneeder, Jr.
Vice President
Controller
Pursuant to the requirements of the Securities and 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 a
majority of the members of the Board of Directors of the Registrant) on behalf
of the Registrant.
Signature and Title Signature and Title
/s/ David A. Bell Michael E. Murphy*
- ------------------------------------- -------------------------------------
David A. Bell Michael E. Murphy
Joseph A. Califano, Jr.* Charles D. Peebler, Jr.*
- ------------------------------------- -------------------------------------
Joseph A. Califano, Jr. Charles D. Peebler, Jr.
Donald M. Elliman, Jr.* J. Brendan Ryan*
- ------------------------------------- -------------------------------------
Donald M. Elliman, Jr. J. Brendan Ryan
H. John Greeniaus* Donald L. Seeley*
- ------------------------------------- -------------------------------------
H. John Greeniaus Donald L. Seeley
Leo-Arthur Kelmenson* Marilyn R. Seymann*
- ------------------------------------- -------------------------------------
Leo-Arthur Kelmenson Marilyn R. Seymann
Stephen T. Vehslage*
-------------------------------------
Stephen T. Vehslage
/s/ Suzanne S. Bettman
*By: ________________________________
Suzanne S. Bettman
as Attorney-in-Fact
11
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------
<C> <S>
4.4* Registrant's Bylaws, as restated on March 2, 2000.
10.6#* Registrant's Executive Deferred Compensation Plan.
10.12#* Employment Agreement between Bruce Mason and Registrant dated
February, 1999, amending the Employment Agreement between Bruce Mason
and Registrant effective as of December 1, 1997.
10.14#* Amendment To Employment Agreement between J. Brendan Ryan and
Registrant dated as of July 30, 1997.
10.16#* Employment Agreement between Gene Bartley and Registrant, dated April
1, 1993, as amended as of April 1, 1995 and July 30, 1997.
10.17#* Employment Agreement between Harris Diamond and Registrant, dated as
of March 1, 1993, as amended on December 13, 1996 and January 1, 2000.
10.18#* Employment Agreement between Leo-Arthur Kelmenson and Registrant,
dated August 1, 1999.
10.19#* Employment Agreement between David A. Bell and Registrant, dated
January 1, 2000.
11.1* Statement re Computation of Per Share Earnings.
13.1* Portions of Registrant's Annual Report to Shareholders incorporated by
reference into this Annual Report on Form 10-K.
21.1* Sudsidiaries of Registrant.
23.1* Consent of Arthur Andersen LLP.
24.1* Power of Attorney.
27.1* Financial Data Schedule.
</TABLE>
- --------
* Filed herewith.
# Management contract or compensatory plan or arrangement.
12
<PAGE>
Exhibit 4.4
BYLAWS
OF
TRUE NORTH COMMUNICATIONS INC.
as amended
through March 2, 2000
ARTICLE I
---------
Stockholders' Meetings
----------------------
Section 1. Annual Meeting. (a) The annual meeting of stockholders for the
election of directors and the transaction of such other business as may properly
come before it shall be held at such hour as shall be determined by the Board of
Directors on the second Wednesday in May of each year, or at such other time as
shall be determined by the Board of Directors. If the day fixed for the annual
meeting is a legal holiday, such meeting shall be held on the next succeeding
business day. The annual meeting shall be held at such place as shall be
determined by the Board of Directors.
(b) Only such business shall be conducted at an annual meeting of
stockholders as shall have been properly brought before the meeting. For
business to be properly brought before the meeting, it must be: (i) authorized
by the Board of Directors and specified in the notice, or a supplemental notice,
of the meeting, (ii) otherwise brought before the meeting by or at the direction
of the Board of Directors or the chairman of the meeting, or (iii) otherwise
properly brought before the meeting by a stockholder. For business to be
properly brought before an annual meeting by a stockholder, the stockholder must
have given written notice thereof to the Secretary, delivered or mailed to and
received at the principal executive offices of the corporation (a) not less than
60 days nor more than 90 days prior to the meeting, or (b) if less than 70 days'
notice of the meeting or prior public disclosure of the date of the meeting is
given or made to stockholders, not later than the close of business on the tenth
day following the day on which the notice of the meeting was mailed or, if
earlier, the day on which such public disclosure was made. A stockholder's
notice to the Secretary shall set forth as to each item of business the
stockholder proposes to bring before the meeting (1) a brief description of such
item and the reasons for conducting such business at the meeting, (2) the name
and address, as they appear on the corporation's records, of the stockholder
proposing such business, (3) the class and number of shares of stock of the
corporation which are beneficially owned by the stockholder (for purposes of the
regulations under Sections 13 and 14 of the Securities Exchange Act of 1934, as
amended), and (4) any material interest of the stockholder in such business. No
business shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b). The chairman of the meeting at which
any business is proposed by a stockholder shall, if the facts warrant, determine
and declare to the meeting that such business was not properly brought before
the meeting in accordance with the provisions of this paragraph (b), and, in
such event, the business not properly before the meeting shall not be
transacted.
<PAGE>
Section 2. Special Meetings. Special meetings of stockholders may be called
by the Board of Directors, the Chief Executive Officer or the President and may
be held at such places, within or without the State of Delaware, as may be
specified in the call of any meeting.
Section 3. Notice of Meetings. Notice of every meeting of stockholders
stating the place, date, hour and purposes thereof, shall, except when otherwise
required by law, be provided by mail or other methods authorized by the laws of
the State of Delaware at least ten but not more than fifty days prior to the
meeting to each stockholder of record entitled to vote thereat. Any meeting at
which a quorum of stockholders is present, in person or by proxy, may adjourn
from time to time until its business is completed. At the adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
Section 4. Quorum. The holders of a majority of the shares of stock issued
and outstanding and entitled to vote, present in person or by proxy, shall,
except as otherwise provided by law, constitute a quorum for the transaction of
business at all meetings of stockholders. If at any meeting a quorum is not
present, the chairman of the meeting or the holders of the majority of the
shares of stock present or represented may adjourn the meeting from time to
time. At the adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting. The stockholders
present or represented at a duly called or held meeting at which a quorum is
present may continue to transact business until adjournment notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
Section 5. Voting. Each holder of stock entitled to vote at a stockholders'
meeting shall, as to all matters in respect of which such stock has voting
rights, be entitled to one vote in person or by proxy appointed by such
stockholder in accordance with applicable law for each share of stock owned of
record by him, but no proxy shall be voted or acted upon after three years from
its date unless the proxy provides for a longer period. No vote upon any matter,
except the election of directors, need be by ballot unless demanded by the
holders of at least ten percent of the shares represented and entitled to vote
at the meeting. All elections and questions shall be decided by a plurality of
the votes cast, except as otherwise required by the laws of Delaware.
Section 6. List of Stockholders, At least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder, and the number of shares registered in the name of each
stockholder, shall be prepared by the Secretary. Such list shall be open to the
examination of any stockholder for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not specified, at the
place where the meeting is to be held. The list shall also be produced and kept
at the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. The original or duplicate stock
ledger shall be the only evidence as to who are stockholders entitled to examine
the stock ledger, the list required
-2-
<PAGE>
by this section or the books of the corporation, or to vote in person or by
proxy at any meeting of stockholders.
ARTICLE II
----------
Directors
---------
Section 1. Number, Election and Term of Office. A Board of Directors
consisting of not less than 9 nor more than 21 directors (as shall from time to
time be determined by the Board of Directors) shall be elected at every annual
stockholders' meeting. Each director elected shall hold office until his
successor is elected and qualified or until his earlier resignation or removal.
Directors need not be stockholders.
Nominations for the election of directors may be made by the Board of
Directors or a committee appointed by the Board of Directors or by any
stockholder entitled to vote in the election of directors at the particular
meeting at which the nomination is to occur. However, any stockholder entitled
to vote at such meeting may nominate one or more persons for election as
directors only in person or by proxy at such meeting and only if written notice
of such stockholder's intent to make such nomination or nominations has been
delivered personally to or otherwise received by the Secretary of the
corporation at least 60 days but no more than 90 days prior to the meeting of
stockholders; provided that in the event that less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made, whichever
first occurs. Each such notice shall contain a representation that: (i) the
stockholder is, and will be on the record date, a beneficial owner or a holder
of record of stock of the corporation entitled to vote at such meeting; (ii) the
stockholder has, and will have on the record date, full voting power with
respect to such shares; and (iii) the stockholder intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice. Additionally, each such notice shall set forth: (a) the name and address
of the stockholder who intends to make the nomination and of the person or
persons to be nominated; (b) a description of all arrangements or understandings
between the stockholder and each proposed nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (c) the number and kinds of
securities of the corporation held beneficially or of record by each proposed
nominee; (d) such other information regarding each proposed nominee as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission for the initial election of such
proposed nominee for director; and (e) the consent of each proposed nominee to
serve as a director if so elected. The presiding officer of the meeting may
refuse to acknowledge the nomination of any person if any of the information
supplied is false or misleading or if any of the foregoing requirements are not
satisfied.
Section 2. Vacancies. Any vacancy occurring in the Board and any
directorship to be filled by reason of an increase in the authorized number of
directors may be filled by a majority of the directors then in office, although
less than a quorum. A director elected to fill a vacancy shall hold office until
the next annual election of directors. When one or more directors shall resign
from the Board, effective at a future date, a majority of the directors then in
office,
-3-
<PAGE>
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective, and each director so chosen shall hold office as
provided in this section in the filling of other vacancies.
Section 3. Place of Meetings. Directors' meetings may be held at such
places, within or without the State of Delaware, as the Board may from time to
time determine or as may be specified in the call of any meetings.
Section 4. Regular Meetings. A regular annual meeting of the Board shall
be held without call or notice immediately after and at the same general place
as the annual meeting of the stockholders, for the purpose of organizing the
Board, electing officers and transacting any other business that may properly
come before the meeting. Additional regular meetings of the Board may be held
without call or notice at such place and at such time as shall be fixed by
resolution of the Board.
Section 5. Special Meetings. Special meetings of the Board may be called
by the Chief Executive Officer, the President, or by a majority of the directors
then in office. Notice of special meetings shall either be mailed by the
Secretary to each director at least three days before the meeting or shall be
given personally or via facsimile to each director at least one day before the
meeting. Such notice shall set forth the time and place of such meeting but need
not, unless otherwise required by law, state the purposes of the meeting. A
majority of the directors present at any meeting may adjourn the meeting from
time to time without further notice other than announcement at the meeting.
Section 6. Quorum. One third of the total number of directors shall
constitute a quorum for the transaction of business at any meeting of the Board.
If at any meeting a quorum is not present, a majority of the directors present
may adjourn the meeting from time to time without notice other than announcement
at the meeting until a quorum is present.
Section 7. Committees of the Board. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees. Each such committee shall consist of two or more of the directors of
the corporation and, to the extent provided in the resolution designating such
committee, shall have and may exercise the powers of the Board of Directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers which may require it.
The Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of any member of such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board to act at the meeting in the
place of such absent or disqualified member.
Section 8. Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting if all members of the Board, or of such committee, as
the case may be, consent thereto in writing, and such written consent is filed
with the minutes of the proceedings of the Board or of such committee.
-4-
<PAGE>
Section 9. Compensation. Directors and members of committees may receive
such compensation, if any, for their services, and such reimbursement for
expenses, as may be fixed or determined by the Board of Directors, provided
that nothing herein contained shall be construed to preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
ARTICLE III
-----------
Officers and Employees
----------------------
Section 1. Number, Oualification, Election and Term of Office. (a) The
Board of Directors shall elect the officers of the corporation which may
include a Chief Executive Officer, a President, a Chief Financial Officer, a
Chief Accounting Officer, a Controller, one or more Vice Presidents (one or
more of whom may be designated as Executive Vice Presidents or as Senior Vice
Presidents or by other designations), a Secretary, a Treasurer, and such other
officers or assistant officers as the Board of Directors may from time to time
deem advisable. No officer need be a director except the Chief Executive
Officer. The same person may hold two or more offices, except that if one
person shall hold the offices of President and Secretary, he shall not hold
any other office.
(b) Each officer of the corporation shall be elected by the Board of
Directors and shall hold office until the annual meeting of the Board of
Directors next succeeding his election and until his successor shall have been
elected and qualified, or until his resignation or removal.
Section 2. Appointments. In addition to the elected officers provided
above, who shall be corporate officers, the Chief Executive Officer may
appoint one or more Assistant Secretaries, Assistant Treasurers and Assistant
Controllers.
Section 3. Removal and Vacancies. All officers shall serve at the
pleasure of the Board. Any officer may be removed by the Board at any time with
or without cause. A vacancy in any office shall be filled by the Board of
Directors.
Section 4. Bonding. The Board may, in its discretion, require any officer
to give the corporation a bond in a sum and with one or more sureties
satisfactory to the Board for the faithful performance of his duties and for the
restoration to the corporation, in the case of death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Section 5. Chairman of the Board and Vice Chairmen. The Board of
Directors may annually elect from its members a Chairman of the Board and one or
more Vice Chairman. The Chairman of the Board, when and if elected by the Board,
shall preside at meetings of the Board. The Vice Chairmen of the Board, when and
if elected by the Board, shall assist the Chairman of the Board and have such
other duties as may be assigned by the Board or the Chairman of the Board. Any
vacancy in the position of Chairman of the Board or Vice Chairman may be filled
at such time and in such manner as the Board of Directors shall determine.
-5-
<PAGE>
Section 6. Chief Executive Officer. The Chief Executive Officer shall
preside at all meetings of stockholders and shall be the chief executive officer
of the corporation. He may sign, execute and deliver in the name of the
corporation, powers of attorney, contracts, bonds and other obligations, and
shall have such further duties as are prescribed by law or as shall from time to
time be designated by the Board.
Section 7. President. The President shall have general and active
supervision over the property, business and affairs of the corporation, subject
to the authority of the Chief Executive Officer. He shall preside, in the
absence of the Chief Executive Officer, at all meetings of stockholders. He may
sign, execute and deliver in the name of the corporation powers of attorney,
contracts, bonds and other obligations, and shall have such further duties as
shall from time to time be designated by the Board.
Section 8. Chief Financial Officer. The Chief Financial Officer shall be
the principal financial officer of the corporation. He shall have such duties as
shall from time to time be designated by the Board.
Section 9. Vice Presidents. The elected Vice Presidents, which may be
designated by different classes, shall have such duties as shall from time to
time be designated by the Board.
Section 10. Secretary. The Secretary shall be the keeper of the corporate
seal and records (except those kept by the Treasurer), and shall give notice of,
attend, and record minutes of meetings of stockholders and directors. The
Secretary or any Assistant Secretary shall have authority to affix the corporate
seal to any instrument requiring it, and when so affixed, the corporate seal may
be attested by the signature of the Secretary or any Assistant Secretary.
Section 11. Treasurer. The Treasurer shall be responsible for (i) the
custody and safekeeping of all of the funds of the corporation, (ii) the receipt
and deposit of all moneys paid to the corporation, (iii) where necessary or
appropriate, the endorsement for collection on behalf of the corporation of all
checks, drafts, notes, and other obligations payable to the corporation, (iv)
the disbursement of funds of the corporation under such rules as the Board may
from time to time adopt, (v) keeping full and accurate records of all receipts
and disbursements, and (vi) the performance of such further duties as are
incident to his office or as may from time to time be designated by the Board.
Section 12. The Chief Accounting Officer. The Chief Accounting Officer
shall have general charge, control, and supervision over the accounting affairs
of the corporation and the implementation of accounting policies and procedures.
The Chief Accounting Officer shall perform such other duties as the Board of
Directors may prescribe or the Chief Financial Officer shall delegate.
Section 13. Controller. The Controller shall have responsibility for the
preparation and maintenance of the financial records of the corporation; shall
collect and consolidate the financial results of its subsidiaries and other
operating units, and supervise the preparation of all financial statements and
reports on the operation and condition of the business. The Controller shall
perform such other duties as the Board of Directors may prescribe or the Chief
Financial Officer shall delegate.
-6-
<PAGE>
ARTICLE IV
----------
Stock Certificates and Transfer Books
-------------------------------------
Section 1. Certificates. Every stockholder shall be entitled to have a
certificate in such form as the Board shall from time to time approve, signed
by, or in the name of the corporation by the Chairman of the Board, the Chief
Executive Officer, the President or any elected Vice-President and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary,
certifying the number of shares owned by him. During the time in which the
corporation is authorized to issue more than one class of stock or more than one
series of any class, there shall be set forth on the face or back of each
certificate issued a statement that the corporation will furnish without charge
to each stockholder who so requests, the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof of the corporation and the qualifications, limitations or restrictions
of such preferences and/or rights.
Section 2. Facsimile Signatures. Where a certificate is countersigned (1)
by a transfer agent other than the corporation or its employee, or, (2) by a
registrar other than the corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
Section 3. Record Ownership. A record of the name and address of the holder
of each certificate, the number of shares represented thereby, and the date of
issue thereof shall be made on the corporation's books. The corporation shall be
entitled to treat the holder of record of any share or shares of stock as the
holder in fact thereof, and accordingly shall not be bound to recognize any
equitable or other claim to or interest in any share on the part of any other
person whether or not it shall have express or other notice thereof, except as
required by the laws of Delaware.
Section 4. Lost Certificates. Any person claiming a stock certificate in
lieu of one lost, stolen, mutilated or destroyed shall give the corporation an
affidavit as to his ownership of the certificate and of the facts which go to
prove its loss, theft, mutilation or destruction. He shall also, if required by
the Board, give the corporation a bond, in such form as may be approved by the
Board, sufficient to indemnify the corporation against any claim that may be
made against it on account of the alleged loss or theft of the certificate or
the issuance of a new certificate.
Section 5. Transfer Agent or Registrar. The corporation shall maintain one
or more transfer offices or agencies, each in charge of a transfer agent
designated by the Board, where the shares of stock of the corporation shall be
transferable. The corporation shall also maintain one or more registry offices,
each in charge of a registrar designated by the Board, wherein such shares of
stock shall be registered.
Section 6. Transfers of Stock. Transfer of shares shall, except as provided
in Section 4 of this ARTICLE IV, be made on the books of the corporation only by
direction of the person named in the certificate or his attorney, lawfully
constituted in writing, and only upon the
-7-
<PAGE>
surrender for cancellation of the certificate therefor, duly endorsed or
accompanied by a written assignment of the shares evidenced thereby.
Section 7. Fixing Date for Determination of Stockholders of Record. (a) In
order that the corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board may fix, in advance, a record date, which shall not be more than sixty
nor less than ten days before the date of such meeting, nor more than sixty days
prior to any other action.
(b) If no record date is fixed:
(1) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business
on the day next preceding the day on which notice is given, or, if notice
is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(2) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto.
(c) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
ARTICLE V
---------
General Provisions
------------------
Section 1. Offices. The registered office of the corporation in Delaware
shall be in the City of Wilmington, County of New Castle. The corporation may
have such other offices as the Board may from time to time determine. The books
of the corporation may be kept outside the State of Delaware.
Section 2. Seal. The corporation's seal shall be a circular in form with
the words "TRUE NORTH COMMUNICATIONS INC. - DELAWARE" around the periphery and
the figures and words "CORPORATE SEAL" within.
Section 3. Fiscal Year. The fiscal year of the corporation shall begin on
January 1 and end on December 31.
Section 4. Inspection of Books. Subject to laws of the State of Delaware,
the directors shall determine from time to time whether, and, if allowed, when
and under what conditions and regulations the accounts and books of the
corporation (except such as may by statute be specifically open to inspection)
or any of them, shall be open to the inspection of the stockholders, and the
stockholders' rights in this respect are and shall be restricted and limited
accordingly.
-8-
<PAGE>
Section 5. Reliance on Records. Each director and officer shall in the
performance of his duties be fully protected in relying in good faith upon the
books of account or reports made to the corporation by any of its officials, or
by an independent certified public accountant, or by an appraiser selected with
reasonable care by the Board, or in relying in good faith upon other records of
the corporation.
Section 6. Annual Report. The Board shall publish and submit to the
stockholders annually, by any means authorized by the laws of the State of
Delaware, a summary of the consolidated income of the corporation and its
consolidated subsidiaries for the previous fiscal year and a full or condensed
consolidated balance sheet of the corporation and its consolidated subsidiaries
at the end of the previous fiscal year.
Section 7. Voting of Stock. Unless otherwise ordered by the Board, the
Chief Executive Officer, the President or the Chief Financial Officer, and each
or any of them, shall have full power and authority, in the name and on behalf
of the corporation, to attend, act and vote at any meeting of stockholders of
any company in which the corporation may hold shares of stock, and at any such
meeting shall possess and may exercise any and all rights and powers incident to
the ownership of such shares and which, as the holder thereof, the corporation
might possess and exercise if personally present, and may exercise such power
and authority through the execution of proxies or may delegate such power and
authority to any other officer, agent or employee of the corporation.
Section 8. Waiver of Notice. Whenever any notice is required to be given, a
waiver thereof in writing, signed by the person or persons entitled to the
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
Section 9. Indemnification. (a) The corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation,
-9-
<PAGE>
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if the person
acted in good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a present or former director, officer, employee or
agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections (a) and (b)
of this Article V, Section 9, or in defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
(b) Any indemnification under subsections (a) and (b) of this Article V,
Section 9 (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
present or former director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard of conduct set
forth in subsections (a) and (b). Such determination shall be made (1) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) by a committee of such
directors designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (4) by the stockholders.
(e) Expenses (including attorney's fees) incurred by an officer or
director in defending a civil, criminal, administrative or investigative action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the corporation as authorized in this Article V, Section 9. Such expenses
(including attorneys' fees) incurred by former directors and officers or other
employees and agents may be so paid upon such terms and conditions, if any, as
the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by or granted
pursuant to this Article V, Section 9 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office.
(g) The corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
-10-
<PAGE>
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of this
Article V, Section 9.
(h) For purposes of this Article V, Section 9, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article V, Section
9 with respect to the resulting or surviving corporation as such person would
have with respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this Article V, Section 9, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good faith and in a
manner such person reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article V, Section 9.
(j) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article V, Section 9 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 10. Amendments to Bylaws. These Bylaws may be altered or repealed
by the stockholders or by the Board of Directors.
-11-
<PAGE>
Exhibit 10.6
TRUE NORTH COMMUNICATIONS INC.
DEFERRED COMPENSATION PLAN
(Effective April 1, 1999)
<PAGE>
TRUE NORTH COMMUNICATIONS INC.
DEFERRED COMPENSATION PLAN
ARTICLE I - PURPOSE; EFFECTIVE DATE
-----------------------
1.1. Purpose. The purpose of the True North Communications Inc. Deferred
Compensation Plan (hereinafter, the "Plan") is to permit a select group of
management or highly compensated employees of True North Communications
Inc. and its participating subsidiaries to defer the receipt of income
which would otherwise become payable to them and to provide additional
deferred compensation through company contributions. In addition, it is
intended that certain obligations undertaken in several predecessor non-
qualified plans established by the Company, its predecessor companies or
affiliates, be incorporated into the operation of this plan for
administrative ease and consistency of benefits. It is intended that this
Plan, by providing this deferral opportunity, will assist the in retaining
and attracting individuals of exceptional ability by providing them with
these benefits.
1.2. Effective Date. The Plan shall be effective as of April 1, 1999.
ARTICLE II - DEFINITIONS
-----------
For the purpose of this Plan, the following terms shall have the meanings
indicated, unless the context clearly indicates otherwise:
2.1. Account(s). "Account(s)" means the account or accounts maintained on the
books of the Company used solely to calculate the amount payable to each
Participant under this Plan and shall not constitute a separate fund of
assets. The Accounts available for each Participant shall be identified as
the Retirement Account and the In-Service Account. In addition, there
shall be an Interest Rate Subaccount within the Retirement Account to
account for certain Rollover Amounts and Discretionary Contributions that
are to be credited with Interest based on a rate of interest determined by
the Committee.
2.2. Beneficiary. "Beneficiary" means the person, persons or entity as
designated by the Participant, entitled under Article VI to receive any
Plan benefits payable after the Participant's death.
2.3. Board. "Board" means the Board of Directors of the Company or the
Compensation Committee thereof.
2.4. Code. "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.5. Committee. "Committee" means the Administrative Committee of the Company,
which has been appointed by the Board to administer the Company's employee
benefit plans, including the Plan.
2.6. Company. "Company" means True North Communications Inc., a Delaware
corporation, and
<PAGE>
any directly or indirectly affiliated subsidiary corporations any of
whose employees are designated as eligible to participate in the Plan.
2.7. Compensation. "Compensation" means the base salary payable to and bonus
or incentive compensation earned by a Participant with respect to
employment services performed for the Company by the Participant and
considered to be "wages" for purposes of federal income tax withholding.
For purposes of this Plan, Compensation shall be calculated before
reduction for any amounts deferred by the Participant pursuant to the
Company's tax-qualified plans which may be maintained under Section
401(k) or Section 125 of the Code or pursuant to this Plan or any other
non-qualified plan which permits the voluntary deferral of compensation.
Inclusion of any other forms of compensation is subject to Committee
approval.
2.8. Deferral Commitment. "Deferral Commitment" means a commitment made by a
Participant to defer a portion of Compensation as set forth in Article
III. The Deferral Commitment shall apply to salary and/or bonus payable
to the Participant, and shall specify the Account or Accounts to which
the Compensation deferred shall be allocated. Such allocation shall be
made in whole percentages or stated dollar amounts and shall be made in a
form acceptable to the Committee. A Deferral Commitment shall remain in
effect until amended or revoked as provided under Section 3.2(d) below.
2.9. Deferral Period. "Deferral Period" means each calendar year, except that
the initial Deferral Period shall be May 1, 1999 through and including
December 31, 1999.
2.10. Determination Date. "Determination Date" means the last day of each
calendar month.
2.11. Disability. "Disability" means total and permanent disability, as
defined in the Company's long-term disability plan, as it may be amended
from time to time, and as interpreted by the Committee in its sole and
absolute discretion.
2.12. Discretionary Contribution. "Discretionary Contribution" means the
Company profit sharing contribution or other discretionary contribution
credited to a Participant's Account(s) under Section 4.6 below.
2.13. Distribution Election. "Distribution Election" means the election by a
Participant as to the timing and/or form of payment of benefits payable
from each Account under this Plan, on a form prescribed by the Committee
for this purpose and completed by the Participant.
2.14. ERISA. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time.
2.15. Excess 401(k) Amount. "Excess 401(k) Amount" means the amount of
Compensation which the Participant has elected to be deferred under the
provisions of the 401(k) Plan, but which cannot be contributed to the
401(k) Plan on behalf of the Participant due to the fact that salary and
bonus deferrals under this Plan are not treated as compensation under the
401(k) Plan and/or due to the limitations imposed by Code Sections
401(a)(30), 402(g)(1), 401(a)(17), 415(c)(1) or any other limitations
under the Code or the provisions of the 401(k) Plan. The
3
<PAGE>
maximum amount that can be contributed to the 401(k) Plan due to these
restrictions is hereinafter referred to as "Maximum 401(k) Amount." It is
recognized that for purposes of the 401(k) Plan the definition of
"compensation" will most likely be more restrictive than the definition
under this Plan and that the calculation of the amount elected to be
deferred into the 401(k) Plan, the Maximum 401(k) Amount, and the Excess
401(k) Amount shall be calculated in accordance with the provisions of
the 401(k) Plan. For purposes of this Plan, in determining the Excess
401(k) Amount, the election with respect to the amount of compensation to
be deferred into the 401(k) Plan in effect at the time that the
Participant achieves the Maximum 401(k) Amount shall be deemed to
continue in effect for the balance of the applicable Deferral Period.
2.16. Financial Hardship. "Financial Hardship" means a severe financial
hardship of the Participant resulting from a sudden and unexpected
illness or accident of the Participant or of a dependent of the
Participant, loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstance arising as a result
of events beyond the control of the Participant. Financial Hardship shall
be determined based upon such standards as are, from time to time,
established by the Committee, and such determination shall be in the sole
discretion of the Committee.
2.17. 401(k) Plan. "401(k) Plan" means the Company retirement plan in which the
Participant participates which is tax-qualified under Section 401(a) of
the Code and satisfies the requirements of Section 401(k) of the Code. As
of the effective date of the Plan, the applicable tax-qualified plans
include the True North Communications Inc. Retirement Plan and the True
North Communications Inc. Profit Sharing and Savings Plan for BJK&E, each
as may be amended from time to time.
2.18. Interest. "Interest" means the amount credited to or deducted from a
Participant's Retirement and In-Service Accounts on each Determination
Date. Amounts credited to or deducted from a Participant's Retirement and
In-Service Accounts shall be based on the Valuation Funds chosen by the
Participant as provided in Section 2.25 below and in a manner consistent
with Section 4.3 below. Such credits to a Participant's Retirement and
In-Service Accounts may be either positive or negative to reflect the
increase or decrease in the applicable Valuation Funds. Notwithstanding
the foregoing, amounts credited to the Interest Rate Subaccount within
the Retirement Account shall be based on a rate of interest set and
declared by the Committee in its sole discretion from time to time.
2.19. Matching Contribution. "Matching Contribution" means the Company
contribution credited to a Participant's Retirement Account under Section
4.5 below.
2.20. Participant. "Participant" means any employee who is eligible pursuant to
Section 3.1 below to participate in this Plan, and who has elected to
defer Compensation under this Plan in accordance with Article III below.
Such employee shall remain a Participant in this Plan for the period of
deferral and until such time as all benefits payable under this Plan have
been paid in accordance with the provisions hereof.
2.21. Plan. "Plan" means this True North Communications Inc. Deferred
Compensation Plan, as
4
<PAGE>
amended from time to time.
2.22. Predecessor Plan. "Predecessor Plan" means those plans maintained by the
Company, or its predecessor entities, established to be non-qualified
deferred compensation plans for a select group of management or highly
compensated employees. These Plans specifically include the Bozell,
Jacobs, Kenyon & Eckhardt, Inc. Executive Wealth Accumulation Plan (the
"EWAP"), the Foote, Cone & Belding Communications, Inc. Stock Purchase
Integration Plan, (the "SPIP"), and the Foote, Cone & Belding
Communications, Inc. Profit Sharing Integration Plan, (the "PSIP") along
with any other plan or program designated by the Committee.
2.23. Retirement. "Retirement" means a Participant's termination of employment
with the Company after attaining age 55.
2.24. Rollover Amount. "Rollover Amount" means the amount determined by the
Committee in its sole discretion to represent the balance of the
obligation to specifically named Participants under a Predecessor Plan,
which is to be added to an Account in this Plan. It is intended that the
Rollover Amount shall be determined in accordance with the terms of the
applicable Predecessor Plan. Such Rollover Amount shall be determined by
the Committee and added to the appropriate Account under this Plan as of
the later of the effective date of this Plan or the date that the
Participant first becomes eligible to participate in this Plan.
2.25. Valuation Funds. "Valuation Funds" means one or more of the independently
established funds or indices that are identified and listed by the
Committee. These Valuation Funds are used solely to calculate the
Interest that is credited to each Participant's Retirement and In-Service
Accounts in accordance with Article IV below, and does not represent nor
should it be interpreted to convey any beneficial interest on the part of
the Participant in any asset or other property of the Company. The
determination of the increase or decrease in the performance of each
Valuation Fund shall be made by the Committee in its reasonable
discretion. The Committee shall select the various Valuation Funds
available to the Participants with respect to this Plan.
ARTICLE III - ELIGIBILITY AND PARTICIPATION
-----------------------------
3.1. Eligibility and Participation.
a) Eligibility. Eligibility to participate in the Plan shall be limited
to those select key employees of the Company who are designated by
management from time to time and approved by the Committee.
b) Participation. An employee's participation in the Plan shall be
effective upon notification to the employee by the Committee of
eligibility to participate, and completion, submission of a Deferral
Commitment and a Distribution Election form to the Committee no later
than 30 days prior to the beginning of the Deferral Period.
c) First-Year Participation. When an individual first becomes eligible to
participate
5
<PAGE>
during a Deferral Period, a Deferral Commitment may be
submitted to the Committee within 30 days after the Committee notifies
the individual of eligibility to participate. Such Deferral Commitment
will be effective only with regard to Compensation earned and payable
following submission of the Deferral Commitment to the Committee.
3.2. Form of Deferral. A Participant may elect a Deferral Commitment as
follows:
a) Salary Deferral Commitment. A Deferral Commitment shall be made with
respect to salary payable by the Company to a Participant during the
immediately succeeding Deferral Period, and shall designate the
portion of each deferral that shall be allocated among the Retirement
and In-Service Accounts. The Participant shall set forth the amount to
be deferred as either a full percentage of salary payable (the
Participant may designate a different percentage of salary and bonus
that is to be deferred under this Plan), or as a stated dollar amount.
Salary Deferral Commitments shall be made in roughly equal amounts
over the calendar year. The salary Deferral Commitment shall specify
the Participant's initial allocation of the amounts deferred into each
Account among the various available Valuation Funds.
b) Bonus Deferral Commitment. A Deferral Commitment shall be made with
respect to each payment of bonus or incentive compensation payable by
the Company to a Participant with respect to services performed during
the immediately succeeding Deferral Period, and shall designate the
portion of each deferral that shall be allocated among the Retirement
and In-Service Accounts. Notwithstanding the foregoing, for a
Participant's initial Deferral Period under the Plan, his or her bonus
Deferral Commitment may apply to bonuses earned for the calendar year
in which such Deferral Commitment is made, provided that the amount of
such bonus remains substantially uncertain as of the time such
Deferral Commitment is submitted. The Participant shall set forth the
amount to be deferred as either a full percentage of bonus or
incentive compensation payable (the Participant may designate a
different percentage of salary and bonus that is to be deferred under
this Plan), as a stated dollar amount, or as a percentage of the bonus
payable in excess of a stated amount. The Deferral Commitment shall
specify the Participant's initial allocation of the amounts deferred
into each Account among the various available Valuation Funds.
c) Excess 401(k) Amount. A Deferral Commitment shall be made with respect
to Excess 401(k) Amounts, if any, as defined in Section 2.15 above.
Any Excess 401(k) Amounts so deferred shall be deferred into the
Retirement Account.
d) Period of Commitment. Once a Participant has made a Deferral
Commitment, that Commitment shall remain in effect for that Deferral
Period and shall remain in effect for all future Deferral Periods
unless revoked or amended in writing by the Participant and delivered
to the Committee no later than 30 days prior to the beginning of a
subsequent Deferral Period.
3.3. Maximum Deferral Commitments. The maximum amount of each payment of base
salary that may be deferred into this Plan shall be 50% of base salary,
and the maximum amount of
6
<PAGE>
each payment of bonus or incentive compensation that may be deferred into
this Plan shall be 100% of bonus or incentive compensation.
3.4. Commitment Limited by Termination. If a Participant terminates employment
with the Company prior to the end of the Deferral Period, the Deferral
Period shall end as of the date of such termination.
3.5. Modification of Deferral Commitment. Except as provided in Section 5.5
below, a Deferral Commitment shall be irrevocable by the Participant
during a Deferral Period.
3.6. Change in Employment Status. If the Committee determines that a
Participant's employment performance is no longer at a level that warrants
reward through participation in this Plan, but does not terminate the
Participant's employment with the Company, the Participant's existing
Deferral Commitment shall terminate at the end of the Deferral Period, and
no new Deferral Commitment may be made by such Participant after notice of
such determination is given by the Committee, unless the Participant later
satisfies the requirements of Section 3.1 above. If the Committee, in its
sole discretion, determines that the Participant no longer qualifies as a
member of a select group of management or highly compensated employees, as
determined in accordance with ERISA, the Committee may in its sole
discretion terminate any Deferral Commitment for that year, prohibit the
Participant from making any future Deferral Commitments and/or distribute
the Participant's Account balances in accordance with Article V below as
if the Participant had terminated employment with the Company as of that
time.
ARTICLE IV - DEFERRED COMPENSATION ACCOUNTS; COMPANY CONTRIBUTIONS
-----------------------------------------------------
4.1. Accounts. The Rollover Amounts, the Compensation deferred by a Participant
under the Plan, any Matching Contributions, Discretionary Contributions,
Excess 401(k) Amounts and Interest shall be credited to the Participant's
various Account(s). Separate accounts may be maintained to reflect the
different Accounts chosen by the Participant, and the Participant shall
designate the portion of each deferral that will be credited to each
Account, as set forth in Section 3.2(a), (b) and (c). These Accounts shall
be used solely to calculate the amount payable to each Participant under
this Plan and shall not constitute a separate fund of assets.
4.2. Timing of Credits; Withholding. A Participant's Deferred Compensation, if
any, shall be credited to each Account designated by the Participant on
the last day of the month during which the Compensation deferred would
have otherwise been payable to the Participant. Excess 401(k) Amounts and
Matching Contributions, if any, shall be credited to the Participant's
Retirement Account on the last day of the month during which the
Compensation deferred to which the Excess 401(k) Amount or Matching
Contribution relates, was credited to an Account. Any Discretionary
Contributions shall be credited to the appropriate Account(s) as provided
by the Committee. Any Rollover Amounts shall be credited to the
appropriate Account(s) as set forth below in Section 4.4 as an initial
balance in the appropriate Account(s) as of the later of the later of the
effective date of this Plan or the date that the Participant first becomes
eligible to participate in this Plan. Any withholding of taxes or other
amounts with
7
<PAGE>
respect to deferred Compensation that is required by local, state or
federal law shall be withheld from the Participant's corresponding non-
deferred portion of the Compensation to the maximum extent possible, and
any remaining amount shall reduce the amount credited to the Participant's
Account in a manner specified by the Committee.
4.3. Valuation Funds. A Participant shall designate, at a time and in a manner
acceptable to the Committee, one or more Valuation Funds for the
Retirement and/or In-Service Account(s) for the sole purpose of
determining the manner by which Interest shall be credited to or deducted
from such Account. Such election shall designate the portion of each
deferral of Compensation made into the Retirement and In-Service Accounts
that shall be allocated among the available Valuation Fund(s), and such
election shall apply to each succeeding deferral of Compensation until
such time as the Participant shall file a new election with the Committee.
Upon notice to the Committee, the Participant may also reallocate the
balance in each Valuation Fund among the other available Valuation Funds
as of the next succeeding Determination Date, but in no event shall such
re-allocation occur more frequently than quarterly.
4.4. Rollover Amounts. The Company may credit a Rollover Amount to the
Participant's Account(s) in an amount determined by the Committee in
accordance with the appropriate Predecessor Plan as stated in Section 2.24
above. Any Rollover Amount designated as being in relation to the EWAP
Predecessor Plan may be credited to the Retirement or the In-Service
Accounts at the direction of the Participant. Any Rollover Amount
designated as being in relation to the SPIP or PSIP Predecessor Plans will
be credited to the Interest Rate Subaccount within the Retirement Account.
4.5. Matching Contributions. The Company may credit Matching Contributions to
the Participant's Retirement Account in an amount to be determined by the
Committee in relation to the Compensation deferred by the Participant
under this Plan during a Deferral Period. As of the effective date of this
Plan, Matching Contributions for each Deferral Period shall equal the
lesser of (1) one hundred percent (100%) of the amounts deferred by the
Participant for that Deferral Period under Section 3.2 above or (2) three
and one-third percent (3-1/3%) of the Participant's Compensation for such
Deferral Period, in either case minus the matching contributions made on
the Participant's behalf for that Deferral Period under the 401(k) Plan.
4.6. Profit-Sharing and Other Discretionary Contributions. The Company may make
Discretionary Contributions to a Participant's Accounts. Discretionary
Contributions shall be credited at such times, in such amounts and to such
Accounts as recommended by the Committee and approved by the Compensation
Committee of the Board or the full Board. As of the effective date of this
Plan, the Company shall make Discretionary Contributions in the form of
profit-sharing contributions on behalf of certain designated eligible
Participants as follows: For each Deferral Period, an eligible
Participant's profit-sharing contribution shall be an amount equal to (a)
minus (b), where:
a) equals the profit-sharing contribution that would have been allocated
to the Participant under the 401(k) Plan for such Deferral Period if
the "Retirement Plan Limits" did not apply and if the amounts deferred
by the Participant pursuant to
8
<PAGE>
Section 3.2 were treated as compensation under the 401(k) Plan; and
b) equals the actual profit-sharing contribution allocated to the
Participant under the 401(k) Plan for such Deferral Period.
For purposes of (a) above, "Retirement Plan Limits" means the limitation
imposed by Section 415 of the Code on allocations to Participants'
accounts under the 401(k) Plan and the limitation imposed by Section
401(a)(17) of the Code on the amount of a Participant's annual
compensation that may be taken into account under the 401(k) Plan. These
profit-sharing Discretionary Contributions shall be credited to a
Participant's Interest Rate Subaccount within the Retirement Account at or
as soon as practicable after the time profit-sharing contributions are
credited to such Participant's account(s) under the 401(k) Plan.
4.7. Determination of Accounts. Each Participant's Account as of each
Determination Date shall consist of the balance of the Account as of the
immediately preceding Determination Date, adjusted as follows:
a) New Deferrals. The Retirement and In-Service Accounts shall be
increased by any deferred Compensation, if any, credited since such
prior Determination Date in the proportion chosen by the Participant.
b) Company Contributions. The Retirement Account shall be increased by
any Matching Contribution, Excess 401(k) Amounts, and/or Discretionary
Contributions credited since such prior Determination Date; provided
that profit-sharing Discretionary Contributions under Section 4.6
shall be credited to the Interest Rate Subaccount within the
Retirement Account. Rollover Amounts shall be treated as initial
balances in the Retirement and/or In-Service Accounts, as applicable.
c) Distributions. Each Account shall be reduced by the amount of each
benefit payment made from that Account since the prior Determination
Date. Distributions from the Retirement and In-Service Accounts shall
be deemed to have been made proportionally from each of the Valuation
Funds maintained within such Account based on the proportion that such
Valuation Fund bears to the sum of all Valuation Funds maintained
within such Account for that Participant as of the Determination Date
immediately preceding the date of payment.
d) Interest. The Retirement and the in-Service Accounts shall be
increased or decreased by the Interest credited to such Accounts since
such Determination Date as though the balance of that Account as of
the beginning of the current month had been invested in the applicable
Valuation Funds chosen by the Participant. The Interest Rate
Subaccount within the Retirement Account shall be increased by the
Interest credited to such Account since such prior Determination Date
based on the interest rate established by the Committee.
4.8. Vesting of Accounts. Subject to the right of the Committee to impose
vesting restrictions with respect to future Matching and/or Discretionary
Contributions, all amounts credited to a
9
<PAGE>
Participant's Accounts and Interest thereon shall be 100% vested.
4.9. Statement of Accounts. The Committee shall give to each Participant a
statement showing the balances in the Participant's Accounts on no less
than an annual basis.
ARTICLE V - PLAN BENEFITS
-------------
5.1. Retirement Account. The balance of a Participant's Retirement Account
shall be distributed to the Participant upon his or her termination of
employment with the Company. Benefits under this Section shall be payable
as soon as administratively practical after termination of employment. The
form of benefit payment shall be that form selected by the Participant
pursuant to Section 5.6 below, except that if the Participant terminates
employment with the Company prior to Retirement, the full amount of the
Retirement Account shall be paid in a lump sum.
5.2. In-Service Account. Subject to the remainder of this Section 5.2, the
balance of a Participant's In-Service Account shall be distributed to the
Participant upon the date chosen by the Participant in his or her
Distribution Election that corresponds to his or her first Deferral
Commitment which designates a portion of the Compensation deferred be
allocated to the In-Service Account; provided, however, that the date of
payment commencement under this Section shall be no earlier than the third
anniversary of the Participant's initial deferral into the In-Service
Account. The Participant may subsequently amend the intended date of
payment to a date later than that date initially chosen by filing a new
Distribution Election with the Committee no later than 24 months prior to
the initially-chosen date of payment. The Participant may file this
amendment to defer the receipt of benefits under this Section only twice,
and each new Distribution Election must provide for a pay-out at a date
later than the election in force immediately prior to filing such new
election. The form of benefit payment shall be that form selected by the
Participant pursuant to Section 5.6 below. Notwithstanding the foregoing,
if the Participant terminates employment with the Company prior to the
date so chosen (or as subsequently amended) by the Participant, the
balance of the In-Service Account as of the date of termination of
employment shall be added to the Retirement Account and shall be paid in
accordance with the provisions of Section 5.1 above.
5.3. Disability. If a participant becomes Disabled in accordance with Section
2.11 above, distribution of the Participant's Plan benefits shall be made
in the same manner as if the Participant were to Retire on the date he or
she commences long-term disability benefits under the Company's long-term
disability plan.
5.4. Death Benefit. Upon the death of a Participant prior to the commencement
of benefits under this Plan from any Account, the Company shall pay to the
Participant's beneficiary an amount equal to the balance in that Account
in a lump sum. In the event of the death of the Participant after the
commencement of installment payments from any Account, the remaining
benefits from that Account shall be paid to the Participant's designated
Beneficiary from that Account either by continuing such installment
payments or in a lump sum, in accordance with the Participant's existing
death benefit Distribution Election.
10
<PAGE>
5.5. Hardship Distributions. Upon a finding that a Participant has suffered a
Financial Hardship, the Committee may, in its sole discretion, amend the
existing Deferral Commitment or make distributions from any or all of the
Participant's Accounts. The amount of such distribution shall be limited
to the amount reasonably necessary to meet the Participant's needs
resulting from the Financial Hardship. If payment is made due to Financial
Hardship, the Participant's deferrals under this Plan shall cease for the
period of the Financial Hardship and for 12 months thereafter. Any
resumption of the Participant's deferrals under the Plan after such 12-
month period shall be made only at the election of the Participant in
accordance with Article III above.
5.6. Form of Payment. Unless otherwise specified in this Article V, the
benefits payable from any Account under this Plan shall be paid in one of
the forms of benefit payment described below, as specified by the
Participant in his or her Distribution Election. The most recently
submitted Distribution Election shall be effective for the entire Account
balance unless amended in writing by the Participant and delivered to the
Committee. If the Participant's most recent Distribution Election as to
the form of payment was made within 24 months of the time benefits under
this Plan become due and payable, then the most recent election made by
the Participant more than 24 months prior to the time such benefits become
due and payable shall be used to determine the form of payment. The
permitted forms of benefit payments are:
a) A lump sum amount which is equal to the Account balance; and
b) Annual installments for a period of five years (with respect to the In-
Service Account) or 10 years (with respect to the Retirement Account),
where the annual payment shall be equal to the balance of the Account
immediately prior to the payment, multiplied by a fraction, the
numerator of which is one and the denominator of which is the remaining
number of annual payments. Interest on the unpaid Account balance shall
be based on the most recent allocation among the available Valuation
Funds chosen by the Participant in accordance with Section 4.3 above;
except that the Interest credited to the Interest Rate Subaccount
within the Retirement Account during the pay-out period shall continue
to be the rate declared by the Committee in accordance with Section
2.18 above.
5.7. Small Accounts. If the total of a Participant's unpaid Account balances as
of the Participant's Retirement is less than $5,000, the remaining unpaid
Account(s) shall be paid in a lump sum, notwithstanding any election by
the Participant to the contrary.
5.8. Withholding; Payroll Taxes. The Company shall withhold from any payment
made pursuant to this Plan any taxes required to be withheld from such
payments under local, state or federal law. A Beneficiary, however, may
elect not to have withholding of federal income tax pursuant to Section
3405(a)(2) of the Code or any successor provision thereto.
5.9. Payment to Guardian. If a Plan benefit is payable to a minor or a person
declared incompetent or to a person incapable of handling the disposition
of the property, the Committee may direct payment to the guardian, legal
representative or person having the care and custody of such minor,
incompetent or person. The Committee may require proof of incompetence,
minority, incapacity or guardianship, as it may deem appropriate prior to
distribution. Such
11
<PAGE>
distribution shall completely discharge the Committee and the Company
from all liability with respect to such benefit.
5.10. Effect of Payment. The full payment of the applicable benefit under this
Article V shall completely discharge all obligations on the part of the
Company to the Participant (and the Participant's Beneficiary) with
respect to the operation of this Plan, and the Participant's (and
Participant's Beneficiary's) rights under this Plan shall terminate.
ARTICLE VI - BENEFICIARY DESIGNATION
-----------------------
6.1. Beneficiary Designation. Each Participant shall have the right, at any
time, to designate one or more persons or entity as Beneficiary (both
primary as well as secondary) to whom benefits under this Plan shall be
paid in the event of the Participant's death prior to complete
distribution of the Participant's Account balances. Each Beneficiary
designation shall be on a written form prescribed by the Committee and
shall be effective only when filed with the Committee during the
Participant's lifetime. Designation by a married Participant to the
Participant's spouse of less than a 50% interest in the Participant's
benefits shall not be effective unless the spouse executes a written
consent that acknowledges the effect of the designation, or it is
established that the consent cannot be obtained because the spouse cannot
be located.
6.2. Changing Beneficiary. Any Beneficiary designation may be changed by an
unmarried Participant without the consent of the previously named
Beneficiary by the filing of a new Beneficiary designation with the
Committee. A married Participant's Beneficiary designation may be changed
by the Participant with the consent of the Participant's spouse as
provided for in Section 6.1 above by the filing of a new designation,
which shall cancel all designations previously filed.
6.3. Change in Marital Status. If the Participant's marital status changes
after the Participant has designated a Beneficiary, the following shall
apply:
a) If the Participant is married at death but was unmarried when the
designation was made, the designation shall be void unless the spouse
has consented to it in the manner prescribed in Section 6.1 above.
b) If the Participant is unmarried at death but was married when the
designation was made:
i) The designation shall be void if the spouse was named as
Beneficiary.
ii) The designation shall remain valid if a non-spouse Beneficiary was
named.
c) If the Participant was married when the designation was made and is
married to a different spouse at death, the designation shall be void
unless the new spouse has consented to it in the manner prescribed in
Section 6.1 above.
6.4. No Beneficiary Designation. If any Participant fails to designate a
Beneficiary in the manner
12
<PAGE>
provided above, if the designation is void, or if the Beneficiary
designated by a deceased Participant dies before the Participant or before
complete distribution of the Participant's benefits, the Participant's
Beneficiary shall be the person in the first of the following classes in
which there is a survivor:
a) The Participant's surviving spouse;
b) The Participant's children in equal shares, except that if any of the
children predeceases the Participant but leaves surviving issue, then
such issue shall take by right of representation the share the
deceased child would have taken if living;
c) The Participant's estate.
6.5. Effect of Payment. Payment to the Beneficiary shall completely discharge
the Company's obligations under this Plan.
ARTICLE VII - ADMINISTRATION
--------------
7.1. Committee. The Plan shall be administered by the Committee.
7.2. Powers of the Committee. The Committee shall have all powers necessary to
administer the Plan, including, without limitation, the power to interpret
the provisions of the Plan, to decide all questions of eligibility, to
establish rules and forms for the administration of the Plan, and to
appoint individuals to assist in the administration of the Plan and any
other agents it deems advisable.
7.3. Actions of the Committee. All determinations, interpretations, rules, and
decisions of the Committee with respect to any question arising out of or
in connection with the administration, interpretation and application of
the Plan and the rules and regulations promulgated hereunder shall be
final, conclusive and binding upon all persons having or claiming to have
any interest or right under the Plan.
7.4. Delegation. The Committee shall have the power to delegate specific duties
and responsibilities to officers or other employees of the Company or to
other individuals or entities. The Committee may rescind any delegation at
any time. Except as otherwise required by law, each person or entity to
whom a duty or responsibility has been delegated shall be responsible for
the exercise of such duty or responsibility and shall not be responsible
for any act or failure to act of any other person or entity.
7.5. Indemnification. The Company shall indemnify the members of the Committee,
the members of the Board and all Company officers and other employees
responsible for administering the Plan against any and all liabilities
arising by reason of any act or failure to act made in good faith in
accordance with the provisions of the Plan. For this purpose, liabilities
include expenses reasonably incurred in the defense of any claim relating
to the Plan.
13
<PAGE>
7.6. Reports and Records. The Committee and those to whom the Committee has
delegated duties under the Plan shall keep records of all their
proceedings and actions and shall maintain books of account, records, and
other data as shall be necessary for the proper administration of the Plan
and for compliance with applicable law.
ARTICLE VIII - CLAIMS PROCEDURE
----------------
If a Participant or his or her beneficiary (hereinafter referred to as a
"Claimant") is denied all or a portion of an expected benefit under the Plan for
any reason, he or she may file a claim with the Committee. Such claim shall be
reviewed by the subcommittee of the Committee that is designated to review such
claims. This subcommittee shall notify the Claimant within 90 days after
receipt of the claim (or within 180 days if special circumstances apply) of
allowance or denial of the claim. If the claim for benefits is denied, in whole
or in part, the Claimant will receive a written explanation of:
a) The specific reasons for the denial;
b) The specific references to provisions of the Plan document that support
those reasons;
c) Any additional information that must be provided to improve the claim
and the reasons why that information is necessary; and
d) The procedures that are available for a further review of the claim.
A Claimant is entitled to request a review of any denial of his or her claim by
the full Committee. The request for review must be submitted within 60 days of
receipt of the denial. Absent a request for review within the 60-day period,
the claim shall be deemed to be conclusively denied. The Claimant or his or her
representatives shall be entitled to review all pertinent documents and to
submit issues and comments in writing as part of any request for review. The
Committee may, but shall not be required to, grant the Claimant a hearing as
part of this review process. The Committee will conduct a full and fair review
of the claim and will notify the Claimant of the decision within 60 days (or 120
days if special circumstances apply). The decision must be in writing and will
include the specific reasons and references to Plan provisions on which the
decision is based. The Committee has the exclusive right and discretion to
interpret the provisions of the Plan, and the entitlement to benefits, and its
decision is conclusive and final and not subject to further review.
ARTICLE IX - AMENDMENT AND TERMINATION OF PLAN
---------------------------------
9.1. Amendment. The Board or any duly authorized committee thereof may amend
the Plan, in full or in part, at any time. However, no amendment shall
reduce the amount accrued in any Account as of the date such notice of the
amendment is given.
9.2. Termination. The Company expects the Plan to be permanent, but necessarily
must, and
14
<PAGE>
does, reserve the right to terminate the Plan, by action of the Board, at
any time.
a) Partial Termination. The Board may partially terminate the Plan by
instructing the Committee not to accept any additional Deferral
Commitments. If such a partial termination occurs, the Plan shall
continue to operate and be effective with regard to Deferral
Commitments entered into prior to the effective date of such partial
termination.
b) Complete Termination. The Board may completely terminate the Plan by
instructing the Committee not to accept any additional Deferral
Commitments, and by terminating all ongoing Deferral Commitments. In
the event of complete termination, the Plan shall cease to operate and
the Company shall distribute each Account to the appropriate
Participant.
ARTICLE X - MISCELLANEOUS
-------------
10.1. Unfunded Plan. This plan is an unfunded plan maintained primarily to
provide deferred compensation benefits for a select group of "management
or highly-compensated employees" within the meaning of Sections 201, 301,
and 401 of ERISA, and therefore is exempt from the provisions of Parts 2,
3 and 4 of Title I of ERISA. Accordingly, the Board may terminate the
Plan and make no further benefit payments or remove certain employees as
Participants if it is determined by the United States Department of
Labor, a court of competent jurisdiction, or an opinion of counsel that
the Plan constitutes an employee pension benefit plan within the meaning
of Section 3 (2) of ERISA (as currently in effect or hereafter amended)
which is not so exempt.
10.2. Company Obligation. The obligation to make benefit payments to any
Participant under the Plan shall be an obligation solely of the Company.
10.3. Unsecured General Creditor. Notwithstanding any other provision of this
Plan, Participants and Participants' Beneficiaries shall be unsecured
general creditors, with no secured or preferential rights to any assets
of the Company or any other party for payment of benefits under this
Plan. Any property held by the Company for the purpose of generating the
cash flow for benefit payments shall remain its general, unpledged and
unrestricted assets. The Company's obligation under the Plan shall be an
unfunded and unsecured promise to pay money in the future.
10.4. Trust Fund. The Company shall be responsible for the payment of all
benefits provided under the Plan. At its discretion, the Company may
establish one or more trusts, with such trustees as the Committee may
approve, for the purpose of assisting in the payment of such benefits.
Although such a trust shall be irrevocable, its assets shall be held for
payment of all of the Company's general creditors in the event of
insolvency. To the extent any benefits provided under the Plan are paid
from any such trust, the Company shall have no further obligation to pay
them. If not paid from the trust, such benefits shall remain the
obligation of the Company.
15
<PAGE>
10.5. Nonassignability. Neither a Participant nor any other person shall have
any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate or convey in
advance of actual receipt the amounts, if any, payable hereunder, or any
part thereof, which are, and all rights to which are, expressly declared
to be unassignable and non-transferable. No part of the amounts payable
shall, prior to actual payment, be subject to seizure or sequestration
for the payment of any debts, judgments, alimony or separate maintenance
owed by a Participant or any other person, nor be transferable by
operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency.
10.6. Not a Contract of Employment. This Plan shall not constitute a contract
of employment between the Company and any Participant. Nothing in this
Plan shall give a Participant the right to be retained in the service of
the Company or to interfere with the right of the Company to discipline
or discharge a Participant at any time.
10.7. Protective Provisions. A Participant will cooperate with the Company by
furnishing any and all information requested by the Company in order to
facilitate the payment of benefits hereunder, and by taking such physical
examinations as the Company may deem necessary and taking such other
action as may be requested by the Company.
10.8. Governing Law. The provisions of this Plan shall be construed and
interpreted according to the laws of the State of Illinois, except as
preempted by federal law.
10.9. Validity. If any provision of this Plan shall be held illegal or invalid
for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as
if such illegal and invalid provision had never been inserted herein.
10.10. Successors. The provisions of this Plan shall bind and inure to the
benefit of the Company and its successors and assigns. The term
successors as used herein shall include any corporate or other business
entity which shall, whether by merger, consolidation, purchase or
otherwise, acquire all or substantially all of the business and assets
of the Company, and successors of any such corporation or other business
entity.
10.11. Severability. If any provision of the Plan shall be found to be invalid
or unenforceable by a court of competent jurisdiction, the validity or
enforceability of the remaining provisions of the Plan shall remain in
full force and effect.
16
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Plan to be executed on this
26th day of May, 1999.
TRUE NORTH COMMUNICATIONS INC.
By: /s/ Paul Sollitto
-------------------------
Its: VP - Human Resources
--------------------
17
<PAGE>
Exhibit 10. 12
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement") dated and effective as of December
1, 1997 between True North Communications Inc., a Delaware corporation (the
"Company"), and Bruce Mason (the "Executive").
WHEREAS, the Company is a global communications holding company which owns
companies engaged in the advertising agency business, the multimedia production
business, the business of planning and buying of media time and space and
related businesses.
WHEREAS, the Executive currently serves as Chairman and Chief Executive
Officer of the Company pursuant to an Employment Agreement dated as of July 30,
1997 (the "Existing Employment Agreement").
WHEREAS, pursuant to the Existing Employment Agreement, such service is
scheduled to end on February 28, 1999.
WHEREAS, the Company desires that the Executive continue to serve as the
Chief Executive Officer of the Company for an additional month.
WHEREAS, the Company and the Executive desire to replace the Existing
Employment Agreement (insofar as it relates to periods from and after the date
hereof) with this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereby agree as follows:
1. Employment. The Company hereby employs the Executive and the
Executive hereby agrees to be employed by the Company upon the terms and subject
to the conditions contained in this Agreement. The term of full-time employment
of the Executive by the Company pursuant to this Agreement (the "Full-Time
Employment Period") shall commence on the date hereof and, unless extended by
mutual agreement of the Company and the Executive or earlier terminated pursuant
to Section 4, shall end sixteen months thereafter.
2. Position and Duties; Responsibilities.
(a) Position and Duties. The Company shall employ the Executive during
the Full-Time Employment Period as its principal executive officer, with the
title of Chief Executive Officer. During the Full-Time Employment Period, the
Executive shall perform faithfully and loyally and to the best of his abilities
the duties assigned to him hereunder, shall devote his full business time,
attention and effort to the affairs of the Company and shall use his reasonable
best efforts to promote the interests of the
<PAGE>
Company. Notwithstanding the foregoing, the Executive may engage in charitable,
civic or community activities and, with the prior approval of the Board of
Directors of the Company (the "Board"), may serve as a director of any business
corporation, provided that such activities or service do not violate the terms
of any of the covenants contained in Section 10 or Section 11.
(b) Responsibilities. The Executive shall report directly to the Board.
Subject to the powers, authority and responsibilities vested in the Board and in
duly constituted committees of the Board, the Executive shall have all the
authority and responsibility of the principal executive officer of a
corporation, including without limitation authority and responsibility for the
formulation and execution of the corporate policy of the Company. Accordingly,
the chief executive of each company owned by the Company that is engaged in the
global advertising agency business shall report directly to the Executive. The
Executive shall also perform such other duties (not inconsistent with the
position of principal executive officer) on behalf of the Company and its
subsidiaries as may from time to time be authorized or directed by the Board and
as are customarily exercisable by a chief executive officer. Notwithstanding any
other provision of this Agreement, the Executive shall be permitted to express
to the Board and to the stockholders of the Company his views on any matter
presented to, considered by or raised by the Board or such stockholders.
3. Compensation.
(a) Salary, VIC and DVIC. With respect to the Full-Time Employment
Period, the Company shall pay to the Executive a salary at the annual rate of
$600,000 and variable incentive compensation ("VIC") and deferred variable
incentive compensation ("DVIC") in accordance with the Company's Performance
Program, provided that the aggregate amount of such salary, VIC and DVIC for the
remainder of calendar year 1997 and for each subsequent calendar year or portion
thereof during the Full-Time Employment Period shall be not less than the
greater of (i) the amount for such period based on an annual rate of not less
than $1,350,000 and (ii) the aggregate amount of salary and bonus for such
period paid to the President of the Company (such greater amount, annualized if
for a period of less than a full calendar year, being referred to as the
"Calendar Year Minimum Compensation") and that any payment required to be made
by this proviso shall be deemed to be VIC.
(b) Stock Options. During the Full-Time Employment Period, the Executive
shall be entitled to receive variable incentive stock options in accordance with
the Company's variable incentive stock option program, and in any event shall be
entitled to receive variable incentive stock options at least equivalent to
options received by the Company's President. In addition, the Company covenants
that the Compensation Committee shall take such actions as may be necessary,
including approval of stock option agreements with respect to the future grant
of stock options to the Executive, so that upon the termination of the Full-Time
Employment Period all of the stock options theretofore granted to the Executive
by the Company then held by the Executive shall be fully exercisable until the
end of the term thereof. The Company assumes no responsibility for any liability
of the Executive under Section 16 of the Securities Exchange Act of 1934
relating in any manner, directly or indirectly, to the amendment of such stock
options.
<PAGE>
(c) Other Benefits. During the Full-Time Employment Period, the Executive
shall be entitled to participate in the Company's employee benefit plans
generally available to senior executives of the Company, including group health,
life, short-term disability, long-term disability, pension, profit sharing,
profit-sharing integration, stock purchase, stock purchase integration and
nonqualified deferred compensation and retirement plans and the plans or
programs for the allowance for or the reimbursement of automobile expenses,
financial planning expenses and club dues and any other plans of general
application to employees on the date hereof and such plans and programs adopted
hereafter for the benefit of senior executives of the Company (all such benefits
being hereinafter referred to as the "Employee Benefits"), in the case of plans
or programs in effect on the date hereof on terms no less favorable than their
terms on the date hereof; provided that all retirement benefits shall be based
upon plans in effect on the date hereof, subject to modifications of general
application to all employees. The Executive shall be entitled to take time off
for vacation or illness in accordance with the Company's policy for senior
executives and to receive all other fringe benefits as are from time to time
made generally available to senior executives of the Company.
(d) Expense Reimbursement. During the Full-Time Employment Period, the
Company shall reimburse the Executive for all proper expenses incurred by him in
the performance of his duties hereunder in accordance with the Company's
policies and procedures.
4. Termination of Full-Time Employment Period; Suspension.
(a) Termination. The Full-Time Employment Period shall be terminated upon
the first to occur of (i) the expiration thereof pursuant to Section 1, (ii)
termination by the Company at any time without Cause (as such term is defined in
Section 4(b)) upon written notice given to the Executive at least 30 days prior
to such termination, (iii) termination by the Company at any time for Cause upon
written notice given to the Executive at least 10 days prior to such
termination, (iv) termination by the Company on account of the Executive's
having become unable (as determined by the Board in good faith and certified by
a physician chosen by the Company and acceptable to the Executive) to regularly
perform his duties hereunder by reason of illness or incapacity for a period of
more than six consecutive months ("Termination for Disability"), or (v) the
Executive's death. Upon termination of the Full-Time Employment Period, the
Executive shall automatically and without further action on his part be deemed
to have resigned from all offices and directorships with the Company and its
subsidiaries and affiliates.
(b) Definition of Cause. For purposes of this Agreement, "Cause" shall
mean (i) the commission of a felony, (ii) the commission of any act which
involves both dishonesty with respect to the Company or any of its subsidiaries
and moral turpitude and causes the Company to be viewed in a materially
unfavorable light by its customers, employees or investors, (iii) material
willful misconduct with respect to the Company or any of its subsidiaries,
provided that if it reasonably could be concluded that such alleged material
willful misconduct did not occur or was not material or willful or misconduct
and if such alleged material willful misconduct is curable, the Executive shall
have 30 days following written notice thereof to the Executive to cure such
alleged material
<PAGE>
willful misconduct unless the Company, in its good faith judgment, determines
that such cure period must be shorter to avoid harm to the Company, in which
case such cure period shall be such lesser number of days as shall be determined
in good faith by the Company and set forth in such written notice to the
Executive, commencing upon such written notice to the Executive, or (iv) breach
of any provision of Section 10, 11 or 12.
(c) Suspension. If the Company shall determine that the Executive has
committed any act or acts which constitute Cause and shall notify the Executive
thereof in writing and if the Executive shall deny that he committed such act or
acts or that such act or acts constitute Cause and shall notify the Company of
such denial in writing within seven days following the Company's written notice
to the Executive, the Board may, in its sole and absolute discretion, suspend
the Executive with full compensation and benefits during the pendency of any
investigation or arbitration with respect thereto.
5. Consequences of Termination of Full-Time Employment Period.
(a) Expiration or Termination Without Cause. If the Full-Time Employment
Period terminates for a reason set forth in clause (i) or (ii) of Section 4(a),
the commencement of the Company's Directors Part-Time Employment Agreement shall
be deferred until the end of the Initial Part-Time Employment Period (as such
term is defined in Section 6(a)) or until the end of the Vested Period (as such
term is defined in Section 5(a)(iv)), respectively, and in lieu of any severance
amounts which otherwise would be payable to the Executive:
(i) the Executive shall be entitled to receive (A) all salary payable
with respect to the period through the date of such termination, (B)
unpaid VIC and DVIC for the prior calendar year, (C) VIC and DVIC for the
then current calendar year, prorated through the date of such termination
based on actual results of operations for full calendar year and (D)
reimbursement of expenses incurred through the date of such termination;
provided, that in determining the aggregate amount of the salary payable
pursuant to clause (A) of this Section 5(a)(i) and the VIC and DVIC
payable pursuant to clause (C) of this Section 5(a)(i), the Calendar Year
Minimum Compensation shall be prorated through the date of such
termination;
(ii) each stock option theretofore granted to the Executive by the
Company then held by the Executive shall, on the date of such
termination, be exercisable for the full term of such option in
accordance with the applicable stock option agreement in effect at the
time of such termination (giving effect to this provision);
(iii) if the Full-Time Employment Period terminates for reason set forth
in clause (i) of Section 4(a), the Executive shall become a part-time
employee of the Company entitled to the compensation and benefits payable
during the Initial Part-Time Employment Period in accordance with Section
6(c); and
<PAGE>
(iv) if the Full-Time Employment Period terminates for reason set forth
in clause (ii) of Section 4(a), (A) during the period of two and one-half
years following the termination of the Full-Time Employment Period (the
"Vested Period"), the Executive (or, in the event of his disability, his
legal representative, as applicable) shall receive the compensation and
benefits described in Section 6(c)(i) and Section 6(c)(ii) as if the
Vested Period were the Initial Part-Time Employment Period and such
Initial Part-Time Employment Period could neither be terminated early nor
suspended and (B) following the Vested Period, the Executive shall be
entitled to the compensation and benefits set forth in the Company's
Directors Part-Time Employment Agreement upon the terms set forth therein
on the date hereof, but with all age and service requirements deemed to
have been satisfied and with the benefit calculated at 45% of final
average annual compensation (as defined in such Agreement) regardless of
actual service, and payments thereunder shall be made for the period
commencing on the day following the expiration of the Vested Period and
continuing for five years thereafter. In the event of the Executive's
death during the Vested Period, his executor shall be entitled to the
compensation set forth in clause (A) of the previous sentence until the
expiration of the Vested Period and the Executive's spouse shall be
entitled to the continuation of medical insurance coverage on the same
basis as theretofore provided to the Executive until the expiration of
the Vested Period and following the Vested Period the compensation and
benefits set forth in the Company's Directors Part-Time Employment
Agreement shall become payable upon the terms set forth therein on the
date hereof, but with all age and service requirements deemed to have
been satisfied and with the benefit calculated at 45% of final average
annual compensation (as defined in such Agreement) regardless of actual
service, and payments thereunder shall be made for the period commencing
on the day following the expiration of the Vested Period and continuing
for five years thereafter.
(b) Termination for Cause. If the Full-Time Employment Period terminates
for any reason set forth in clause (iii) of Section 4(a), the Executive shall be
entitled to receive (i) all salary payable with respect to the period through
the date of such termination, (ii) unpaid VIC and DVIC for the prior calendar
year, (iii) VIC and DVIC for the then current calendar year, prorated through
the date of such termination based on actual results of operations for such full
calendar year, (iv) reimbursement of expenses incurred through the date of such
termination and (v) any other benefits accrued through the date of such
termination; provided that in determining the aggregate amount of the salary
payable pursuant to clause (i) of this Section 5(b) and the VIC and DVIC payable
pursuant to clause (iii) of this Section 5(b), the Calendar Year Minimum
Compensation shall be prorated through the date of such termination. In
addition, (A) during the Vested Period, the Executive (or, in the event of his
disability, his legal representative, as applicable) shall receive the
compensation and benefits described in Section 6(c)(i) and Section 6(c)(ii) as
if the Vested Period were the Initial Part-Time Employment Period and such
Initial Part-Time Employment Period could neither be terminated early nor
suspended and (B) following the Vested Period, unless the Cause that gave rise
to such termination would have permitted the Company to terminate the Initial
Part-Time
<PAGE>
Employment Period had it occurred during the Initial Part-Time Employment
Period, the Executive shall be entitled to the compensation and benefits set
forth in the Company's Directors Part-Time Employment Agreement upon the terms
set forth therein on the date hereof, but as if such termination had been
without cause and with all age and service requirements deemed to have been
satisfied and with the benefit calculated at 45% of final average annual
compensation (as defined in such Agreement) regardless of actual service, and
payments thereunder shall be made for the period commencing on the day following
the expiration of the Vested Period and continuing for five years thereafter. In
the event of the Executive's death during the Vested Period, his executor shall
be entitled to the compensation set forth in clause (A) of the previous sentence
until the expiration of the Vested Period and the Executive's spouse shall be
entitled to the continuation of medical insurance coverage on the same basis as
theretofore provided to the Executive until the expiration of the Vested Period
and following the Vested Period, unless the Cause that gave rise to the
termination of the Full-Time Employment Period would have permitted the Company
to terminate the Initial Part-Time Employment Period had it occurred during the
Initial Part-Time Employment Period, the compensation and benefits set forth in
the Company's Directors Part-Time Employment Agreement shall become payable upon
the terms set forth therein on the date hereof, but as if the termination of the
Full-Time Employment Period had been without cause and with all age and service
requirements deemed to have been satisfied and with the benefit calculated at
45% of final average annual compensation (as defined in such Agreement)
regardless of actual service, and payments thereunder shall be made for the
period commencing on the day following the expiration of the Vested Period and
continuing for five years thereafter. Except as provided above in this Section
6(b), the Executive shall not be entitled to any compensation or benefits under
the Company's Directors Part-Time Employment Agreement or any other severance
payments.
(c) Disability or Death. If the Full-Time Employment Period terminates
for a reason set forth in clause (iv) or (v) of Section 4(a), commencement of
the Company's Directors Part-Time Employment Agreement shall be deferred until
the end of the Vested Period and in lieu of any severance amounts which
otherwise would be payable to the Executive the Executive or his executor,
administrator or other legal representative, as the case may be, shall be
entitled to the payments and benefits set forth in Section 5(a)(i) and Section
5(a)(ii) and during the Vested Period the Executive or his executor,
administrator or other legal representative, as the case may be, shall be
entitled to the compensation set forth in Section 6(c)(i), and (A) in the case
of Termination for Disability, the Executive shall be entitled to the benefits
set forth in Section 6(c)(ii) (and in the event the Executive dies prior to the
end of the Vested Period, the Executive's spouse shall be entitled to the of
medical insurance coverage on the same basis as theretofore provided to the
Executive until the end of the Vested Period) or (B) in the case of termination
on account of the Executive's death, the Executive's spouse shall be entitled to
the continuation of medical insurance coverage on the same basis as theretofore
provided to the Executive until the end of the Vested Period and, in either
case, the compensation and benefits set forth in the Company's Directors Part-
Time Employment Agreement shall become payable upon the terms set forth therein
on the date hereof, but with all age and service requirements deemed to have
been satisfied and with the benefit calculated at 45% of final average annual
compensation (as defined in such Agreement) regardless of actual service, for
the
<PAGE>
period commencing on the day following the expiration of the Vested Period and
continuing for five years thereafter.
6. Initial Part-Time Employment Period.
(a) Commencement. If the Full-Time Employment Period terminates for a
reason set forth in clause (i) of Section 4(a), the Executive shall become a
part-time employee of the Company for the period commencing upon termination of
the Full-Time Employment Period and ending on September 30, 2001 (the "Initial
Part-Time Employment Period").
(b) Position and Duties. During the Initial Part-Time Employment Period
the Executive shall be a part-time employee of the Company and shall make
himself available, upon reasonable notice (reasonableness to include, but not be
limited to, a good faith effort to accommodate the schedules and time needs of
the parties), to perform services for the Company which (i) shall be related to
such projects and matters as the Board or the Chief Executive Officer of the
Company may designate from time to time, (ii) are commensurate with the
Executive's years of experience and level of skill and (iii) are similar to the
services rendered by the Executive prior to the termination of the Full-Time
Employment Period, including, but not limited to, the duties set forth in
Section 12. The Executive shall not be required to devote more than 10 days
during any calendar quarter to the performance of such services.
(c) Compensation. As compensation for the services to be performed by the
Executive during the Initial Part-Time Employment Period, the Executive shall
receive the following compensation and benefits in accordance with the Company's
normal payroll policies:
(i) cash compensation shall be paid to the Executive during the Initial
Part-Time Employment Period at the rate of $1,350,000 per year;
(ii) the Employee Benefits shall continue to be paid to the Executive
during the Initial Part-Time Employment Period, in the case of Employee
Benefits in effect on the date hereof on terms no less favorable than
their terms on the date hereof; provided that coverage for the Executive
under the Company's long-term disability insurance plan shall cease upon
termination of the Full-Time Employment Period; provided further that all
retirement benefits shall be based upon plans in effect on the date
hereof, subject to modifications of general application to all employees;
and provided further that for the year in which the Full-Time Employment
Period terminates contributions shall be made to a supplemental
retirement plan for the benefit of the Executive in an amount which,
together with any contributions made for such year for the benefit of the
Executive under the Company's Profit Sharing Retirement Plan, Profit
Sharing Integration Plan, Stock Purchase Plan and Stock Purchase
Integration Plan, is equal to the contributions which would have been
made for such year for the benefit of the Executive under such plans
based upon compensation received by the Executive during such year
notwithstanding the hours of service conditions of such plans; and
<PAGE>
(iii) the Company shall reimburse the Executive in accordance with the
Company's policies and procedures for all proper expenses incurred by him
in the performance of his duties during the Initial Part-Time Employment
Period.
7. Termination of Initial Part-Time Employment Period; Suspension.
(a) Termination. The Initial Part-Time Employment Period shall be
terminated on the first to occur, after the termination of the Full-Time
Employment Period, of (i) September 30, 2001, (ii) termination thereof by the
Company at any time for Cause upon written notice given to the Executive at
least 10 days prior to such termination, (iii) Termination for Disability or
(iv) the Executive's death.
(b) Suspension. If the Company shall determine that the Executive has
committed any act or acts which constitute Cause and shall notify the Executive
thereof in writing and if the Executive shall deny that he committed such act or
acts or that such act or acts constitute Cause and shall notify the Company of
such denial in writing within seven days following the Company's written notice
to the Executive, the Board may, in its sole and absolute discretion, suspend
the Executive with full compensation and benefits during the pendency of any
investigation or arbitration with respect thereto.
8. Consequences of Termination of Initial Part-Time Employment Period.
(a) Expiration. If the Initial Part-Time Employment Period terminates on
September 30, 2001, in lieu of any severance amounts which otherwise would be
payable to the Executive, the Executive shall thereafter be entitled to the
compensation and benefits set forth in the Company's Directors Part-Time
Employment Agreement upon the terms set forth therein on the date hereof, but
with all age and service requirements deemed to have been satisfied and with the
benefit calculated at 45% of final average annual compensation (as defined in
such Agreement) regardless of actual service, and payments thereunder shall be
made for the period commencing on October 1, 2001 and continuing for five years
thereafter.
(b) Termination for Cause. If the Initial Part-Time Employment Period is
terminated by the Company for Cause, during the remainder of the Vested Period
the Executive (or, in the event of his disability, his legal representative, as
applicable) shall receive the compensation and benefits described in Section
6(c)(i) and Section 6(c)(ii) as if the Initial Part-Time Employment Period had
not been terminated, but the Executive shall not be entitled to any compensation
or benefits under the Company's Directors Part-Time Employment Agreement or any
other severance payments. In the event of the Executive's death during the
Vested Period, his executor shall be entitled to such compensation until the
expiration of the Vested Period and the Executive's spouse shall be entitled to
the continuation of medical insurance coverage on the same basis as theretofore
provided to the Executive until the end of the Vested Period.
(c) Disability or Death. If the Initial Part-Time Employment Period
terminates as a result of a Termination for Disability or the Executive's death,
in lieu of any severance
<PAGE>
amounts which otherwise would be payable to the Executive, the Executive or his
executor, administrator or other legal representative, as the case may be, shall
be entitled to the compensation set forth in Section 6(c)(i) until September 30,
2001 and (i) in the case of Termination for Disability, the Executive shall be
entitled to the benefits set forth in Section 6(c)(ii) until September 30, 2001
(and, in the event the Executive dies prior to September 30, 2001, the
Executive's spouse shall be entitled to the continuation of medical insurance
coverage on the same basis as theretofore provided to the Executive until
September 30, 2001) or (ii) in the case of termination on account of the
Executive's death, the Executive's spouse shall be entitled to the continuation
of medical insurance coverage on the same basis as theretofore provided to the
Executive until September 30, 2001 and, in either case, the compensation and
benefits set forth in the Company's Directors Part-Time Employment Agreement
shall become payable upon the terms set forth therein on the date hereof, but
with all age and service requirements deemed to have been satisfied and with the
benefit calculated at 45% of final average annual compensation (as defined in
such Agreement) regardless of actual service, for the period commencing on
October 1, 2001 and continuing for five years thereafter.
9. Federal and State Withholding. The Company shall deduct from the
amounts payable to the Executive pursuant to this Agreement the amount of all
required federal and state withholding taxes in accordance with the Executive's
Form W-4 on file with the Company and all applicable social security taxes.
10. Noncompetition; Nonsolicitation.
(a) The Executive acknowledges that in the course of his employment with
the Company pursuant to his Agreement he will become familiar, and during the
course of his employment with the Company or any of its subsidiaries prior to
the date of this Agreement he has become familiar, with trade secrets and
customer lists of, and other confidential information concerning, the Company
and its subsidiaries, affiliates and clients and that his services have been and
will be of special, unique and extraordinary value to the Company.
(b) The Executive agrees that during the Full-Time Employment Period and
for a period of five years thereafter (the "Noncompetition Period") he shall not
in any manner, directly or indirectly, through any person, firm or corporation,
alone or as a member of a partnership or as an officer, director, stockholder,
investor or employee of or consultant to any other corporation or enterprise or
otherwise, engage or be engaged, or assist any other person, firm, corporation
or enterprise in engaging or being engaged, in any business being conducted by
the Company or any of its subsidiaries as of the termination of the Full-Time
Employment Period in any geographic area in which the Company or any of its
subsidiaries is then conducting such business. Within seven days following the
termination of the Full-Time Employment Period, the Company shall deliver to the
Executive a written description of the businesses being conducted by the Company
and its subsidiaries as of the date of such termination and the respective
geographic areas in which such businesses are then being conducted; provided,
however, that if the Company shall fail to deliver such written description
within such seven-day period, the Executive may deliver to the Company a written
demand therefor and the Company shall have seven days following the delivery of
such written demand to deliver such written
<PAGE>
description to the Executive. The Executive shall have no liability for any
breach of the covenant contained in this Section 10(b) which may occur during
the period commencing on the termination of the Full-Time Employment Period and
ending on the date of the delivery of such written description to the Executive,
provided that the Executive shall have attempted in good faith to comply with
such covenant during such period. Notwithstanding the foregoing, subsequent to
the termination of the Full-Time Employment Period the Executive may engage or
be engaged, or assist any other person, firm, corporation or enterprise in
engaging or being engaged, in any business activity which is competitive with a
business activity being conducted by the Company or any of its subsidiaries at
the time of termination of the Full-Time Employment Period only if, at least 60
days prior to the commencement of such competitive activity, the Executive
delivers to the Company a written release, in form and substance satisfactory to
the Company, releasing the Company from all further obligations to the Executive
pursuant to this Agreement, pursuant to the Company's Directors Part-Time
Employment Agreement, pursuant to any other agreement or arrangement with the
Company or any subsidiary of the Company or otherwise, other than the right of
the Executive to receive benefits under any retirement plan of the Company; and
provided further, that nothing contained in this Section 10(b) shall release or
otherwise affect the obligations of the Executive contained in Section 11 of
this Agreement.
(c) The Executive further agrees that during the Non-competition Period he
shall not (i) in any manner, directly or indirectly, induce or attempt to induce
any employee of the Company or any of its subsidiaries or affiliates to
terminate or abandon his or her employment for any purpose whatsoever, or (ii)
in connection with any business to which Section 10(b) applies, call on,
service, solicit or otherwise do business with any client of the Company or any
of its subsidiaries; provided, however, that the restriction contained in clause
(i) of this Section 10(c) shall not apply to, or interfere with, the proper
performance by the Executive of his duties pursuant to Section 2 of this
Agreement.
(d) Nothing in this Section 10 shall prohibit the Executive from being (i)
a stockholder in a mutual fund or a diversified investment company or (ii) a
passive owner of not more than two percent of the outstanding stock of any class
of a corporation so long as the Executive has no active participation in the
business of such corporation.
(e) If, at any time of enforcement of this Section 10, a court or an
arbitrator holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
11. Confidentiality. The Executive shall not, at any time during the
Full-Time Employment Period, the Initial Part-Time Employment Period, the
duration of the Company's Directors Part-Time Employment Agreement or
thereafter, make use of or disclose, directly or indirectly, any (i) trade
secret or other confidential or secret information of the Company or of any of
its subsidiaries, affiliates or clients or (ii) other technical, business,
proprietary or financial information of the Company or of any of its
<PAGE>
subsidiaries, affiliates or clients not available to the public generally or to
the competitors of the Company or to the competitors of any of its subsidiaries
or affiliates, in each case that the Executive obtained as a result of his
employment by the Company or any of its subsidiaries ("Confidential
Information"), except to the extent that such Confidential Information (a) is
used by the Executive during the Full-Time Employment Period in the proper
performance of his duties pursuant to this Agreement, (b) is disclosed by the
Executive to his legal counsel in connection with legal services performed by
such counsel for the Executive, provided that such disclosure is made on a
confidential basis, (c) becomes a matter of public record or is published in a
newspaper, magazine or other periodical available to the general public, other
than as a result of any act or omission of the Executive outside the proper
performance of his duties pursuant to this Agreement, or (d) is required to be
disclosed by any law, regulation or order of any court or regulatory commission,
department or agency. Promptly following the termination of the Full-Time
Employment Period, the Executive shall surrender to the Company all records,
memoranda, notes, plans, reports, computer tapes and software and other
documents and data which constitute Confidential Information which he may then
possess or have under his control (together with all copies thereof); provided,
however, that the Executive may retain copies of such documents as are necessary
for the preparation of his federal or state income tax returns; and provided
further that if the Company believes that not all Confidential Information which
the Executive may then possess or have under his control has been surrendered to
the Company, the Company shall request with specificity the Confidential
Information to be surrendered by the Executive. The Executive shall have a
reasonable period of time following such request to surrender such Confidential
Information which in no event shall be less than 15 or more than 30 days
following such request and, if the Executive makes a good faith effort to comply
with such request, his failure to surrender any Confidential Information shall
not constitute Cause for purposes of Section 4(b)(iv) hereof.
12. Nondisparagement; Cooperation.
(a) The Executive shall not, at any time during the Full-Time Employment
Period, the Initial Part-Time Employment Period or the duration of the Company's
Directors Part-Time Employment Agreement or thereafter, make any statement,
publicly or privately, which would disparage the Company, its business or any
director or officer of the Company or would have a deleterious effect upon the
interests of the Company's business or its stockholders; provided, however, that
the Executive shall not be in breach of this restriction if such statements
consist solely of (i) private statements made to any officers, directors or
employees of the Company by the Executive in the course of carrying out his
duties pursuant to this Agreement or (ii) private statements made to persons
other than clients or competitors of the Company or any of its subsidiaries or
its affiliates (or their representatives) or members of the press or the
financial community that do not have a material adverse effect upon the Company;
and provided further that nothing contained in this Section 12(a) or in any
other provision of this Agreement shall preclude the Executive from making any
statement in good faith which is required by law, regulation or order of any
court or regulatory commission, department or agency. During the Full-Time
Employment Period, the Initial Part-Time Employment Period and the duration of
the Company's Directors Part-Time Employment Agreement and upon
<PAGE>
reasonable notice and at the expense of the Company, the Executive shall take
such actions as the Company shall reasonably request (reasonableness to include,
but not be limited to, a good faith effort to accommodate the schedules and time
needs of the parties) in furtherance of the client relationships of the Company
and its subsidiaries. Upon the termination of the Full-Time Employment Period,
the Executive shall urge the clients of the Company and its subsidiaries to
maintain their relationships with the Company and its subsidiaries, which
action, together with any other actions required under this Agreement, shall not
require the Executive to perform services (i) during the Initial Part-Time
Employment Period in excess of the limit of 10 days of service during any
calendar quarter set forth in Section 6(b) or (ii) during the duration of the
Company's Directors Part-Time Employment Agreement in excess of 10 days during
any calendar quarter.
(b) The Company shall not, at any time during the Full-Time Employment
Period, the Initial Part-Time Employment Period or the duration of the Company's
Directors Part-Time Employment Agreement or thereafter, authorize any person to
make or allow, nor shall the Company condone the making of, any statement,
publicly or privately, which would disparage the Executive; provided, however,
that the Company shall not be in breach of this restriction if such statements
consist solely of (i) private statements made to any officers, directors or
employees of the Company or (ii) private statements made to persons other than
clients or competitors of the Company or any of its subsidiaries or affiliates
(or their representatives) or members of the press or the financial community
that do not have a materially adverse effect upon the Executive; and provided
further that nothing contained in this Section 12(b) shall preclude any officer,
director, employee, agent or other representative of the Company from making any
statement in good faith which is required by any law, regulation or order of any
court or regulatory commission, department or agency.
13. Enforcement. The parties hereto agree that the Company would be damaged
irreparably in the event that any provision of section 10, 11, or 12 of this
Agreement were not performed in accordance with its terms or were otherwise
breached and that money damages would be an inadequate remedy for any such
nonperformance or breach. Accordingly, the Company and its successors or
permitted assigns shall be entitled, in addition to other rights and remedies
existing in their favor, to an injunction or injunctions to prevent any breach
or threatened breach of any of such provisions and to enforce such provisions
specifically (without posting a bond or other security). Each of the parties
agrees that he or it will submit himself or itself to the personal jurisdiction
of the courts of the State of Illinois in any action by the other party to
enforce an arbitration award against him or it or to obtain interim injunctive
or other relief pending an arbitration decision.
14. Survival. Sections 10, 11, 12 and 13 of this Agreement shall survive and
continue in full force and effect in accordance with their respective terms,
notwithstanding any termination of the Full-Time Employment Period, the Initial
Part-Time Employment Period or the duration of the Company's Directors Part-Time
Employment Agreement.
<PAGE>
15. 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 good faith in connection with this arbitration
provision, including without limitation in connection with any such application
undertaken by the Executive in good faith, as well as for all such 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 States Federal
Arbitration Act shall govern the interpretation and enforcement of this
arbitration provision.
16. Expenses of this Agreement. The Company shall pay the Executive's legal
fees and expenses incurred in connection with this Agreement, in an amount not
to exceed $30,000, promptly upon submission to the Company of a detailed
statement therefor, subject to approval of the Company's General Counsel.
17. Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed given when (a) delivered
personally or by overnight courier to the following addresses of the other party
hereto and his or its counsel (or such other address for such party or his or
its counsel as shall be specified by notice given pursuant to this Section 17)
or (b) sent by facsimile to the following facsimile numbers of the other party
hereto and his or its counsel (or such other facsimile number for such party or
his or its counsel as shall be specified by notice given pursuant to this
Section 17), with the confirmatory copy delivered by overnight courier to the
addresses of such party and his or its counsel pursuant to this Section 17:
(a) if to the Company, to:
Chief Human Resources Officer
True North Communications Inc.
101 East Erie Street
Chicago, Illinois 60611-2897
Facsimile No.: 312-425-6350
<PAGE>
with a copy to:
Thomas A. Cole
Sidley & Austin
One First National Plaza
Chicago, Illinois 60603
Facsimile No.: 312-853-7036
(b) if to the Executive, to:
Bruce Mason
618 Dock Drive
Barrington, Illinois 60010
Facsimile No.: 847-381-8416
with a copy to:
Melvin S. Adess
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Facsimile No.: 312-861-2200
18. Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under applicable law or rule in any jurisdiction,
such invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision of this Agreement or the
validity, legality or enforceability of such provision in any other
jurisdiction, but this Agreement shall be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
19. Entire Agreement. This Agreement constitutes the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supersedes and preempts any prior understanding, agreements or representations
by or between the parties, written or oral, which may have related in any manner
to the subject matter hereof; it being understood that this Agreement relates to
the terms of the Executive's employment from and after the date hereof and
nothing herein supersedes or preempts the Existing Employment Agreement insofar
as it applies to periods prior to the date hereof.
20. Successors and Assigns. This Agreement shall be enforceable by the
Executive and his heirs, executors, administrators and legal representatives,
and by the Company and its successors and permitted assigns. Any successor of
the Company shall assume the liabilities of the Company hereunder. This
Agreement shall not be assigned by the Company other than to a successor
pursuant to a merger, consolidation or transfer
<PAGE>
of all or substantially all of the capital stock or assets of the Company. The
Executive's rights pursuant to this Agreement shall continue notwithstanding any
change in control (as defined in the Directors Part-Time Employment Agreement).
21. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Illinois without
regard to principles of conflict of laws.
22. Amendment and Waiver. The provisions of this Agreement may be amended or
waived only by the written agreement of the Company and the Executive, and no
course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.
23. Counterparts. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original and both of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
TRUE NORTH COMMUNICATIONS INC.
By: /s/ Richard P. Mayer
--------------------
Richard P. Mayer
Chairman of the Compensation
Committee of the Board of
Directors
/s/ Bruce Mason
---------------
Bruce Mason
<PAGE>
Exhibit 10.14
July 30, 1997
True North Communications Inc.
101 East Erie Street
Chicago, IL 60611-2897
Ladies and Gentlemen:
Reference is made to the Employment Agreement dated as of December 31,
1996, between True North Communications Inc. (the "Company") and the
undersigned, which together with the letter dated June 19, 1997, from Paul
Sollitto to Lisa Gersh Hall (a copy of which is attached) constitutes the
Employment Agreement.
As a member of the Board of Directors, I am familiar with the proposed
Agreement and Plan of Merger among the Company, one of its subsidiaries and
Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("BJK&E") to be entered into as of the
date hereof (the "Merger Agreement"). For purposes of this letter, the
"Contemplated Changes" mean (i) the Merger expressly described in the Merger
Agreement and (ii) the board governance, management arrangements and corporate
structure expressly described in the Merger Agreement; provided, however, that
the plan of succession referred to in Section 5.16 of the Merger Agreement shall
not be included in the definition of Contemplated Changes. This will confirm
that, for so long as each of the individuals identified in Section 5.16 hold the
positions referred to therein, I waive my right to assert that the Contemplated
Changes would allow me to effect a Qualifying Termination by reason of an event
described in Section 4(a)(iv)(1)(ii) or (v) of the Employment Agreement or would
allow me to effect a Qualifying Termination for purposes of Section 5(d) of the
Employment Agreement or the Company's Asset Protection Plan. I expressly reserve
all rights to assert that termination following any events which may occur
subsequent to Effective Time (as described in the Merger Agreement) (including
the implementation of such plan of succession) may allow me to effect a
Qualifying Termination under the provisions referenced above, or any other
applicable provision of the Employment Agreement. It is also agreed that, for
purposes of Section 5(d) of the Employment Agreement, the Merger constitutes a
Change in Control and that the Contemplated Changes constitute events described
in Section 4(a)(iv)(1)(v) of the Employment Agreement and if I terminate my
employment after any of the individuals identified in Section 5.16 of the Merger
Agreement no longer hold the positions referred to therein, such termination
will be due to the occurrence without my consent of events described in Section
4(a)(iv)(1)(v) of the Employment Agreement.
I further consent to your sharing this with BJK&E and to making whatever
disclosure about this letter which may be compelled by your obligations under
the federal securities laws or other applicable laws and regulations.
Very truly yours,
/s/ J. Brendan Ryan
J. Brendan Ryan
Attachment
Agreed and Acknowledged
True North Communications Inc.
By: /s/ Theodore J. Theophilos
- -------------------------------------
Theodore J. Theophilos
Executive Vice President
and General Counsel
<PAGE>
[LOGO]
TRUE NORTH COMMUNICATIONS INC,
101 EAST ERIE STREET, CHICAGO, ILLINOIS 60611-2897, USA PHONE 312 425 6500
FAX 312 425 5010
PAUL L. SOLLITTO
VICE PRESIDENT
CORPORATE HUMAN RESOURCES
June 19, 1997
VIA FEDERAL EXPRESS
- -------------------
Ms. Lisa Gersh Hall
Friedman & Kaplan
875 Third Avenue
New York, New York 10022-6225
Dear Lisa:
Attached for your files is a copy of the executed Employment Agreement for
Brendan Ryan. I have provided Brendan with his own original and a second signed
original is on file in Chicago.
Per your letter of May 5, this letter confirms our mutual understanding of the
following two points:
1. At the end of the term of the Agreement, Brendan will be entitled to
the benefits payable under the Directors Part-Time Employment
Agreement, with all age and service requirements deemed to be satisfied
and with the benefit calculated at 45% of final average annual
compensation, assuming 30 years of credited service.
2. The non-competition and non-solicitation restrictions provided for in
Section 7 of the Agreement will apply during the Full-Time Employment
Period and Severance Period provided that Brendan is being paid the
compensation to which he is entitled.
I think this wraps up the last of the details. Let me know if you need anything
else.
Regards,
/s/ Paul Sollitto
PS:Vgo
Attachment
cc: B. Ryan
<PAGE>
Exhibit 10.16
EMPLOYMENT AGREEMENT
AGREEMENT dated as of the 1st day of April, 1993 by and between BOZELL
WORLDWIDE, INC., a New York corporation, with its principal place of business at
40 West 23rd Street, New York, New York (hereinafter the "Agency") and EUGENE
BARTLEY, residing at 6 Oakledge Road, Bronxville, New York 10708 (hereinafter
the "Executive").
W I T N E S S E T H:
- - - - - - - - - - -
1. The Agency hereby agrees to continue the employment of the Executive,
and the Executive hereby agrees to continue to render his exclusive services to
the Agency during the term of this Agreement and to continue to render his
services well and faithfully and to the best of his ability. The Executive shall
devote his full time and attention to the services to be rendered by him
hereunder.
2. The Executive shall continue to serve as an Executive Vice President of
the Agency and as the Profit Center Manager of the New York office of the
Agency. The Executive shall continue to perform such functions as are
customarily performed by an Executive Vice President and Profit Center Manager
and such other functions as may from time to time be designated by the Board of
Directors of the Agency not inconsistent with the office of Executive Vice
President and of a Profit Center Manager.
3. The term of this Agreement shall commence as of April 1, 1993 and shall
continue indefinitely thereafter unless and until terminated by either party
upon not less than twelve (12) months prior written notice to the other, unless
terminated for Cause, as hereinafter defined, in which event the Agency may
terminate the Agreement without notice. Notwithstanding the foregoing, the
Agency shall not have the right to terminate this Agreement (unless the
termination is for Cause) during the three-year period immediately following the
Effective Time (as such term is defined in Section 1.2 of the Agreement and Plan
of Merger among True North Communications Inc., Cherokee Acquisition Corporation
and Bozell, Jacobs, Kenyon & Eckhardt, Inc.).
4. As full compensation for his services hereunder, the Agency agrees to
pay the Executive, and Executive agrees to accept, the following:
a. a salary (the "Salary") computed at the annual rate of Five
Hundred Thousand Dollars ($500,000) per year throughout the Term, payable
in such installments as salaries are paid to other executive personnel of
the Agency.
On April 1, 1997 and on each anniversary during the Term of this
Agreement (the "Adjustment Date"), the Executive's Salary shall be adjusted
upward based upon the Consumer Price Index for All Urban Consumer/United
States City Average, as published by the Bureau of Labor Statistics of the
United States Department of Labor (the "CPI"). The Executive's Salary for
the twelve (12) months beginning on each Adjustment Date shall be equal to
the greater of (a) $500,000 or (b) $500,000 multiplied by a fraction, the
numerator of which shall be the CPI published most recently prior to the
Adjustment Date, and the denominator of which shall be the CPI published
most recently prior to April 1, 1996. In no event, however, shall the
Salary for any such twelve (12) month
<PAGE>
period exceed one hundred and six percent (106%) of the salary payable in
the previous twelve (12) month period.
b. The Executive shall be entitled to reimbursement of authorized
business expenses incurred in connection with the performance of his duties
in accordance with the Agency's standard policy with regard thereto.
c. It is acknowledged that the performance of the Executive's duties
hereunder will necessitate considerable client entertainment, and the
Agency agrees to pay for the Executive's membership fees and dues at a
country club in the Metropolitan New York area, up to a maximum of Six
Thousand Dollars ($6,000.00) per year.
d. The Agency will make available to the Executive an automobile
suitable and appropriate for use by executives within the Agency similarly
situated to the Executive, should the Executive so elect. Such automobile
shall be leased by the Agency, the monthly rental charges of which shall be
the sole responsibility of the Executive, which monthly charges will be
deducted from the Executive's salary payments. The Agency shall be
responsible for the insurance of the automobile, but all costs of
maintaining the automobile shall be the responsibility of the Executive.
Upon the termination of the Executive's employment for any reason, the
Executive's liability for subsequent rental charges and maintenance
expenses shall cease upon delivery of the automobile to the Agency. The
Executive, however, may request that the lease of the automobile thus made
available to him at the time of such termination be transferred and
assigned to him, which request the Agency agrees to honor so long as the
lessor of such automobile consents thereto in writing and releases the
Agency from any subsequent obligation or liability under such lease. Any
such request by the Executive shall be in writing and shall be delivered to
the Agency within ten (10) days after such termination of employment.
e. The Executive shall be entitled to life insurance, medical
insurance, vacation benefits, Profit-Sharing Plan participation, Management
Incentive Program participation, Executive Wealth Accumulation Plan
participation, and other fringe benefits in accordance with the Agency's
standard policy affecting senior Agency executives. With regard to term
life insurance protection, however, the amount of coverage to be provided
to the Executive shall be the amount provided pursuant to the Agency's
standard group life insurance program or the sum of Five Hundred Thousand
Dollars ($500,000.00), whichever is higher.
5. "Cause", as used herein, is hereby defined as gross insubordination
continuing after written warning, unless cured within ten (10) days after the
Executive's receipt of such written warning, the repeated failure or refusal to
perform the duties of the Executive's position (not caused by the Executive's
disability), continuing after written warning unless similarly cured, the
performance of willful and intentional acts which reflect unfavorably on the
reputation of the Agency or dishonesty affecting the Agency.
6. In consideration of the Executive's employment and continued employment
by the Agency, the Executive agrees that while in the employ of the Agency and
for a period of one (1) year subsequent to the termination of his employment,
whether such termination occurs prior to, simultaneously with or after the
expiration of the Term, (the period from the commencement of employment through
the one (1) year period subsequent to termination of employment being the "Non-
Competition Period") the Executive will not directly or indirectly, either on
his own behalf or on behalf of any
2
<PAGE>
other person, firm or corporation, solicit any account which is a client of the
Agency at any time within one year prior to the date of such termination.
The Executive further covenants and agrees that during the Non-Competition
Period he will not, directly or indirectly, perform any services relating to
advertising, public relations, marketing or research for any such account,
either on his own behalf or on behalf of any advertising agency, public
relations consultant, or similar organization representing any such account.
The Executive further covenants and agrees that within the Non-Competition
Period he will not, directly or indirectly, employ or attempt to employ or
assist anyone else to employ any person who is at such time or who was at any
time within the six (6) month period immediately prior to such time, in the
employ of the Agency.
Accounts which are or were clients of the Agency, as used herein, are
hereby defined as advertising or public relations accounts which are principally
represented by the office of the Agency at which the Executive is principally
employed.
The Executive also agrees that he will not at any time (whether before or
after the termination of his employment with the Agency) disclose to anyone any
confidential information or trade secrets of the Agency or of any client of the
Agency, or utilize such confidential information or trade secrets for his own
benefit or the benefit of third parties. All records, memoranda, notes and
other documents compiled by him or made available to him during his employment
concerning the business of the Agency or the business of any of its clients
shall be and remain the property of the Agency, and shall be delivered to the
Agency upon the termination of the Executive's employment or any time prior
thereto upon request.
In the event of any breach by the Executive of any of the covenants
hereinabove contained, it is specifically understood and agreed that the Agency
shall be entitled, in addition to any other remedies which it may have, to
equitable relief by way of injunction or otherwise.
7. Any notices by either party to the other hereunder shall be in writing
and shall be sufficient if personally delivered or sent by certified or
registered mail, return receipt requested, to the party to whom it is to be
given at the following address, or at such other address as either party shall
subsequently designate by written notice. Such notice shall be deemed given
when personally delivered or, if mailed as hereinabove referred to, five (5)
days after such mailing.
If to the Agency: Bozell, Jacobs, Kenyon & Eckhardt, Inc.
40 West 23rd Street
New York, New York 10010
Attn: Mr. Val Zammit
With a Copy to: William J. Marlow, Esq.
Loeb and Loeb
230 Park Avenue
New York, New York 10169
If to the Executive: Eugene Bartley
6 Oakledge Road
Bronxville, New York 10708
With a Copy to: Michael J. Kopcsak, Esq.
3
<PAGE>
Tucker, Gellman & Mulderig, P.C.
285 Madison Avenue
25th Floor
New York, New York 10017
8. The obligations and rights of the Executive shall inure to the benefit
of and shall be binding upon himself and his personal representatives, and the
obligations and rights of the Agency shall inure to the benefit of and shall be
binding upon it and its successors and assigns.
9. This Agreement constitutes the complete understanding between the
parties with respect to the employment of the Executives hereunder, and no
statement, representation, warranty or covenant has been made by either party
with respect thereto except as expressly set forth herein. This Agreement may
not be altered, modified, amended or terminated except by written instrument
signed by each of the parties hereto.
10. If any covenant or other provision of this Agreement is declared to be
invalid, unlawful, or incapable of being enforced, by reason of any rule of law
or public policy, all other conditions and provisions of this Agreement which
can be given effect without the valid, unlawful or unenforceable provision,
shall be given effect.
11. This Agreement supersedes any and all other agreements which may be in
effect between the parties providing for the Executive's employment by the
Agency.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first set forth above.
BOZELL, JACOBS, KENYON &
ECKHARDT, INC.
By: /s/ Leo-Arthur Kelmenson
-----------------------------------
Chairman of the Board
/s/ Eugene Bartley
-----------------------------------
EUGENE BARTLEY
4
<PAGE>
Exhibit 10.17
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of March 1, 1993, between BSMG WORLDWIDE, INC.
(FORMERLY BOZELL SAWYER MILLER GROUP, INC. AND ROBINSON, LAKE, LERER &
MONTGOMERY, INC.), a corporation organized under the laws of the State of New
York, with its principal executive offices located at 75 Rockefeller Plaza, New
York, New York 10019 (the "Company"), TRUE NORTH COMMUNICATIONS INC., a
corporation organized under the laws of the State of Delaware ("True North"),
and HARRIS DIAMOND, residing at 18 Old Hyde Road, Weston, Connecticut 06883 (the
"Executive").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company and Bozell, Jacobs, Kenyon & Eckhardt, Inc. ("BJK&E"),
which has later become a subsidiary of True North, have entered into an Asset
Purchase Agreement, dated as of the date hereof (as the same may be amended or
modified, the "Asset Purchase Agreement") with D. H. Sawyer & Associates, Ltd.,
a Delaware corporation doing business as Sawyer Miller Group ("SMG"), Executive
and three other executives of SMG (collectively, with Executive the "SMG
Principals"), pursuant to which the Company is to acquire certain assets of SMG
and its wholly-owned subsidiary, KRC Research & Consulting, Inc.;
WHEREAS, as of the date hereof, the Executive is the record and beneficial
owner of 25% of the outstanding stock of SMG and is a director and executive
officer of SMG and will benefit by the consummation of the acquisition
contemplated by the Asset Purchase Agreement (the "Acquisition"):
WHEREAS, subject to the consummation of the Acquisition, the Company
desires to employ the Executive as an executive officer, True North desires to
undertake certain obligations in connection therewith, and the Executive desires
to accept such employment, all on the terms and conditions set forth herein:
WHEREAS, in conjunction with such employment, True North is as of the date
hereof entering into a Stock Subscription Agreement with the Executive pursuant
to which BJK&E, is subject to the terms and conditions thereof, to sell stock of
BJK&E to the Executive:
NOW, THEREFORE, the parties hereto agree as follows:
1. Employment: Effectiveness
The Company hereby agrees to employ the Executive, and the Executive
hereby accepts such employment, upon the terms and conditions hereinafter set
forth and effective upon the consummation of the Acquisition. In the event that
the consummation of the Acquisition does not take place on or prior to 5:00 p.m.
New York time on April 30, 1993, this Agreement and the rights and obligations
hereunder of the Company, True North and the Executive shall be null and void
without any liability hereunder to any other party.
2. Titles and Duties
<PAGE>
(a) The Company shall employ the Executive as the Chairman of the
Board and Chief Executive Officer of the Company. The Executive shall have the
authority, powers and responsibility normally and customarily associated with
those of a chief executive officer. The Executive shall perform such duties as
may be assigned to him by any of the Chief Executive Officer of True North, the
Board of Directors of the Company and the Board of Directors of True North which
are not inconsistent with those of the Chief Executive Officer. Subject to the
immediately preceding sentence, the Executive shall report directly to the Board
of Directors of the Company. True North agrees to arrange for the election of
the Executive to the Board of Directors of the Company. The Executive's
principal place of business shall be at the Company's principal office in the
metropolitan New York City area; provided that it is understood that the
performance of Executive's duties under this Agreement are expected to require
substantial domestic and international travel. At True North's request, but
without any additional compensation (unless paid to other similarly situated
executives generally), if so elected the Executive also agrees to serve as a
Member of the Management Executive Committee of True North.
(b) Intentionally Left Blank.
(c) The Executive hereby accepts such employment and agrees to render
his services well and faithfully and to the best of his ability. The Executive
shall devote his full business time and attention to the services to be rendered
by him hereunder.
3. Term
(a) Subject to Paragraph 1, the term of this Agreement (the "Term")
shall commence and take effect as of April 1, 1993 (or, if later, the Effective
Time as defined in the Asset Purchase Agreement) and end on June 30, 2005 or on
such earlier date as the employment of the Executive is terminated by the
Executive or the Company as hereinafter provided in Paragraph 3(b), (c) or (d).
The Term shall automatically be extended from July 1, 2005 through June 30, 2007
(the "Extension Term"), unless, on or before March 31, 2005, the Company
notifies the Executive in writing of its intent not to extend the Term (a "Non-
Extension Notice"). The terms of this Agreement shall remain unchanged during
the Extension Term (including the Executive's rights as to compensation benefits
position and status as in effect immediately prior to the Extension Term). If
the Company decides to terminate the Executive's employment after the end of the
Extension Term, then the Executive shall be eligible for severance benefits
under the terms and conditions of the Company's normal severance policy, as then
in effect.
(b) The employment of the Executive will terminate upon the death or
disability of the Executive (the physical or mental incapacity of the Executive
which prevents Executive from performing the Executive's duties as herein
provided for a continuous period of one hundred and twenty (120) days or an
aggregate period of 180 days during any consecutive twelve-month period).
(c) The Company may terminate the employment of the Executive for
"Just Cause" upon thirty days' notice of such termination to the Executive.
Termination of the Executive's employment by the Company shall constitute a
termination for "Just Cause" only if such termination is for one or more of the
following reasons: (x) the failure of the Executive to render services to the
Company in accordance with the Executive's obligations under this Agreement,
which failure amounts to gross neglect of the Executive's duties to the Company
for more than thirty (30) days after having received written notice specifying
the nature of the failure; or (y) the commission by the
2
<PAGE>
Executive of any flagrant act of dishonesty or disloyalty or any act involving
gross moral turpitude which materially and adversely affects the business of the
Company; or (z) the conviction of the Executive in a court of law of any crime
or offense involving misuse or misappropriation of money or other property of
the Company.
(d) The Executive may terminate his employment with the Company at
any time with "Good Reason" upon thirty (30) days written notice by the
Executive to the Company (except, in the case of (i) below, upon ten (10) days
written notice by the Executive to the Company and the Company's failure to cure
the same within such ten-day period, and, in the case of (ii) below, upon
fifteen (15) days written notice by the Executive to the Company and the
Company's failure to cure the same within such fifteen-day period), and the
Executive's employment will thereupon terminate on the date specified in such
notice. "Good Reason" means (i) a reduction in or failure to pay the Executive's
compensation (it being understood that neither the elimination or reduction of
discretionary benefits or other discretionary compensation nor the failure
pursuant to Paragraph 6(e) hereof to pay any Annual Bonus shall constitute Good
Reason; provided that the failure for any other reason to pay the Annual Bonus
for so long as such Annual Bonus remains in effect shall constitute Good
Reason), (ii) a material change in the Executive's duties or responsibilities or
reduction in authority, (iii) without the Executive's prior written consent, a
transfer from the Company to an affiliate thereof of a material portion of the
business (including the Controlled P.R. Operations, as hereinafter defined)
operated by the Company or of the Business (as defined in the Asset Purchase
Agreement), (iv) without the Executive's prior written consent, a sale of a
substantial portion of the assets of the Company, (v) without the Executive's
prior written consent, the merger or consolidation of the Company immediately
after which the business of the Company constitutes less than a majority of the
business of the surviving or new entity, (vi) a written requirement by the
Company that the Executive move from his present place of residence, or (vii)
the failure of True North management to recommend to the Compensation Committee
of the True North Board of Directors a minimum stock option grant for the
Executive of 15,000 shares for each 12-month period from January 1, 2000 through
June 30, 2002.
4. Severance Payments
(a) If the Company terminates the Executive's employment without Just
Cause or the Executive terminates his employment for Good Reason, in either case
prior to the end of the Term (or the Extension Term, as applicable), or if the
Company delivers a Non-Extension Notice on or before March 31, 2005, the Company
will provide the Executive the following benefits (but without any mitigation of
the Company's liability to the Executive):
(i) For a severance period equal to the remainder of the Term
(subject to a minimum severance period of 18 months and a maximum
severance period of 30 months), (A) continuing base salary (at the
annual rate payable as of the date of termination), (B) an annual
bonus equal to 50% of annual base salary (to be paid at the time other
senior executive bonuses are paid), and (C) continuing medical, dental
and life insurance coverage (on terms substantially comparable to
those provided to the Executive and his covered dependents immediately
prior to the termination of his employment);
(ii) Any earned but unpaid Annual Bonus for the year prior to
the year in which the Executive's termination of employment occurs,
and any other previously earned and accrued entitlements and benefits
from
3
<PAGE>
the Company or its affiliates (including any entitlements under
applicable Company or affiliate benefit plans, programs or policies);
(iii) If the Executive is terminated by the Company without
Just Cause effective prior to July 1, 2002, a full Annual Bonus for
the fiscal year (or the first half of the fiscal year, in the case of
2002) in which such termination takes place;
(iv) If the Executive terminates his employment for Good
Reason effective prior to July 1, 2002, a pro-rated Annual Bonus for
the fiscal year (or the first half of the fiscal year, in the case of
2002) in which such termination takes place, based on the length of
the Executive's employment for that fiscal year;
(v) If the Executive's employment terminates on or after July
1, 2002, he shall be considered for a pro-rated annual incentive bonus
for the fiscal year in which such termination of employment is
effective;
(vi) Full vesting of all stock options then held by the
Executive that are granted to the Executive by True North on or after
January 1, 2000 (including the stock options granted to the Executive
concurrent with entering into the January 1, 2000 Amendment to the
Agreement);
(vii) Full vesting of all restricted stock then held by the
Executive that was previously or is in the future granted to the
Executive by True North (including the restricted stock granted to the
Executive concurrent with entering into the January 1, 2000 Amendment
to the Agreement); and
(viii) Each stock option granted to the Executive by True North
on or after January 1, 2000 (including the stock options granted to
the Executive concurrent with entering into the January 1, 2000
Amendment to the Agreement) then held by the Executive shall be
exercisable by the Executive for up to three years after the date of
termination of employment, but in no case beyond the 10-year term of
such stock option.
it being understood that, other than pursuant to clauses (i)-(viii) above, the
Executive shall have no interest in or right to receive from the Company or its
affiliates any other entitlement, benefit or bonus.
(b) If the Executive's employment is terminated by the Company for
Just Cause or if the Executive terminates his employment for any reason other
than for Good Reason, the Executive will receive only the amounts and benefits
specified in Paragraph 4(a)(ii) hereof.
(c) In the event of the Executive's death or disability, as specified
in Paragraph 3(b), the Executive, his heirs, distributees and legal
representatives will receive only the amounts and benefits specified in
Paragraph 4(a)(ii) hereof and the pro rata portion of the Annual Bonus for the
year in which the Executive's death or disability occurs.
5. Compensation
For all services rendered under this Agreement,
4
<PAGE>
(a) Base Salary
Effective January 1, 2000, the Company shall pay the Executive a
base salary of not less than $724,250 per annum, payable in such installments as
salaries are paid to other senior executive personnel of the Company.
(b) Discretionary Bonus
Prior to July 1, 2002, at the sole and absolute discretion of the
Chief Executive Officer of True North, or any successor thereto, the Company
may, but shall not be required to, pay the Executive a bonus for the period
commencing on the date of this Agreement and ending March 31, 1994 and for each
or any successive twelve-month period thereafter during the term of this
Agreement. Effective July 1, 2002, the Executive shall be entitled to
participate in the True North Executive Compensation Program, as applied to his
position with the Company and within the True North organization, and as such
Program may be amended from time to time. The Executive's target opportunities
and performance standards under that Program shall be comparable to those
applicable to other senior executives holding comparable positions.
(c) Expenses
During the term of Executive's employment hereunder, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive (in accordance with the policies and
procedures established by the Company and its affiliates for their executive
officers) in performing services hereunder, provided that the Executive properly
accounts therefor in accordance with Company policy.
(d) Participation in Benefit Plans
The Executive shall be entitled to participate in or receive
benefits under any of the pension, profit sharing, or savings plans that are
qualified under the provisions of Section 401(a) of the Internal Revenue Code of
1986, as amended, that are at present or in the future made available generally
to the executives and key management employees of the Company and its
affiliates, in accordance with the terms thereof. Nothing paid to the Executive
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of base salary or bonuses payable to the
Executive hereunder.
During the Term, the Executive shall be entitled to participate in the
employee benefit plans and programs and fringe benefit arrangements that are
generally available to senior executives of the Company from time to time
(including coverage under any director and officer liability insurance
maintained by True North and including, but not to the extent resulting in
duplicative benefits, the benefit plans and programs and fringe benefit
arrangements generally available to members of the Management Executive
Committee of True North, to the extent the Executive continues to be a member of
that Committee).
Upon the January 1, 2000 Amendment to the Agreement, True North shall
grant to the Executive a stock option for 40,000 shares and 5,000 shares of
restricted stock, with each such award to become vested as to one-third of the
shares on each of the first, second and third anniversaries of the date of grant
(subject to accelerated vesting hereunder), and with both such awards to be
subject to the terms of the True North Stock
5
<PAGE>
Option Plan. In addition, for the period January 1, 2000 through June 30, 2002,
True North management will recommend to the Compensation Committee of the True
North Board of Directors a minimum stock option grant for the Executive of
15,000 shares for each 12-month period.
Executive's service with SMG, calculated in accordance with the terms
of the relevant SMG benefit plan or policy, shall be credited for eligibility,
vesting and (with respect to unused vacation time accrued since January 1, 1993
and deductibles absorbed by the Executive on medical, health and dental plans)
benefit accrual purposes under all benefit plans and employment policies of the
Company and its affiliates described in this Paragraph 5, as if such service had
been rendered to the Company or its affiliates, including, without limitation,
True North.
(e) Vacation and Holidays
The Executive shall be entitled to paid vacations and holidays in
accordance with the policy of the Company and its affiliates in effect from time
to time for their senior officers.
6. Special Bonus
For each fiscal year of the Company commencing on April 1, 1993 and
ending June 30, 2002, the Executive shall be entitled to receive an annual bonus
(the "Annual Bonus") payable not later than seventy-five (75) days after the end
of the fiscal year for which such payment is due, determined in the following
manner:
(a) Annual Bonus
Subject to subparagraphs 6(b) and (c) below, the Annual Bonus
shall be equal to 8.33% of the amount of Operating Profit, as hereinafter
defined, earned by the Company within each such fiscal year. The Company shall
have the right to offset against any payments of the Annual Bonus any amounts
then due and payable by the Executive to the Company or any of its affiliates.
(b) Bonus Threshold
Notwithstanding subparagraph (a) above, the Executive shall not
be entitled to an Annual Bonus for any fiscal year of the Company (i) unless and
until the Operating Profit of the Company for such fiscal year exceeds the
amount set forth below under the heading "Operating Profit Threshold" with
respect to such fiscal year, (ii) with respect to any Operating Profit other
than that portion of such Operating Profit in excess of the Operating Profit
Threshold for such fiscal year set forth below and (iii) unless the sum of the
cumulative Operating Profits from April 1, 1993 through the end of such fiscal
year exceeds the sum of the Operating Profit Thresholds set forth below for such
period; provided, however, that the amount of the Operating Profit Threshold for
the fiscal years ending March 31, 1994, 1995 and 1996 shall be reduced in each
case by the Sawyer Profit (as hereinafter defined) earned in that fiscal year,
provided further that the foregoing reduction shall not exceed $1,000,000 for
the fiscal year ending in 1994, $1,350,000 for the fiscal year ending in 1995
and $1,500,000 for the fiscal year ending in 1996; provided further, however,
that the Operating Profit Threshold for the fiscal year ending March 31, 1996
shall be reduced by $200,000 in the event that the Company and its Affiliates
(as hereinafter defined) receive revenues in the fiscal years ending in 1994 and
1995 equal in the aggregate to at least $3,000,000 from (i) spot buying computed
at rates of 3.5% and network buying computed at rates of 1.5% done by the
Company
6
<PAGE>
through the Company and its Affiliates and (ii) from any other advertising
services obtained by the Company from the Company and its Affiliates at a charge
of 2.85 times the salary and benefit costs of the employees providing such
services:
Fiscal Year Ending March 31, Operating Profit Threshold
---------------------------- --------------------------
1994 $1,600,000
1995 $2,550,000
1996 $2,700,000
1997 $ 400,000
1998 $ 400,000
1999 $ 400,000
2000 $ 400,000
2001 $ 400,000
2002 (through June 30, 2002) $ 400,000
For purposes hereof, the term "Sawyer Profit" shall mean the product of three
times the sum of (i) 3% of gross income earned by the Company and any other
direct or indirect subsidiaries of BJK&E ("Affiliates") directly from any
advertising client accounts obtained by the Company or any Affiliates after the
date hereof, and as to which accounts the activities of David H. Sawyer ("DHS")
were a material factor in the Company or such Affiliates obtaining the same,
plus (ii) (x) the gross income earned by the Company and any Affiliate directly
from any public relations client accounts obtained by the Company or any
Affiliate after the date hereof and as to which accounts the activities of DHS
were a material factor in the Company or such Affiliates obtaining the same,
minus (y) the costs of servicing such accounts (such costs being the direct
salary and other direct costs of servicing such accounts plus overhead based on
the Company's parent's accounting system), it being understood that such costs
do not include the salary payable to DHS.
(c) It is acknowledged that the three other SMG Principals and the
RLL&M Principals are each, pursuant to their employment agreements with the
Company, eligible to receive an annual bonus identical to the Annual Bonus to
which the Executive is entitled under Paragraph 6(a) hereof (each an "Incentive
Annual Bonus"), provided that the employment agreements of the RLL&M Principals
do not provide for any minimum Operating Profits as set forth in Paragraph 6(b)
hereof (the SMG Principals and the RLL&M Principals being hereinafter referred
to collectively as the "Incentive Executives"). If within the Term any of the
Incentive Executives (other than the Executive) ceases to be entitled to receive
an Incentive Annual Bonus, then the Annual Bonus payable to the Executive shall
be increased from 8.33% of the amount of Operating Profit to: if one of the
other Incentive Executives ceases to be so employed, 9.01%; if a total of two of
the other Incentive Executives ceases to be so employed, 9.87%; if a total of
three of the other Incentive Executives ceases to be so employed, 11%; if a
total of four of the other Incentive Executives ceases to be so employed,
12.57%; if a total of five of the other Incentive Executives ceases to be so
employed, 14.24%; if a total of six of the other Incentive Executives ceases to
be so employed, 17.69%; and if all seven of the other Incentive Executives cease
to be so employed, 25%; provided, however, if pursuant to the Employment
Agreement of any of such other Incentive Executives, such Incentive Executive is
entitled to an Incentive Annual Bonus with respect to a portion of a year as a
result of such Incentive Executive having been terminated by the Company without
Just Cause (as defined in such agreement) or terminated his or her employment
for Good Reason (as defined in such agreement), or in the event of his death or
disability, then this sentence shall only apply with respect to the pro rata
portion of such year for which such other Incentive Executive is not entitled to
an Incentive Annual Bonus. Notwithstanding anything to the contrary, and
regardless of
7
<PAGE>
whether or not additional Incentive Executives cease to be so employed, the
Annual Bonus payable to the Executive shall be and is hereby fixed at 14.24% of
the amount of the Operating Profit for the periods through March 31, 1998 and
thereafter shall be 15%; provided that, should any of the other Incentive
Executives cease to be employed after November 30, 1996, and prior to March 31,
1998, the Annual Bonus payable to the Executive for such fiscal year and all
years thereafter shall be 15%.
(d) Operating Profit
"Operating Profit", as used herein, is defined as the income
earned by the Company and the Controlled P.R. Operations (as hereinafter
defined) from operations in any fiscal year, or portion thereof, of the Company
within the Term, less all salary and general administrative and operating
expenses of the Company and the Controlled P.R. Operations, including
compensation (other than the Executive's Annual Bonuses, the other Incentive
Executives' Incentive Annual Bonuses, and any bonuses paid pursuant to paragraph
5(b) hereof; payable to the Incentive Executives, expenses regarding the Assumed
Liabilities (as defined in the Asset Purchase Agreement; and the corporate
apportionment expense referred to in subparagraph (f) hereof, incurred in such
fiscal year, but excluding any charges related to the employment of DHS, any
deductions, charges or amortization of the assets purchased as part of the
Acquisition and any indemnification obligations under the Asset Purchase
Agreement. `Controlled P.R. Operations,' as used herein, is defined as those
public relations operations directly or indirectly and minority or majority
owned by the Company or True North that are operated by and have reporting
responsibilities to the Company. As a point of clarification, the operating
profit of a Controlled P.R. Operation that is acquired by True North or the
Company after January 1, 1999 shall be included in the above Operating Profit
calculation as follows (with respect to the determination of Annual Bonus for
each fiscal year):
(i) For each fiscal year, the actual operating profit of that
Controlled P.R. Operation shall be included in the Operating Profit
calculation.
(ii) The resulting Operating Profit shall then be reduced by
the pro forma estimate of the first 12 months' post-acquisition
operating profit that is presented by the Executive and/or his staff
and approved by the Board of Directors of True North, the Finance
Committee of the Board of Directors of True North, or True North
management (as the case may be) in connection with the acquisition of
such Controlled P.R. Operation (such reduction shall be without regard
to any unusual or acquisition related charges that are included in
such pro-forma estimate, unless such charges are also reflected in the
actual operating profit calculation for the year in question).
(iii) For consistency purposes, both the actual operating profit
in (i) above and the pro-forma operating profit in (ii) above shall be
adjusted to exclude the corporate allocations referred to in Paragraph
6(f) of this Agreement.
(iv) Notwithstanding the foregoing, the Financial Relations
Board and the Benjamin Group shall not be included in the Operating
Profit Calculation for 1999, and, beginning with the 2000 fiscal year,
the reduction described in (ii) above for the Financial Relations
Board and the Benjamin Group, shall be $5,486,000 and $2,200,000,
respectively.
8
<PAGE>
(v) Also notwithstanding the foregoing, upon any sale, merger
or other corporate reorganization of a Controlled P.R. Operation that
occurs without the consent of the Executive, unless otherwise agreed
to by all parties to this Agreement, such operation shall not be
considered a Controlled P.R. Operation for purposes of this Paragraph
6(d) with respect to any period of time after such sale, merger or
other corporate reorganization.
(e) Default
(i) The parties acknowledge that True North is subject to
certain monetary restrictions imposed pursuant to the terms and
conditions of agreements with its lending institutions (such lending
institutions and any other institutions providing for the refinancing
or full or partial repayment of any amounts owed to such lending
institutions being the "Lenders"). In the event that the making of any
Annual Bonus payment to the Executive would result (with or without
the passage of time or giving of notice or both) in a default
("Default") by True North or any affiliate in True North's or any
affiliate's obligations to any one or more of its Lenders, or if True
North or any affiliate is in Default at the time that any such Annual
Bonus payment is due, then the Company need not make such Bonus
payment at such time.
(ii) At such time as payment of all or any portion of such
unpaid Annual Bonus payment can be paid without incurring a Default or
when such existing Default ceases, the Company agrees to make any
payment thereof to the Executive, with interest from the date such
payment was due at the rate of interest on 26 week Treasury Bills for
the immediately preceding auction of short-term U.S. Government bills
as quoted in the "Money Rates" section of the Wall Street Journal (or,
if not quoted therein, as quoted in any other reliable source).
(iii) Anything hereinabove contained in subparagraph (ii) to the
contrary notwithstanding, in the event that an Annual Bonus payment is
not made by reason of the existence of an event of Default, or that
payment would occasion an event of Default, the board of directors of
the Company may, at its option, nevertheless determine to make all or
a portion of such Bonus payment to the Executive if consent thereto
can be obtained from the Lenders.
(iv) Anything hereinabove contained in this subparagraph (e) to
the contrary notwithstanding, in the event that any Annual Bonus
payment is not made to the Executive by reason of an event of Default,
the Executive may demand, by written notice to the Company with a copy
to True North, payment of an amount equal to the lesser of (x) the
full amount of the Annual Bonus payment or payments then due and
payable to the Executive, and (y) the sum of $200,000, and in the
event of receipt of such written demand from the Executive, the
Company agrees to make prompt payment of the amount thus demanded, it
being understood that any amount so paid shall be a credit against
accrued but unpaid Annual Bonus payments (and accrued interest
thereon) and any remaining amounts of any Annual Bonus shall be
payable pursuant to the other provisions of this subparagraph (e).
9
<PAGE>
(v) Notwithstanding any provision of this Agreement to the
contrary, the occurrence of any Default under this Paragraph shall be
determined based on the terms of the default provisions as in effect
on January 1, 2000 under the credit agreements or other lending
arrangements between True North or its affiliates and their respective
lenders.
(f) Corporate Apportionment
True North shall make available to the Company the services of
all administrative departments of True North and its affiliates, such as,
without limitation, accounting and personnel, without charge to both the Company
and the Controlled P.R. Operations other than an apportionment charge equal to
Three Percent (3%) (four percent (4%) for all periods commencing from and after
April 1, 1997) of all revenues of the Company and the Controlled P.R.
Operations, other than those specified below in this Paragraph 6(f), to provide
appropriate compensation to True North and its affiliates for corporate salaries
(i.e., Messrs. Peebler, Zammit et al.), services provided by True North's and
its affiliates' accounting and data processing departments, ordinary legal
expenses, charitable contributions, fees and subscriptions (i.e., Dun &
Bradstreet Reports), audits, corporate communications, Yellow Page listings, and
the Company's and the Controlled P.R. Operation's share of other expenses which
are paid out of corporate funds. Revenues will not include any payments by a
client which True North or its affiliates receives as a paying agent for the
client to pay a third party to produce or purchase a product or service for the
client.
(g) Resolution of Disputes
The Company shall advise the Executive in writing, not later than
simultaneously with payment of the Annual Bonus, the manner in which the Annual
Bonus and any amounts offset against the Annual Bonus were determined. If
within thirty (30) days thereafter, none of the Executive or the other Incentive
Executives objects, such computations shall be deemed to be final and binding on
the Company and the Incentive Executives. If within the thirty day period any
Incentive Executive gives the Company notice of objection to such computations,
and if within thirty days of receipt of such notice, the Company and the
objecting Incentive Executive(s) fail(s) to resolve their differences, then the
auditors for the Company and such auditors as the objecting Incentive
Executive(s) may choose shall refer the dispute to a nationally-recognized
accounting firm whose determination shall be final and binding. The Company
shall make available to such accounting firm such books and records as may be
reasonably requested to resolve the matter. The expenses of such accounting
firm with respect to the resolution of such matter shall be borne by the non-
prevailing party, it being understood that in the event that the Company is the
prevailing party, such expenses shall be borne by the objecting Incentive
Executive and not all Incentive Executives.
7. Covenant Not to Solicit or Compete
In consideration of the Executive's employment and continued
employment with the Company, and in consideration of the payment of the Purchase
Price and the assumption of the Assumed Liabilities by the Company pursuant to
the Asset Purchase Agreement, the Executive agrees that for a period of one (1)
year subsequent to the termination of the Executive's employment with the
Company for any reason (specifically including termination by the Executive of
his employment with the Company for Good Reason and specifically including
termination upon delivery by the
10
<PAGE>
Company of a Non-Extension Notice) other than death or termination by the
Company without Just Cause, the Executive will not, directly or indirectly,
either on the Executive's own behalf or on behalf of any other person, firm or
corporation:
(a) solicit the employment of or employ or attempt to employ or assist
anyone else to employ any person who is then or at any time during the preceding
twelve-month period was in the employ of the Company, RLL&M or SMG; or
(b) solicit any account which is a client of the Company, RLL&M or
SMG at the time of such termination, or which was a client of the Company, RLL&M
or SMG at any time within one year prior to the date of such termination; or
(c) perform any services relating to advertising, public relations,
marketing or research for any account described in subparagraph (b) hereof,
either on the Executive's own behalf or on behalf of any other public relations
firm, advertising agency or similar organization representing any such accounts.
It is the desire and intent of the parties that the provisions of this
Paragraph 7 shall be enforced to the fullest extent permissible under the laws
and public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular subparagraph or portion of this paragraph 7 or
application of this paragraph 7 shall be adjudicated to be invalid or
unenforceable, this paragraph 7 shall be deemed amended to delete therefrom the
portion or application thus adjudicated to be invalid or unenforceable, such
deletion to apply only with respect to the operation of this Paragraph in the
particular jurisdiction in which such adjudication is made.
8. Corporate Name
It is acknowledged that it is the present intention of the Company to
utilize as its name the name "Robinson, Lake, Lerer & Montgomery/Sawyer Miller
Group, Inc." The Executive covenants and agrees that for so long as any of the
surnames which are intended to be used in the name of RLL&M/SMG are used in the
name of RLL&M/SMG, and for a period of one year thereafter, the Executive will
not use any of said surnames in the title of any business entity.
9. Company Remedies
If there is a breach or threatened breach of the provisions of
paragraph 7 of this Agreement, the Company shall be entitled to an injunction
restraining the Executive from such breach. Nothing herein shall be construed
as prohibiting the Company from pursuing any other remedies for such breach or
threatened breach.
10. Executive Remedies
The Executive shall be afforded, and shall be entitled to pursue, all
remedies at law and in equity for any breach of this Agreement.
11. Insurance
The Company may, at its election and for its benefit, insure the
Executive against accidental loss or death, and the Executive shall submit to
such physical examination and supply such information as may be required in
connection therewith.
11
<PAGE>
12. Relocation
The Company acknowledges that under no circumstances will the Executive be
required to move from the present place of residence of the Executive.
13. Representations and Warranties
(a) True North represents and warrants as of the date hereof it is,
and as of the Effective Time it will be, the record and beneficial owner of all
of the issued and outstanding capital stock of BJK&E, which is, and as of the
Effective Time will be, the record and beneficial owner of all of the issued and
outstanding capital stock of the Company, it being understood that such shares
are and/or in the future may be pledged, and there are no options, rights or
other securities of the Company which are issued or outstanding.
(b) The Company represents and warrants as of the date hereof that
except as provided in the employment agreements between the Company and each of
the SMG Principals, and each of the RLL&M Principals (which do not provide any
rights or benefits which are in any material respect different from those
provided to the Executive pursuant to this Agreement so as to affect the
calculation of the Operating Profit for purposes of Paragraph 6(d) hereof, or
affect the amount of any Annual Bonus to which the Executive may be entitled
hereunder), and except as provided in the articles of incorporation and bylaws
of RLL&M, there is no, and as of the Effective Time there will not be any,
agreement between the Company or RLL&M and any other person, firm or entity
relating to the management, operation and control of RLL&M.
14. Expenses
(a) Except as provided in Paragraph 14(b) below, all costs, expenses
and charges incurred by the parties in connection with the transactions herein
contemplated shall be borne by the party incurring the same.
(b) In the event a party retains legal counsel in connection with the
enforcement of its rights under this Agreement, and the other party is found by
a court having competent jurisdiction to have breached its obligations
hereunder, after all appeals therefrom have been exhausted, such party shall be
liable for the payment of the reasonable legal fees and related reasonable
charges and disbursements of the prevailing party in connection with any such
enforcement action.
15. Notices
Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and sent by registered mail or delivered in
person to the Executive at the residence address the Executive has provided to
the Company, and to the Company at its address set forth above, Attention:
Chief Executive Officer and also to True North at 101 East Erie Street, Chicago,
IL, Attention: General Counsel (or to such other address as a party may
designate by notice to the other).
16. Waiver of Breach
12
<PAGE>
A waiver of the Company, True North or the Executive of a breach of
any provision of this Agreement by any other party shall not operate or be
construed as a waiver of any subsequent breach by such party.
17. Governing Law
This Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York.
18. Entire Agreement
This instrument contains the entire agreement of the parties. It may
be changed only by an agreement in writing signed by a party against whom
enforcement of any consent, waiver, change, modification, extension or discharge
is sought. Any amendment hereof must be in writing and signed by all the
parties hereto.
19. Assignment
This Agreement shall be binding upon and inure to the benefit of the
Executive, and with respect to the amounts and benefits specified in Paragraphs
4, 5 and 6 hereof, his heirs, distributees and legal representatives, and the
Company and True North and their respective successors and permitted assigns.
Except as provided in the immediately preceding sentence, the Executive shall
not assign any of his rights or obligations under this Agreement. The Company
shall not merge or consolidate with or into, or sell or otherwise transfer
substantially all of its assets to, another corporation or entity unless that
corporation or entity assumes, either expressly or by operation of law, the
Company's obligations under this Agreement. Any purported assignment or
transfer of this Agreement in violation of this Paragraph 19 shall be void.
20. Survival
The provisions of Paragraphs 1, 4 5(c) and (d), 6, 7, 8, 9, 10, 13,
14, 19, 20, 21 and 22 hereof shall survive the termination of the employment of
the Executive under this Agreement.
21. Indemnification
Each of the Company and True North shall indemnify and hold the
Executive harmless to the maximum extent permitted by applicable law against
judgments, fines, amounts paid in settlement and reasonable attorney's fees
incurred by the Executive, in connection with the defense of or as a result of
any action, proceeding (or appeal of any action or proceeding) in which the
Executive is made or is threatened to be made a party by reason of the fact that
he is or was an officer or director of the Company.
22. True North Guarantee
(a) The execution, delivery and performance by True North of this
Agreement are within the corporate powers of True North and have been duly
authorized by all necessary corporate action on the part of True North, and this
Agreement constitutes a valid and legally binding agreement of True North,
enforceable against True North in accordance with its terms.
13
<PAGE>
(b) True North hereby unconditionally and irrevocably guarantees (the
"Guarantee"), to and for the benefit of the Executive, payment and performance
by the Company when due of all its obligations under this Agreement.
(c) True North agrees that its Guarantee shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
of any obligation to Executive under this Agreement is rescinded or must
otherwise be returned by the Executive upon the bankruptcy, insolvency,
liquidation or reorganization of the Company or otherwise, as though such
payment had not been made, and, in furtherance (but not in limitation) of the
foregoing, True North agrees to pay the Executive on demand any amount which the
Executive is required to pay to any person or entity under any bankruptcy,
insolvency, liquidation, reorganization or other similar law on account of any
amount received by the Executive from any person or entity under or with respect
to this Agreement or the Guarantee.
(d) The Guarantee is a continuing guarantee, and it is a guarantee of
payment and performance and not of collection.
(e) Notwithstanding any provision to the contrary contained in this
Agreement, True North hereby unconditionally and irrevocably waives (i) any and
all rights of subrogation to the claims, whether existing now or arising
hereafter, True North may have against the Company, whether due to any payment
under this Agreement or otherwise and (ii) any and all rights of reimbursement,
contribution or indemnity that True North may have against the Company, which
may have heretofore arisen or may hereafter arise in connection with any
guarantee or any pledge or grant of any lien or security interest made in
connection with any obligation under this Agreement.
(f) True North hereby waives (i) promptness and diligence, (ii)
notice of acceptance, and (iii) all other notices, demands and protests in
connection with the enforcement of such obligations or of the obligations of
True North under this Agreement, the omission of or delay in which, but for the
provisions of this paragraph (f), might constitute grounds for relieving True
North of its obligations under this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first hereinabove written.
BSMG WORLDWIDE, INC.
BY: /s/ Edward Powers
----------------------------------
Edward Powers
Chief Operating Officer
/s/ Harris Diamond
----------------------------------
Signature of Executive
TRUE NORTH COMMUNICATIONS INC.
14
<PAGE>
BY: /s/ Donald L. Seeley
----------------------------------
Donald L. Seeley,
Vice Chairman - Chief Financial
Officer
15
<PAGE>
Exhibit 10.18
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of August 1, 1999 between True North
Communications Inc., a Delaware corporation (the "Company" or "True North") and
Leo-Arthur Kelmenson (the "Executive").
WHEREAS, the Company is a global communications holding company with
ownership interests in subsidiaries, affiliates and joint ventures that are
engaged in the advertising agency business, the multimedia production business,
the business of planning and buying of media time and space and related
businesses (the Company and the subsidiaries, affiliates and joint ventures in
which it from time to time has equity interests are hereinafter referred to
collectively as the "True North Group");
WHEREAS, the Executive currently serves the Company as the Chairman
and Chief Executive Officer of Bozell Worldwide, Inc. ("Bozell");
WHEREAS, the Executive and Bozell's direct parent company, Bozell,
Jacobs, Kenyon & Eckhardt, Inc., have entered into an Employment Agreement dated
March 30, 1992 and subsequently amended from time to time (the "BJK&E
Agreement"); and
WHEREAS, the Company and the Executive desire to enter into this
Agreement to replace the BJK&E Agreement and to provide for the continued
employment of the Executive by the Company upon the terms and subject to the
conditions set forth herein. (Unless noted otherwise, all references herein to
the Company shall include Bozell.)
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereby agree as follows:
1. Employment. The Company hereby employs the Executive and the
Executive hereby agrees to be employed by the Company upon the terms and subject
to the conditions contained in this Agreement. The term of employment of the
Executive by the Company pursuant to this Agreement (the "Employment Period")
shall commence on the date hereof (the "Effective Date") and, unless earlier
terminated, shall expire on March 31, 2004; provided that the Employment Period
may be extended by mutual written agreement of the parties. In addition, the
Executive may choose at his sole discretion to retire after March 31, 2001 but
prior to the scheduled expiration of the Employment Period and thereby trigger
commencement of the four-year Consulting Period; provided that the Executive
must provide the Company with at least six months' advance written notice of
such retirement, unless the Executive's health condition is such that a shorter
notice period is necessary.
<PAGE>
2. Position and Duties. The Company shall employ the Executive
during the Employment Period with the title of Chairman and Chief Executive
Officer of Bozell (or such other title as may be mutually agreed upon by the
Executive and the Company); provided that the Executive will agree to relinquish
the title of Chief Executive Officer of Bozell and will cooperate with the
transition to the successor chief executive officer if and when he or she is
named. The Executive shall report directly to the True North Chief Executive
Officer (the "True North CEO"). The Executive's principal place of business
during the Employment Period shall be in New York City. While the Executive is
in the full-time employment of the Company, Company management will recommend
that the Executive be slated for election as a member of the True North Board of
Directors (the "Board"). Subject to the powers, authority and responsibilities
vested in the Board, in duly constituted committees of the Board and in the True
North CEO, the Executive shall have the duties and responsibilities commensurate
with his position and title as are reasonably assigned to him from time to time
by the True North CEO or the Board. During the Employment Period, the Executive
shall perform faithfully and loyally and to the best of the Executive's
abilities his duties hereunder, shall devote his full business time, attention
and efforts to the affairs of the True North Group and shall use his reasonable
best efforts to promote the interests of the Company. Notwithstanding the
foregoing, the Executive may engage in charitable, civic or community
activities, provided that they do not interfere with the performance of the
Executive's duties hereunder, and, with the prior approval of 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 8 hereof.
3. Compensation.
(a) Annual Base Salary. During the Employment Period, the Company
shall pay to the Executive an annual base salary at the rate of $1,024,800 per
annum in accordance with the Company's regular payroll practices. This annual
base salary shall be reviewed periodically in accordance with guidelines
applicable to the Company's senior executives generally.
(b) Incentive Compensation. During the Employment Period, the
Executive shall be entitled to participate in the True North Executive
Compensation Program, as such Program applies to similarly situated senior
executives and as such Program may be amended from time to time. As currently
in effect, such Program consists of annual incentive compensation and long-term
incentives in the form of Earnings Performance Units and stock options.
(c) Other Benefits. During the Employment Period, the Executive
shall be entitled to participate in the Company's employee benefit plans and
programs and fringe benefits that are generally available to senior executives
of the Company from time to time, subject to compliance with Company policies
and procedures; provided that the fringe benefits currently applicable to the
Executive under the BJK&E Agreement shall remain in place during the Employment
Period.
-2-
<PAGE>
(d) Expense Reimbursement. During the Employment Period, the Company
shall reimburse the Executive for all proper expenses incurred by him in the
performance of his duties hereunder in accordance with the Company's policies
and procedures.
4. Consulting Period and Benefits.
(a) Commencement. At the expiration of the Employment Period in
accordance with Section 1 above, the Executive shall become a consultant to the
Company for the four-year period beginning on the day following the last day of
the Employment Period (the "Consulting Period").
(b) Duties and Responsibilities. During the Consulting Period, the
Executive shall make himself available, upon reasonable notice, to perform
services for the Company that shall be related to such projects and matters as
the Board or the True North CEO may designate from time to time and that shall
be commensurate with the Executive's years of experience and level of skill.
Such services shall include consulting and advisory services with respect to the
operation of the Company's advertising business and the maintenance of
harmonious relations between the Company and those clients of the Company as may
be designated by the Board or the True North CEO. Without limiting the
generality of the foregoing, the Executive shall (i) cooperate fully with the
True North CEO and the other senior executive officers of the Company, (ii)
provide such assistance and information as may be reasonably requested by the
Board or the True North CEO, and (iii) be available, by telephone or in person,
at such times and places as may be reasonably requested by the Company and as
may be mutually convenient to the Company and the Executive. During the
Consulting Period, (1) the Executive shall not be required to devote more than
an average of six hours per week to such consulting and advisory services and
(2) the Executive may engage or participate in, or become employed by, or render
advisory or other services in connection with, any and all other business
activities which are not inconsistent with or otherwise in breach of the
Executive's duties and obligations to the Company (including, but not limited
to, the obligations set forth in Sections 8 and 9 of this Agreement).
(c) Consulting Benefits. During the Consulting Period, the Executive
shall be paid an annual cash benefit equal to $950,000. These consulting
payments shall be made no less frequently than monthly, and shall be subject to
any applicable tax withholding and tax reporting requirements. The Company
shall reimburse the Executive in accordance with the Company's policies and
procedures for all proper expenses incurred by him in the performance of his
duties and responsibilities during the Consulting Period. All stock options
granted to the Executive after the Effective Date shall, to the extent vested as
of the end of the Employment Period, be exercisable during the Consulting
Period, subject to expiration at the end of the specified term of each such
option. During the Consulting Period and for the remainder of their respective
lives, the Executive and his current spouse shall be entitled to continued
coverage under the Company's then existing retiree medical plan (subject to the
continued payment of the Executive's portion of the applicable cost).
-3-
<PAGE>
(d) Termination of Consulting Period. The Consulting Period shall
terminate prior to the end of the four-year period, and the benefits described
in subsection (c) above shall immediately cease, upon the occurrence of either
of the following: (i) the material failure by the Executive to perform the
reasonably requested duties and responsibilities described in subsection (b)
above (subject to written notice by the Company and a reasonable opportunity to
cure) or (ii) a material breach by the Executive of this Agreement or other
action by the Executive that constitutes "Cause" under Section 5(b) (subject to
written notice by the Company and a reasonable opportunity to remedy any
condition, conduct, action or inaction of the Executive giving rise to the
violation or breach if such violation or breach is remediable). Notwithstanding
the foregoing, if the Executive dies or becomes permanently disabled (see
"Disability" as defined in Section 5(a) below) during the Consulting Period,
then the consulting benefits shall continue to be paid to the Executive or his
estate or designated beneficiary, as applicable, for the remainder of the four-
year Consulting Period; provided that such consulting benefits shall be reduced
by any amounts received by the Executive through a disability policy maintained
by the Company. The Executive shall resume rendering the services described in
subsection (b) above if he should fully recover from any such Disability before
the end of the four-year Consulting Period. The foregoing shall not be
construed as limiting any other rights or remedies that may be available to the
Company upon the Executive's breach of any provision of this Agreement.
5. Termination of Employment Period.
(a) Qualifying Termination. For purposes of this Agreement,
"Qualifying Termination" means the occurrence of any of the following events
prior to the expiration of the Employment Period, as extended if applicable: (i)
termination of the Executive's employment by the Company without Cause (as
defined in subsection (b) below), (ii) termination of the Executive's employment
by the Company on account of the Executive having become unable (as determined
by the Company in good faith) to perform regularly his duties hereunder by
reason of illness or incapacity for a period of more than six consecutive months
(termination for "Disability"), (iii) termination of the Executive's employment
on account of the Executive's death, or (iv) termination of the Executive's
employment by the Executive due to the occurrence, without the Executive's
express written consent, of any of the following events: (1) the assignment to
the Executive of any duties that either (A) are inconsistent in any material
respect with the Executive's position, 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 are agreed to by the Executive)
or (B) result in a material diminution of the Executive's responsibilities, (2)
a material adverse change in the Executive's reporting responsibilities, titles
or offices with the Company (excluding the relinquishment of the Executive's
Chief Executive Officer title as provided in Section 2 above) (3) a material
breach of the Company's obligations set forth in this Agreement, (4) a decrease
in the Executive's base salary that is not agreed to by the Executive, or (5)
any requirement of the Company that the location where the Executive is based is
outside of New York City.
For purposes of this Agreement, an isolated, insubstantial and inadvertent
action taken by the Company in good faith and which is remedied by the Company
promptly (the later of 60 days or
-4-
<PAGE>
as soon as reasonably practicable) after receipt of written notice thereof given
by the Executive shall not constitute a basis for a Qualifying Termination.
(b) Definition of Cause. The Company may terminate the Executive's
employment immediately for "Cause" if, in the reasonable determination of the
Board or the Compensation Committee of the Board, as set forth in an action of
the Board or such Committee setting forth in reasonable detail the reasons for
such termination, (i) the Executive engages in conduct that violates significant
policies of the Company after the Executive is notified by the Company that he
is engaging in conduct that violates such policies and that such conduct will be
deemed to be Cause; (ii) the Executive fails to perform the essential functions
of his job (except for a failure resulting from a bona fide illness or
incapacity) or fails to carry out the Board's reasonable directions with respect
to material duties after the Executive is notified by the Company that he is
failing to perform these essential functions or failing to carry out such
reasonable directions and that such conduct will be deemed to be Cause; (iii)
the Executive engages in embezzlement or misappropriation of corporate funds or
other acts of fraud, dishonesty or self-dealing, or commits a felony or any
significant violation of any material statutory or common law duty of loyalty to
the Company; or (iv) the Executive breaches a material provision of this
Agreement (including, but not limited to, the non-compete, non-solicitation,
confidentiality, or non-disparagement provisions in Sections 8 and 9), after the
Executive is notified by the Company that he has breached a material provision
of this Agreement and that such breach will be deemed to be Cause. Prior to any
termination of the Executive for Cause pursuant to clauses (i), (ii) or (iv) of
this Section 5(b), the Company shall give the Executive reasonable opportunity
to remedy any condition, conduct, action or inaction of the Executive giving
rise to the violation or breach of such clause if such violation or breach is
remediable.
6. Consequences of Termination of Employment Period.
(a) Benefits Upon Termination. If the Employment Period terminates
for any reason, the Executive (or the Executive's executor, administrator or
other legal representative, as the case may be) shall be entitled to receive the
following benefits:
(i) within 30 days after the amount in question is reasonably
determinable (1) base salary payable through the date of termination of
employment, (2) unpaid annual incentive compensation for the calendar year
immediately preceding the date of such termination, and (3) reimbursement
of proper expenses incurred through the date of such termination;
(ii) any previously-granted earnings performance units shall be
treated in accordance with the then existing terms of the Company's
Earnings Performance Plan; and
(iii) participation (by the Executive or the Executive's qualified
dependents, as the case may be) in all other applicable benefit plans or
programs in accordance with the
-5-
<PAGE>
provisions thereof applicable to terminated employees (or their qualified
dependents, as the case may be).
(b) Additional Benefits Upon Qualifying Termination. If the
Employment Period terminates prior to March 31, 2004 (or any mutually agreed-
upon extended expiration of the Employment Period) for a reason set forth in
Section 5(a), the Executive (or the Executive's executor, administrator or other
legal representative, as the case may be) shall be entitled to receive the
following additional benefits:
(i) within 30 days after the amount in question is reasonably
determinable, annual incentive compensation and stock options for the
calendar year in which such termination shall have occurred, prorated
through the date of such termination based on actual results of operations
for such full calendar year;
(ii) if the Qualifying Termination is for any reason other than death
or Disability:
(1) each stock option granted to the Executive by the Company on or
after the Effective Date then held by the Executive shall on the
date of such termination be 100% vested;
(2) for the lesser of 30 months or the remainder of the scheduled
term of the Employment Period, the Executive shall receive annual
base salary at the rate in effect as of the termination of the
Executive's employment; provided that (A) any agreed-upon
reduction in the Executive's base salary during the Employment
Period shall not be taken into account for purposes of
determining the base salary to be paid to the Executive under
this subparagraph (2), and (B) the Company shall pay this benefit
in one lump sum (without discount) within 90 days after the
Executive's termination of employment, and
(3) for the four-year period immediately following the Executive's
termination of employment, he shall become a consultant to the
Company under Section 4 above, with the corresponding benefits
described in that Section;
(iii) if the Qualifying Termination is due to the Executive's death
or Disability, the Executive or the Executive's executor, administrator or
other legal representative, as the case may be, shall receive the
consulting benefits described in Section 4(c) above for the four-year
Consulting Period; subject in the event of Disability to the same
conditions that would apply under Section 4(d) upon Disability during the
Consulting Period; and
(iv) if the Qualifying Termination is due to the Executive's death,
in addition to the consulting benefits described in Section 4(c) above, for
the six-month period immediately following the Executive's death, the
Executive's executor or administrator
-6-
<PAGE>
shall receive the Executive's base salary at the rate in effect at the time
of the Executive's death.
7. Federal and State Withholding. The Company shall deduct from the
amounts payable to the Executive pursuant to this Agreement the amount of all
required federal and state withholding taxes in accordance with the Executive's
Form W-4 on file with the Company and all applicable social security and
Medicare taxes.
8. Noncompetition; Nonsolicitation; Confidentiality.
(a) Covenant Not to Compete. The Executive acknowledges that in the
course of his employment with the Company pursuant to this Agreement and the
BJK&E Agreement, the Executive has and will become familiar with confidential
information of the Company and its subsidiaries, affiliates and clients, and
that the Executive's services are of special, unique and extraordinary value to
the Company. Except with the prior written consent of the Board, during the
Employment Period and the Consulting Period (including what would have been the
remaining scheduled terms of the Employment Period and the Consulting period but
for the Executive's resignation or termination for "Cause"):
(i) 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 (1) the
businesses conducted at the date hereof by the True North Group or (2) any
business in which the True North Group is substantially engaged at any time
during the Employment Period or the Consulting Period;
(ii) the Executive shall not directly or indirectly solicit, call
on, perform services for or otherwise do business with, or interfere in any
way with the Company's relationship with any customer, client or other
business relationship of the businesses conducted by the True North Group
as of the date hereof or of any business in which the True North Group is
substantially engaged at any time during the Employment Period or the
Consulting Period;
(iii) the Executive shall not induce or attempt to persuade any
employee of the True North Group to terminate the employee's employment
relationship with 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 the True North Group,
nor divulge any trade secrets or other confidential information 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
-7-
<PAGE>
Company all Company 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 8(a)(i) or which were paid for by 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:
(i) the covenants set forth in Sections 8(a)(i) and 8(a)(ii) shall
apply within all territories in which the True North Group is actively
engaged in the conduct of business during the Employment Period, including,
without limitation, the territories in which customers are then being
solicited;
(ii) each party intends and agrees that if in any action before any
court or agency legally empowered to enforce the covenants contained in
Sections 8(a) and 8(b) any term, restriction, covenant or promise contained
therein is found to be unreasonable and accordingly unenforceable, then
such term, restriction, covenant or promise shall be deemed modified to the
extent necessary to make it enforceable by such court or agency; and
(iii) the covenants contained in Sections 8(a) and 8(b) shall survive
the conclusion of the Executive's employment by the Company.
9. Nondisparagement; Cooperation. (a) The Executive shall not, at
any time during his employment with the Company or thereafter, make any public
or private statement to the news media, to any True North Group competitor or
client, or to any other individual or entity, if such statement would disparage
any of the True North Group, any of their respective businesses or any director
or officer of any of them or such businesses or would have a deleterious effect
upon the interests of any of such businesses or the stockholders or other owners
of any of them; provided, however, that the Executive shall not be in breach of
this restriction if such statements consist solely of (i) private statements
made to any officers, directors or employees of any of the True North Group by
the Executive in the course of carrying out his duties pursuant to this
Agreement or his duties as a director or officer, or (ii) private statements
made to persons other than clients or competitors of any of the True North Group
(or their representatives) or members of the press or the financial community
that do not have a material adverse effect upon any of the True North Group; and
provided further that nothing contained in this Section 9(a) or in any other
provision of this Agreement shall preclude the Executive from making any
statement in good faith that is required by law, regulation or order of any
court or regulatory commission, department or agency.
(b) The Company shall not, at any time during the Executive's
employment with the Company or thereafter, authorize any person to make, nor
shall the Company condone the making of, any statement, publicly or privately,
that would disparage the Executive;
-8-
<PAGE>
provided, however, that the Company shall not be in breach of this restriction
if such statements consist solely of (i) private statements made to any
officers, directors or employees of the True North Group or (ii) private
statements made to persons other than clients or competitors of any of the True
North Group (or their representatives) or members of the press or the financial
community that do not have a material adverse effect upon the Executive; and
provided further that nothing contained in this Section 9(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 that is required by any law, regulation or order of any
court or regulatory commission, department or agency.
10. Enforcement. The parties hereto agree that the Company would be
damaged irreparably in the event that any provision of Section 8 or 9 of this
Agreement were not performed in accordance with its terms or were otherwise
breached and that money damages would be an inadequate remedy for any such
nonperformance or breach. Accordingly, the Company and its successors or
permitted assigns shall be entitled, in addition to other rights and remedies
existing in their favor, to an injunction or injunctions to prevent any breach
or threatened breach of any of such provisions and to enforce such provisions
specifically (without posting a bond or other security). Each of the parties
agrees that he or it will submit himself or itself to the personal jurisdiction
of 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.
11. Survival. Sections 8, 9 and 10 of this Agreement shall survive
and continue in full force and effect in accordance with their respective terms,
notwithstanding any termination of the Employment Period.
12. 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 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. Except as necessary in court
proceedings to enforce this arbitration provision or an award rendered
hereunder, or to obtain interim relief, neither a party nor an arbitrator may
disclose the existence, content or results of any arbitration hereunder without
the prior written consent of the Company and the Executive. The Company and the
Executive acknowledge that this Agreement evidences a transaction involving
interstate commerce. Notwithstanding any choice of law provision included in
this Agreement, the United States Federal Arbitration Act shall govern the
interpretation and enforcement of this arbitration provision.
-9-
<PAGE>
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 faxed five days after deposit in the United
States mail, certified and return receipt requested, postage prepaid, addressed
(a) if to the Executive, to the most recent address then shown on the employment
records of the Company, with a copy to Bruce Bodner, 250 Park Avenue South., New
York, NY 10003 (fax: 212-353-8454), and if to the Company, to True North
Communications Inc., 101 East Erie Street, Chicago, Illinois 60611-2897,
Attention: General Counsel, or (b) to such other address as either party may
have furnished to the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon receipt.
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 the BJK&E Agreement and any other
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related in any manner to the subject matter
hereof.
16. Successors and Assigns. This Agreement shall be enforceable by
the Executive and the Executive's heirs, executors, administrators and legal
representatives, and by the Company and its successors and permitted assigns.
Any successor or permitted assign of the Company shall assume by instrument
delivered to the Executive the liabilities of the Company hereunder. This
Agreement shall not be assigned by the Company other than to a successor
pursuant to a merger, consolidation or transfer of all or substantially all of
the capital stock or assets of the Company.
17. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to principles of conflict of laws.
18. Amendment and Waiver. The provisions of this Agreement may be
amended or waived only by the written agreement of the Company and the
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
-10-
<PAGE>
19. Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original and both of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TRUE NORTH COMMUNICATIONS INC.
By: /s/ David A. Bell
----------------------------------
David A. Bell,
Chief Executive Officer
By: /s/ Marilyn R. Seymann
----------------------------------
Marilyn R. Seymann,
Chairman of the Compensation
Committee of the Board of
Directors
EXECUTIVE
/s/ Leo-Arthur Kelmenson
----------------------------------
Leo-Arthur Kelmenson
-11-
<PAGE>
Exhibit 10.19
EMPLOYMENT AGREEMENT
--------------------
EMPLOYMENT AGREEMENT dated as of January 1, 2000 (the "Effective
Date") between True North Communications Inc., a Delaware corporation (the
"Company"), and David A. Bell (the "Executive").
WHEREAS, the Company is a global communications holding company with
ownership interests in subsidiaries, affiliates and joint ventures that are
engaged in the advertising agency business, the multimedia production business,
the business of planning and buying of media time and space and related
businesses (the Company and the subsidiaries, affiliates and joint ventures in
which it from time to time has equity interests are hereinafter referred to
collectively as the "True North Group");
WHEREAS, the Executive has previously served the Company as the
President and Chief Executive Officer of Bozell Worldwide, Inc.;
WHEREAS, the Executive and Bozell Worldwide Inc.'s direct parent
company, Bozell, Jacobs, Kenyon & Eckhardt, Inc., have entered into an
Employment Agreement dated September 13, 1985 and subsequently amended from time
to time (the "BJK&E Agreement"); and
WHEREAS, the Company and the Executive desire to enter into this
Agreement to replace the BJK&E Agreement and to provide for the employment of
the Executive by the Company as its Chairman and Chief Executive Officer, upon
the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereby agree as follows:
1. Employment. The Company hereby employs the Executive and the
Executive hereby agrees to be employed by the Company upon the terms and subject
to the conditions contained in this Agreement. The term of employment of the
Executive by the Company pursuant to this Agreement (the "Employment Period")
shall commence on the Effective Date and, unless earlier terminated, shall end
on December 31, 2002; provided that the Employment Period may be extended by
mutual written agreement of the parties.
2. Position and Duties. The Company shall employ the Executive
during the Employment Period with the title of Chairman and Chief Executive
Officer. The Executive shall also serve as a member of the Company's Board of
Directors (the "Board") (subject to continued election by the Company's
stockholders). The Executive shall report directly to the Board, and he shall
split
<PAGE>
his time during the Employment Period between Chicago and New York City, as
necessary to carry out his duties and responsibilities. Subject to the powers,
authority and responsibilities vested in the Board and in duly constituted
committees of the Board, the Executive shall have the authority, duties and
responsibilities commensurate with his position and title as the principal
executive officer of the Company and such other duties and responsibilities (not
inconsistent with his position) as are reasonably assigned to him from time to
time by the Board or any committee thereof. During the Employment Period, the
Executive shall perform faithfully and loyally and to the best of the
Executive's abilities his duties hereunder, shall devote his full business time,
attention and efforts to the affairs of the True North Group and shall use his
reasonable best efforts to promote the interests of the Company. Notwithstanding
the foregoing, the Executive may engage in charitable, civic or community
activities, provided that they do not interfere with the performance of the
Executive's duties hereunder, and, with the prior approval of 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 8 hereof.
3. Compensation.
(a) Annual Base Salary. During the Employment Period, the Company
shall pay to the Executive an annual base salary at the rate of $900,000 per
annum in accordance with the Company's regular payroll practices. The annual
base salary shall be reviewed periodically in accordance with guidelines
applicable to the Company's senior executives generally.
(b) Incentive Compensation. During the Employment Period, the
Executive shall be entitled to participate in the Company's Executive
Compensation Program (and any other incentive compensation program that may
apply generally to senior executives of the Company from time to time), as such
Program applies to similarly situated senior executives and as such Program may
be amended from time to time. As of the Effective Date, the Executive's targets
for annual incentive compensation and stock options are 122% of base salary and
175% of base salary, respectively.
(c) Other Benefits. During the Employment Period, the Executive
shall be entitled to participate in the Company's employee benefit plans and
programs and fringe benefits that are generally available to senior executives
of the Company from time to time. All benefits referred to in this Section 3(c)
are hereinafter referred to as the "Employee Benefits."
(d) Expense Reimbursement. During the Employment Period, the Company
shall reimburse the Executive for all proper expenses incurred by him in the
performance of his duties hereunder in accordance with the Company's policies
and procedures for senior executives.
4. Consulting Period and Benefits.
(a) Commencement. At the end of the scheduled term of the Employment
Period (as extended, if applicable), if the Executive retires from the Company
or the Company decides not to extend the Employment Period, then the Executive
shall become a consultant to the Company for the five-year period beginning on
the day following the last day of the Employment Period (the
-2-
<PAGE>
"Consulting Period"). In addition, if the Executive resigns from the Company
prior to the end of the Employment Period (other than upon a "Qualifying
Termination," as defined in Section 5(a) below), then the Consulting Period and
corresponding benefits shall apply, subject to the vesting requirements set
forth in subsection (d) below.
(b) Duties and Responsibilities. During the Consulting Period, the
Executive shall make himself available, upon reasonable notice, to perform
services for the Company which shall be related to such projects and matters as
the Board or the Chief Executive Officer of the Company may designate from time
to time and which shall be commensurate with the Executive's years of experience
and level of skill. The Executive shall not be required to devote more than the
equivalent of 10 full business days during any calendar quarter to the
performance of such services.
(c) Consulting Benefits. During the Consulting Period, the Executive
shall be paid an annual cash benefit equal to the vested portion of 75% of the
average of the Executive's annual base salary over the last three full calendar
years of his employment with the Company, with the vested portion determined in
accordance with subsection (d) below. These consulting payments shall be made
no less frequently than monthly, and shall be subject to any applicable tax
withholding and tax reporting requirements. The Company shall also reimburse
the Executive in accordance with the Company's policies and procedures for all
proper expenses incurred by him in the performance of his duties and
responsibilities during the Consulting Period.
(d) Vesting. The Executive's annual cash benefit described in
subsection (c) above shall vest one-third per year beginning on the first
anniversary of the date the Executive commenced serving as Chief Executive
Officer of the Company, such that the benefit shall vest one-third on each of
April 1, 2000, 2001, and 2002 (subject to the Executive's continued employment
with the Company through those dates).
(e) Termination of Consulting Period. The Consulting Period shall
terminate prior to the end of the five-year period, and the benefits described
in subsection (c) above shall immediately cease, upon the occurrence of either
of the following: (i) the material failure by the Executive to perform the
reasonably requested duties and responsibilities described in subsection (b)
above (subject to written notice by the Company and a reasonable opportunity to
cure) or (ii) a material breach by the Executive of this Agreement or other
action by the Executive that constitutes "Cause" under Section 5(b) (subject to
written notice by the Company and a reasonable opportunity to remedy any
condition, conduct, action or inaction of the Executive giving rise to the
violation or breach if such violation or breach is remediable). Notwithstanding
the foregoing, if the Executive dies or becomes permanently disabled (see
"Disability" as defined in Section 5(a) below) during the Consulting Period,
then the vested consulting benefits shall continue to be paid to the Executive
or his estate, as applicable, for the remainder of the five-year Consulting
Period. The foregoing shall not be construed as limiting any other rights or
remedies that may be available to the Company upon the Executive's breach of any
provision of this Agreement.
5. Termination of Employment Period.
-3-
<PAGE>
(a) Qualifying Termination. For purposes of this Agreement,
"Qualifying Termination" means the occurrence of any of the following events
prior to the expiration of the Employment Period, as extended, if applicable:
(i) termination of the Executive's employment by the Company without Cause (as
defined in subsection (b) below), (ii) termination of the Executive's employment
by the Company on account of the Executive having become unable (as determined
by the Company in good faith) to perform regularly his duties hereunder by
reason of illness or incapacity for a period of more than six consecutive months
(termination for "Disability"), (iii) termination of the Executive's employment
on account of the Executive's death, or (iv) termination of the Executive's
employment by the Executive due to and upon the occurrence, without the
Executive's express written consent, of any of the following events: (1) the
assignment to the Executive of any duties that either (A) are inconsistent in
any material respect with the Executive's position, 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 are agreed to by the
Executive) or (B) result in a material diminution of the Executive's
responsibilities, (2) a material adverse change in the Executive's reporting
responsibilities, titles or offices with the Company, (3) a material breach of
the Company's obligations set forth in this Agreement, (4) a decrease in the
Executive's base salary, or (5) any requirement of the Company that the location
where the Executive is based be materially changed.
For purposes of this Agreement, an isolated, insubstantial and inadvertent
action taken by the Company in good faith and which is remedied by the Company
promptly (the later of 60 days or as soon as reasonably practicable) after
receipt of written notice thereof given by the Executive shall not constitute a
basis for a Qualifying Termination.
(b) Definition of Cause. The Company may terminate the Executive's
employment immediately for "Cause" if, in the reasonable determination of the
Board or the Compensation Committee of the Board, as set forth in an action of
the Board or such Committee setting forth in reasonable detail the reasons for
such termination, (i) the Executive engages in conduct that violates significant
policies of the Company after the Executive is notified by the Company that he
is engaging in conduct that violates such policies and that such conduct will be
deemed to be Cause; (ii) the Executive fails to perform the essential functions
of his job (except for a failure resulting from a bona fide illness or
incapacity) or fails to carry out the Board's reasonable directions with respect
to material duties after the Executive is notified by the Company that he is
failing to perform these essential functions or failing to carry out such
reasonable directions and that such conduct will be deemed to be Cause; (iii)
the Executive engages in embezzlement or misappropriation of corporate funds or
other acts of fraud, dishonesty or self-dealing, or commits a felony or any
significant violation of any material statutory or common law duty of loyalty to
the Company; or (iv) the Executive breaches a material provision of this
Agreement (including, but not limited to, the non-compete, non-solicitation,
confidentiality, or non-disparagement provisions in Sections 8 and 9), after the
Executive is notified by the Company that he has breached a material provision
of this Agreement and that such breach will be deemed to be Cause. Prior to any
termination of the Executive for Cause pursuant to clauses (i), (ii) or (iv) of
this Section 5(b), the Company shall give the Executive reasonable opportunity
to remedy any condition, conduct, action or inaction of the Executive giving
rise to the violation or breach of such clause if such violation or breach is
remediable.
-4-
<PAGE>
6. Consequences of Termination of Employment Period.
(a) Benefits Upon Termination. If the Employment Period terminates
for any reason, the Executive (or the Executive's executor, administrator or
other legal representative, as the case may be) shall be entitled to receive the
following benefits:
(i) within 30 days after the amount in question is reasonably
determinable (1) base salary payable through the date of termination of
employment, (2) unpaid annual incentive compensation for the calendar year
immediately preceding the date of such termination, and (3) reimbursement
of proper expenses incurred through the date of such termination;
(ii) any previously-granted earnings performance units shall be
treated in accordance with the then existing terms of the Company's
Earnings Performance Plan; and
(iii) participation (by the Executive or the Executive's qualified
dependents, as the case may be) in all other applicable benefit plans or
programs in accordance with the provisions thereof applicable to terminated
employees (or their qualified dependents, as the case may be).
(b) Additional Benefits Upon Qualifying Termination. If the
Employment Period terminates prior to its scheduled expiration date, as extended
if applicable, for a reason set forth in Section 5(a), the Executive (or the
Executive's executor, administrator or other legal representative, as the case
may be) shall be entitled to receive the following additional benefits:
(i) within 30 days after the amount in question is reasonably
determinable, annual incentive compensation for the calendar year in which
such termination shall have occurred, prorated through the date of such
termination based on actual results of operations for such full calendar
year; and
(ii) if the Qualifying Termination is for any reason other than death
or Disability:
(1) each stock option granted to the Executive by the Company on or
after the Effective Date then held by the Executive shall on the
date of such termination be 100% vested;
(2) for a period of three years commencing on the day immediately
following the date of termination of the employment of the
Executive (the "Severance Period"), the Executive shall be
entitled to receive (A) base salary, at the rate payable as of
the date of such termination, payable in accordance with the
Company's normal payroll policies and (B) within 30 days after
the amount in question is reasonably determinable, annual
incentive compensation at the higher of (x) the rate payable to
the Executive for the calendar year in which such termination
shall have occurred or (y) the average of the rates payable
-5-
<PAGE>
to the Executive for the three calendar years (or if the
Executive shall have participated in the Company's Executive
Compensation Program for fewer than three calendar years, for
such lesser number of calendar years) immediately preceding the
year in which such termination shall have occurred;
(3) during the Severance Period, the Executive shall be entitled to
participate in life insurance, medical and dental benefits on
terms no less favorable than on the termination date, subject to
legal restrictions and to modifications of general application to
all similarly situated employees; and
(4) for a period of two years beginning on the day immediately
following the conclusion of the Severance Period, the Executive
shall receive the annual Consulting Period benefit described in
Section 4(c) above, with all vesting requirements deemed to be
satisfied;
(iii) if the Qualifying Termination is due to the Executive's
Disability, for the five-year period beginning on the day immediately
following the effective date of the Executive's termination of employment,
the Executive shall receive the then vested portion of the annual
Consulting Period benefit described in Section 4(c) above; and
(iv) each stock option granted to the Executive by the Company on or
after the Effective Date then held by the Executive shall be exercisable to
the extent it is vested at the date of termination by the Executive or the
Executive's executor, administrator or other legal representative, as the
case may be, for up to three years after the date of termination, but in no
case beyond a date 10 years following the date of grant of such option.
7. Federal and State Withholding. The Company shall deduct from the
amounts payable to the Executive pursuant to this Agreement the amount of all
required federal and state withholding taxes in accordance with the Executive's
Form W-4 on file with the Company and all applicable social security and
Medicare taxes.
8. Noncompetition; Nonsolicitation; Confidentiality.
(a) Covenant Not to Compete. Except with the prior written consent
of the Board, during the Employment Period (including the remaining scheduled
term of the Employment Period following the Executive's resignation or
termination for "Cause"), any Severance Period and any Consulting Period
(including the period during which consulting benefits are paid in accordance
with Section 6(b)(ii) or (iii) above):
(i) 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 (1) the
businesses conducted at the date hereof by the True North Group or (2) any
business in
-6-
<PAGE>
which the True North Group is substantially engaged at any time during the
Employment Period;
(ii) the Executive shall not solicit, directly or indirectly, any
customer, client or other business relationship of the businesses conducted
by the True North Group as of the date hereof or of any business in which
the True North Group is substantially engaged at any time during the
Employment Period; and
(iii) the Executive shall not induce or attempt to persuade any
employee of the True North Group to terminate the employee's employment
relationship with 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 the True North Group,
nor divulge any trade secrets or other confidential information 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 8(a)(i) or which were paid for by 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:
(i) the covenants set forth in Sections 8(a)(i) and 8(a)(ii) shall
apply within all territories in which the True North Group is actively
engaged in the conduct of business during the Employment Period, including,
without limitation, the territories in which customers are then being
solicited;
(ii) each party intends and agrees that if in any action before any
court or agency legally empowered to enforce the covenants contained in
Sections 8(a) and 8(b) any term, restriction, covenant or promise contained
therein is found to be unreasonable and accordingly unenforceable, then
such term, restriction, covenant or promise shall be deemed modified to the
extent necessary to make it enforceable by such court or agency; and
(iii) the covenants contained in Sections 8(a) and 8(b) shall survive
the conclusion of the Executive's employment by the Company.
9. Nondisparagement; Cooperation. (a) The Executive shall not, at
any time during his employment with the Company or thereafter, make any public
or private statement to the news media, to any True North Group competitor or
client, or to any other individual or entity, if
-7-
<PAGE>
such statement would disparage any of the True North Group, any of their
respective businesses or any director or officer of any of them or such
businesses or would have a deleterious effect upon the interests of any of such
businesses or the stockholders or other owners of any of them; provided,
however, that the Executive shall not be in breach of this restriction if such
statements consist solely of (i) private statements made to any officers,
directors or employees of any of the True North Group by the Executive in the
course of carrying out his duties pursuant to this Agreement or, to the extent
applicable, his duties as a director or officer, or (ii) private statements made
to persons other than clients or competitors of any of the True North Group (or
their representatives) or members of the press or the financial community that
do not have a material adverse effect upon any of the True North Group; and
provided further that nothing contained in this Section 9(a) or in any other
provision of this Agreement shall preclude the Executive from making any
statement in good faith that is required by law, regulation or order of any
court or regulatory commission, department or agency.
(b) The Company shall not, at any time during the Executive's
employment with the Company or thereafter, authorize any person to make, nor
shall the Company condone the making of, any statement, publicly or privately,
which would disparage the Executive; provided, however, that the Company shall
not be in breach of this restriction if such statements consist solely of (i)
private statements made to any officers, directors or employees of the True
North Group or (ii) private statements made to persons other than clients or
competitors of any of the True North Group (or their representatives) or members
of the press or the financial community that do not have a material adverse
effect upon the Executive; and provided further that nothing contained in this
Section 9(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.
10. Enforcement. The parties hereto agree that the Company would be
damaged irreparably in the event that any provision of Section 8 or 9 of this
Agreement were not performed in accordance with its terms or were otherwise
breached and that money damages would be an inadequate remedy for any such
nonperformance or breach. Accordingly, the Company and its successors or
permitted assigns shall be entitled, in addition to other rights and remedies
existing in their favor, to an injunction or injunctions to prevent any breach
or threatened breach of any of such provisions and to enforce such provisions
specifically (without posting a bond or other security). Each of the parties
agrees that he or it will submit himself or itself to the personal jurisdiction
of 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.
11. Survival. Sections 8, 9 and 10 of this Agreement shall survive
and continue in full force and effect in accordance with their respective terms,
notwithstanding any termination or expiration of the Employment Period.
12. Arbitration; 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 in New York, New York administered by the
-8-
<PAGE>
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 States Federal Arbitration Act shall govern the
interpretation and enforcement of this arbitration provision.
13. Notice. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given when personally delivered or five days after deposit in the United States
mail, certified and return receipt requested, postage prepaid, addressed (a) if
to the Executive, to the most recent address then shown on the employment
records of the Company, and if to the Company, to True North Communications
Inc., 101 East Erie Street, Chicago, Illinois 60611-2897, Attention: General
Counsel, or (b) to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
14. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is determined to be
invalid, illegal or unenforceable in any respect under applicable law or rule in
any jurisdiction, such invalidity, illegality or unenforceability shall not
affect the validity, legality or enforceability of any other provision of this
Agreement or the validity, legality or enforceability of such provision in any
other jurisdiction, but this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision had
never been contained herein.
15. Entire Agreement. This Agreement constitutes the entire
agreement and understanding between the parties with respect to the subject
matter hereof and supersedes and preempts the BJK&E Agreement and any other
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related in any manner to the subject matter
hereof.
16. Successors and Assigns. This Agreement shall be enforceable by
the Executive and the Executive's heirs, executors, administrators and legal
representatives, and by the Company and its successors and permitted assigns.
Any successor or permitted assign of the 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
-9-
<PAGE>
pursuant to a merger, consolidation or transfer of all or substantially all of
the capital stock or assets of the Company.
17. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the internal laws of the State of New York
without regard to principles of conflict of laws.
18. Amendment and Waiver. The provisions of this Agreement may be
amended or waived only by the written agreement of the Company and the
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
19. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original and both of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
TRUE NORTH COMMUNICATIONS INC.
By: /s/ Marilyn R. Seymann
-----------------------------------
Marilyn R. Seymann,
Chairman of the Compensation
Committee of the Board of
Directors
EXECUTIVE:
/s/ David A. Bell
-----------------------------------
David A. Bell
-10-
<PAGE>
Exhibit 11.1
1. Earnings Per Share - Basic Calculation
1997 1998 1999
---- ---- ----
A. Net Income(loss) $(49,942) $27,261 $38,790
======== ======= =======
B. Calculation of Denominator:
Weighted average common shares outstanding 44,934 45,748 47,346
Treasury share impact of Publicis shares (1,102) -- --
------- ------- -------
43,832 45,748 47,346
======== ======= =======
C. Net Income (loss) per share $(1.14) $0.60 $0.82
======== ======= =======
2. Earnings Per Share - Diluted Calculation
A. Net Income Note 1 $27,261 $38,790
------- =======
B. Calculation of Denominator:
Weighted average common shares outstanding 45,748 47,346
Effect of dilutive options 1,847 796
------- -------
47,595 48,142
======= =======
C. Net Income per share $0.57 $0.81
======= =======
Note 1 -- Because Registrant reported a loss for 1997, presentation of an
earnings per share calculation on a diluted basis is inapplicable.
<PAGE>
Exhibit 13.1
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations-
1999 Compared to 1998
General-True North's net income for the year ended December 31, 1999, was $38.8
million, or $0.81 per diluted share. This compares to $27.3 million, or $0.57
per diluted share, for the year ended December 31, 1998. Both comparable periods
reflected unusual items, including pre-tax restructuring and other charges,
certain gains on sales of securities, severance and executive retirement costs
in 1998 and a loss on the involuntary conversion of True North's investment in
Publicis Communication in 1998. In addition, the 1998 results of The Financial
Relations Board (FRB), which was acquired in February 1999 in a pooling of
interests transaction, included $7.5 million of merger-related costs and expense
adjustments.
Excluding the effect of these unusual items, net income for 1999 was $86.1
million, or $1.79 per diluted share, compared to $68.0 million, or $1.43 per
diluted share.
Revenues-Consolidated revenues increased $165.1 million, or 13%, to $1,439.4
million for the year ended December 31, 1999, from $1,274.3 million in 1998.
Revenues from the U.S. operations increased $132.4 million, or 14.2%, to
$1,064.0 million in 1999, while international revenues increased 9.6%, or $32.7
million, to $375.4 million. Excluding the impact of changes in foreign exchange
rates, international revenues increased 12.9%.
Approximately 60% of the worldwide growth in revenues was due to acquisitions.
Excluding the effects of acquisitions, divestitures and changes in foreign
exchange rates, consolidated revenue growth from net new business wins and
higher existing client net spending was 6.3%.
Operating Expenses-Total consolidated operating expenses increased $192.9
million to $1,357.1 million from $1,164.2 million in 1998. Excluding
restructuring and other charges described below, total operating expenses
increased in 1999 by $136.3 million, or 11.9%. Acquisitions accounted for
approximately 70% of the increase, while FRB's 1998 expenses included
approximately $7.5 million of merger-related costs. Excluding the effects of
restructuring, acquisitions, divestitures, changes in foreign exchange rates and
other unusual items, total operating expenses increased 5.3% in 1999.
Salaries and benefits increased $64.8 million, or 8.0%, to $871.4 million in
1999. Included in the $806.6 million in salaries and benefits for 1998 are $7.0
million related to the retirement of the CEO and the resignation of the Chairman
of the Board, and a $2.1 million severance accrual relating to the downsizing of
a U.S. office. Acquisitions represented approximately $56.4 million of the
increase, while the impact of changes in foreign exchange rates decreased
salaries and related benefit expenses by 0.5%. Excluding the effects of the
items noted above, salaries and related benefits increased by 3.9%, representing
normal salary growth progression offset by lower incentive expense.
Office and general expenses were $409.2 million for the year ended December 31,
1999, compared to $354.3 million in 1998, a $54.9 million, or 15.5%, increase.
Acquisitions accounted for $28.6 million of the increase, while lower foreign
exchange rates decreased those expenses by 0.5%. Excluding the impact of
acquisitions, changes in foreign exchange rates and unusual items, office and
general expenses increased by 8.4% in 1999 versus 1998. This reflects higher
goodwill amortization due to acquisitions, higher depreciation charges from
upgrading the facilities and computer systems, as well as higher costs
associated with the Year 2000 testing and remediation.
Restructuring and Other Charges-In September 1999, management of True North
committed to a formal plan to restructure its operations and recorded a $76.4
million pre-tax charge ($50.2 million after-tax, or $1.04 per diluted share) in
the third quarter of 1999. The charge covers primarily severance, lease
termination and other exit costs in connection with the combination and
integration of True North's two independent worldwide advertising agency
networks. Bozell Worldwide's international operations, along with Bozell Detroit
and Bozell Costa Mesa, were merged with FCB Worldwide and now operate under the
FCB Worldwide name. The restructuring initiatives also include the sale or
closing of certain underperforming business units.
A summary of components of the restructuring charge is as follows (in millions):
==========================================================================
Severance and termination benefits $41.4
Lease termination and other exit costs 24.2
Impairment loss on sale or closing
of business units 10.8
- --------------------------------------------------------------------------
Total $76.4
==========================================================================
The involuntary severance and termination benefits portion of the charge amounts
to $41.4 million and reflects the elimination of approximately 640 positions
worldwide,
18 TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
primarily in international locations. The employee groups affected primarily
include executive and regional management and administrative personnel. As of
December 31, 1999, approximately 400 positions were eliminated and True North
anticipates that the remaining severance actions will be completed during 2000.
The charge of $24.2 million associated with lease terminations and other exit
costs represents primarily the closure, abandonment and downsizing of office
space globally, including approximately 30 international locations. The costs
include $13.5 million of remaining lease obligations net of estimated sublease
income, as well as $5.9 million of impairment charges pertaining to leasehold
improvements and fixed assets that will no longer be used in the combined
operation. As of December 31, 1999, approximately 15 facilities were abandoned
or downsized. The remaining actions are expected to be completed by mid-to-late
2000, with the cash portion of the charge to be paid out over the remaining
lease periods, which range from one to five years.
The impairment loss on the sale or closing of certain businesses amounts to
$10.8 million and results from the decision to sell two business units, one in
the U.S., and one in the United Kingdom, and to close four other business units
and joint ventures, including the R/GA Digital Studios, which specialized in
digital production for advertising and film companies. The impairment loss was
computed based on the difference between the estimated sales proceeds (if any)
and the carrying value of the related assets and investments and primarily
represents the impairment of goodwill associated with such units. These sales or
closures are expected to be completed by mid 2000.
True North anticipates net pre-tax expense savings of approximately $25.0
million on an annualized basis, with approximately half of such savings
occurring in 2000 and the full amount realized in 2001 and thereafter.
During the third quarter of 1998, True North reorganized its Poppe Tyson
subsidiary prior to its merger with Modem Media into Modem Media.Poppe Tyson,
Inc. (MMPT). The impact of the reorganization was a charge of $4.3 million.
These costs included severance, the write-down of computer equipment that was
not being used in the ongoing operations to net realizable value, and the costs
to buy out minority shareholders.
Other Income (Expenses)-Interest income increased by $1.2 million in the year
ended December 31, 1999, compared to 1998 due primarily to higher investment
income at MMPT from the proceeds of its initial public offering (IPO) in
February 1999. Interest expenses decreased by $4.1 million in 1999 versus 1998
due primarily to lower average debt levels resulting from the use of the $135.3
million of proceeds from the June 1999 sale of True North's holdings in Publicis
S.A. to reduce short-term borrowings.
Gains on sales of securities and other amounted to $11.2 million in 1999
compared to $17.5 million in 1998. True North recognized pre-tax gains of $7.9
million in 1999 and $13.4 million in 1998 on the sales of its holdings in
DoubleClick, Inc.
As described below, True North recorded a pre-tax charge of $30.5 million in
1998 resulting from the involuntary conversion of its 26.5% equity investment in
Publicis Communication into publicly traded shares of Publicis S.A., the parent
company of Publicis Communication.
Income Taxes-True North's effective tax rate was 51.0% in 1999 versus 70.2% in
1998. The 1999 effective rate was negatively impacted by the 1999 restructuring
charge, which included the write-off of intangible assets and lower foreign tax
rates, which resulted in a lower tax benefit rate. The 1998 rate was adversely
impacted by the acquisition of FRB, which, prior to the merger, operated as an S
Corporation. Therefore, its $8.8 million loss in 1998 does not reflect corporate
income taxes. Also, the involuntary conversion of True North's investment in
Publicis Communication resulted in a deferred tax obligation of $3.1 million.
Excluding these items, the 1999 effective tax rate was 43.0% and 1998's was
45.0%.
Minority Interests-Minority interest expense in 1999 was $4.2 million,
essentially unchanged from the $4.0 million in 1998. This reflects improvements
in the operation of MMPT offset by lower operating results in certain Latin
American operations.
Equity Income-Equity income was $2.5 million for the full year of 1999 compared
to $7.2 million in the corresponding period of 1998. This decrease is due
primarily to True North's no longer reflecting an equity pick-up in its
investment in Publicis Communication, which was $6.0 million in 1998.
Results of Operations-
1998 Compared to 1997
General-True North's net income for the year ended December 31, 1998, was $27.3
million, or $0.57 per diluted share. This compares to a loss of $49.9 million,
or $1.14 per basic share, in the corresponding period in 1997. Both
TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT 19
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
comparable periods reflected unusual items, including pre-tax restructuring and
other charges, gains on sales of securities, severance, executive retirement and
other unusual costs and a loss on the involuntary conversion of True North's
investment in Publicis of $30.5 million in 1998. In addition, the 1998 results
of FRB, which was acquired in February 1999 in a pooling of interests
transaction, included $7.5 million of merger-related costs and expense
adjustments.
Excluding the effect of these unusual items, net income for 1998 was $68.0
million, or $1.43 per diluted share, compared to $55.3 million, or $1.22 per
diluted share in 1997.
Revenues-Consolidated revenues increased $34.3 million, or 2.8%, to $1,274.3
million for the year ended December 31, 1998, from $1,240.0 million in the
comparable period in 1997. Revenues from the U.S. operations decreased $1.9
million, or 0.2%, to $931.6 million in 1998, while international revenues
increased 11.8%, or $36.2 million, to $342.7 million. Excluding the impact of
changes in foreign exchange rates, international revenues increased 16.1%.
Acquisitions added approximately $65.4 million to 1998's revenue growth.
Excluding the effects of acquisitions, divestitures, the resignation of a client
in the automotive industry and changes in foreign exchange rates, consolidated
revenue growth from net new business wins and higher existing client net
spending was 1.8% in 1998.
Operating Expenses-Total consolidated operating expenses decreased $112.1
million to $1,164.2 million in 1998 from $1,276.3 million in 1997. Excluding
restructuring and other charges described below, total operating expenses
increased in 1998 by $5.8 million, or 0.5%. Acquisitions, net of divestitures,
were $39.0 million, while FRB's 1998 expenses included approximately $7.5
million of merger-related costs. Excluding the effects of acquisitions,
divestitures, changes in foreign exchange rates and other unusual items, total
operating expenses decreased 1.7% in 1998.
Salaries and benefits increased $39.9 million, or 5.2%, to $806.6 million in
1998. Included in the $806.6 million for 1998 are $7.0 million related to the
retirement of the CEO and the resignation of the Chairman of the Board and a
$2.1 million severance accrual relating to the downsizing of a U.S. office.
Salaries and benefits in 1997 included $3.5 million of severance costs
associated with the downsizing of several offices. Acquisitions and divestitures
represented approximately $25.8 million of the increase, while changes in
foreign exchange rates decreased salaries and related benefits expense by 1.2%.
Excluding the effects of the items noted above, salaries and related benefits
increased by 1.5%, representing normal salary growth progression.
Office and general expenses were $354.3 million for the year ended December 31,
1998, compared to $428.7 million in 1997, a $74.4 million, or 17.3%, decrease.
Acquisitions and divestitures accounted for $13.2 million of the increase, while
lower foreign exchange rates decreased those expenses by 1.1%. Office and
general expenses in 1997 included $53.3 million of charges representing lease
reserves and the write-off of associated intangible assets for operations in New
York, Hong Kong, Stamford, Connecticut, and certain other locations; fixed asset
write-offs related to abandoned computer systems projects; the costs of
relocating certain employees as part of a management reorganization; and
accounts receivable write-offs and bad debt provision. Excluding the impact of
acquisitions, changes in foreign exchange rates and other unusual items, office
and general expenses decreased by 8.3% in 1998 versus 1997.
Restructuring and Other Charges-As a result of its acquisition of BJK&E in the
fourth quarter of 1997, True North recorded a pre-tax charge of $80.9 million
related to merger related costs and restructuring of the combined operations.
Activities related to this charge are summarized as follows (in millions):
<TABLE>
<CAPTION>
===========================================================================================================
Anticipated Severance Impaired Merger-related
Loss on and Other Long-lived Transaction
Subleases Exit Costs Assets Costs Total
===========================================================================================================
<S> <C> <C> <C> <C> <C>
Restructuring reserve $11.1 $ 38.7 $ 14.2 $ 16.9 $ 80.9
Write-down of long-lived assets -- -- (14.2) -- (14.2)
1997 cash payments (0.2) (4.8) -- (4.6) (9.6)
- -----------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 10.9 33.9 -- 12.3 57.1
- -----------------------------------------------------------------------------------------------------------
1998 cash payments (4.5) (26.3) -- (12.3) (43.1)
Long-term obligations secured (5.6) (7.4) -- -- (13.0)
Excess reserve reversed to income (0.8) (0.2) -- -- (1.0)
- -----------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 $ -- $ -- $ -- $ -- $ --
===========================================================================================================
</TABLE>
20 TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
These restructuring activities resulted in the identification of leased
facilities that True North no longer required for its operations. As a result,
in the fourth quarter of 1997 True North recorded its best estimate of the net
costs of these subleases as an element of the restructuring charge. During 1998
True North completed actions to sublet these leased facilities. Certain of these
facilities were subleased at terms more favorable than originally estimated in
1997. As a result, in the fourth quarter of 1998, True North reversed $0.8
million in excess lease reserves into pre-tax income.
These restructuring activities included plans for the elimination of 604
positions within True North. During 1997 and 1998, 589 employees were terminated
in accordance with the plans. The remaining positions were eliminated without
incurring severance costs due to normal employee turnover. As a result, True
North reversed $0.2 million in excess severance reserve into pre-tax income in
the fourth quarter of 1998.
The write-down of long-lived assets primarily represents goodwill associated
with offices that have been closed or were sold as a part of the restructuring
plans. In the case of offices sold, True North has computed the goodwill write-
off as the difference between the fair value of the related business and its net
tangible and intangible assets. These sales were completed in 1998.
During the third quarter of 1998, True North reorganized its Poppe Tyson
subsidiary prior to its merger with Modem Media into Modem Media.Poppe Tyson,
Inc. (MMPT). The impact of the reorganization was a charge of $4.3 million.
These costs included severance, the write-down of computer equipment that was
not being used in the ongoing operations to net realizable value, and the costs
to buy out minority shareholders.
Other Income (Expenses)-Interest income decreased by $1.7 million in the year
ended December 31, 1998, compared to 1997, due primarily to lower investment
balances.
Interest expense increased by $2.0 million in 1998 versus 1997 due primarily to
higher average debt levels resulting from acquisition activities.
Gains on sales of securities and other was $17.5 million in 1998 compared to
$2.7 million in 1997. True North recognized pre-tax gains of $13.4 million in
1998 on the sales of its holdings in DoubleClick, Inc., and $1.6 million in 1997
on the sales of certain operations.
As described below, True North recorded a pre-tax charge of $30.5 million in
1998, resulting from the involuntary conversion of its 26.5% equity investment
in Publicis Communication into publicly traded shares of Publicis S.A., the
parent company of Publicis Communication.
Income Taxes-True North's effective tax rate was 70.2% in 1998. The 1998 rate
was adversely impacted by the acquisition of FRB, which, prior to the merger,
operated as an S Corporation. Therefore, its $8.8 million loss in 1998 does not
reflect corporate income taxes. Also, the involuntary conversion of True North's
investment in Publicis Communication resulted in a deferred tax obligation of
$3.1 million. The 1997 tax rate was impacted by the write-off of nondeductible
intangible assets, the payment of nondeductible merger-related costs, and the
establishment of tax reserves of $7.0 million related to True North's plan to
reorganize its foreign operations. Excluding these items, the 1998 effective tax
rate was 45.0% and 1997's was 47.9%.
Minority Interests-Minority interest expense in 1998 was $4.0 million, a $1.6
million increase from the $2.4 million in 1997. This reflects improvements in
the operations of MMPT and certain Asia/Pacific and Latin American operations.
Equity Income-Equity income decreased from $9.7 million in 1997 to $7.2 million
due principally to the involuntary conversion of its equity investment in
Publicis Communication mentioned above. True North was unable to record equity
income related to this investment during a substantial portion of the fourth
quarter of 1998, traditionally a quarter in which Publicis Communication
recognized a substantial portion of its full-year results.
Liquidity and Capital Resources
As of December 31, 1999, True North's cash and cash equivalents totaled $118.3
million, which is an increase of $29.6 million over the 1998 year-end balance of
$88.7 million. The increase is due primarily to the proceeds received by MMPT
from the February 1999 initial public offering of its common stock.
In 1999, cash flow generated from operations, supplemented by seasonal short-
term borrowings and the proceeds from the sales of investments, financed the
operating and capital expenditure requirements of True North, as well as
dividend payments and the repurchase of common stock. True North's cash and cash
equivalents consist primarily of government securities and bank time deposits
and are of investment-grade quality.
TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT 21
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Operating Activities-True North's funds from operating activities consist
primarily of net income adjusted for noncash items, including depreciation and
amortization, and changes in operating assets and liabilities. Cash provided by
operating activities was $24.1 million in 1999. Operating cash flows are
impacted by the seasonal media spending patterns of clients. True North's policy
is to bill and collect monies from its clients prior to payments due to the
media.
Investing Activities-True North's net capital expenditures for property and
equipment were $63.1 million for the year ended December 31, 1999. These
expenditures primarily related to True North's worldwide investment in
technology, coupled with leasehold improvements related to office moves. In
addition, True North spent approximately $5.7 million on Year 2000 testing and
remediation efforts. True North anticipates that capital expenditures in 2000
will approximate 1999's level and has no material commitments for future
expenditures.
In 1999, True North acquired several companies to enhance its network, primarily
in the U.S. and Europe. These acquisitions were financed by the issuance of 1.7
million shares of common stock and treasury stock and additional short-term
borrowings. True North anticipates that it will continue to pursue acquisition
opportunities that will expand its capabilities and geographical presence.
In 1999, True North received $147.3 million from the sale of marketable
securities, including its investment in Publicis S.A. True North's remaining
marketable securities as of December 31, 1999, had a market value of $2.1
million.
Financing Activities-The net change in short-term bank borrowings reflects the
use of the $135.3 million cash proceeds from the sale of True North's investment
in Publicis S.A. to reduce such borrowings, offset by additional debt used to
finance the acquisition program, stock repurchase program and seasonal needs.
In May 1999, True North obtained two three-year term loans totaling $25.0
million, which refinanced similar loans expiring on May 24, 1999. A $15.0
million loan carries a fixed interest rate of 6.52%, and a $10.0 million loan
carries a fixed rate of 6.785%.
On May 27, 1999, True North extended its 364-day credit agreement for up to
$75.0 million of borrowings as part of its $250.0 million Revolving-Credit
Agreement. The terms of the extension include the payment of a commitment fee to
the bank of 0.07% and the increase in the spread over the Euro currency rate of
0.25%. As of December 31, 1999, True North had no borrowings outstanding under
its $175.0 million five-year revolving-credit facility. In addition, True North
had available at various banks uncommitted lines of credit aggregating
approximately $194.2 million on December 31, 1999, of which $76.4 million was
unused.
Effective February 10, 1999, MMPT completed an initial public offering of its
common stock. The number of shares issued was 3.0 million at a price of $16 per
share, with net proceeds totaling $42.0 million. As a result of the IPO, True
North owned approximately 48% of MMPT, down from its previous 70% ownership, and
controlled approximately 80% of the related stockholder votes. MMPT used the
proceeds from the IPO for working capital, capital expenditures and
acquisitions.
In May 1999, True North and MMPT entered into a Stockholders' Agreement which
stipulated, among other things, that upon the earlier of (i) the date True North
and its affiliates no longer own at least 35% of the outstanding capital stock
of MMPT and (ii) June 30, 2000, True North agrees that it and its affiliates
will convert all of their shares of Class B common stock of MMPT into shares of
Class A common stock of MMPT and thereby be entitled to only one vote per share
versus the five votes per share of Class B common stock.
In August 1999, True North and MMPT entered into a Registration Rights Agreement
that contains provisions granting the holders of Class B common stock the right
to participate in any underwritten public offering that MMPT may initiate,
subject to certain limitations. In addition, the agreement also provides the
holders of Class B common stock the right to initiate the registration of their
securities, subject to certain timing and other limitations.
In March 2000, MMPT announced that it had filed a registration statement with
the Securities and Exchange Commission relating to a proposed public offering of
4.5 million shares of its common stock.
As part of the proposed public offering of 4.5 million shares, True North is
offering to sell 2.5 million shares, a stake which represents about 12% of MMPT.
As of March 1, 1999, True North holds approximately 46% of MMPT, or 11.1 million
shares. Assuming the proposed offering is completed, True North's remaining
Class B shares will convert to Class A shares and True North will own
approximately 34% of MMPT. Accordingly, True North will account for its
investment in Modem Media under the equity method of accounting.
22 TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
True North will explore a number of opportunities for reinvestment of its
proceeds from the proposed sale, including the repurchase of True North common
stock and further investments in its portfolio of digital brands.
True North has paid cash dividends at an annual rate of $0.60 per share over the
past ten years. Determination of the payment of dividends is made by True
North's Board of Directors on a quarterly basis. True North anticipates that its
cash flow from operations will be adequate to continue payment of dividends at
similar levels in 2000.
True North continues to acquire shares of its own stock under a 1997 Board of
Directors resolution authorizing the purchase of up to $30.0 million. As of
December 31, 1999, the remaining amount of such authorization is approximately
$10.4 million. True North repurchases its stock primarily to meet its
obligations under various stock-based compensation plans.
True North believes that cash flow from operations, along with current cash
balances, will be sufficient to satisfy working capital and other operating
requirements in 2000. In the event additional funds are required, True North
believes it will have sufficient resources, including borrowing capacity, to
meet such requirements.
Publicis Relationship-During 1997 True North negotiated a resolution to its
outstanding disputes with Publicis, its former partner in a European joint
venture, resulting in a Separation Agreement dated May 19, 1997. The intent of
this agreement was to establish a new legal and business relationship between
the parties so that all disputes between the parties were resolved and each was
free to create its own separate, independent agency network.
Pursuant to the agreement, True North exchanged its 49% interest in the joint
venture for agencies in France, Greece, Portugal and the United Kingdom and an
additional 5.7% interest in Publicis Communication. The impact of this
settlement was not material to True North's 1997 consolidated financial
statements.
On November 6, 1998, Publicis S.A. announced its intention to convert True
North's resulting 26.5% investment in Publicis Communication to approximately
0.8 million of its publicly traded shares. Despite True North's objections, this
transaction was approved by the shareholders of Publicis S.A. and Publicis
Communication in special shareholders' meetings held in December 1998 and closed
shortly thereafter. As a result, True North owned approximately 8.8% of Publicis
S.A.
The book value of True North's 26.5% investment in Publicis Communication at the
date of this transaction was $164.5 million. The fair value of the Publicis S.A.
shares (based upon a December 14, 1998, Publicis closing price of $169.15 per
share) was $134.0 million. Accordingly, True North recorded a pre-tax loss of
$30.5 million in the fourth quarter of 1998 as a result of the involuntary
conversion of its investment in Publicis Communication to shares of Publicis
S.A. In addition, True North recorded a deferred tax obligation of approximately
$3.2 million upon the exchange. As a result, the after-tax impact of this
transaction was a loss of approximately $33.7 million.
On May 5, 1998, Publicis S.A., a greater than 5% shareholder and Publicis
Communication (together, Publicis), filed counterclaims in international
arbitration proceedings which had been instituted by True North with the London
Court of International Arbitration. Publicis sought damages in the amount of 382
million French Francs (approximately $62 million) for, among other things, the
alleged breaches of the May 1997 Separation Agreement between the parties and
other actions which Publicis alleged created liabilities associated with the
arbitration proceedings. The counterclaims followed True North's direct claims
against Publicis in the amount of $106 million for alleged breaches by Publicis
of its obligations under the Separation Agreement and for additional
compensation for its investment in Publicis Communication. The alleged breaches
related principally to the merger of Publicis S.A. and Publicis Communication.
The parties also submitted claims for their respective attorney's fees and
expenses. True North and Publicis appeared before the arbitration tribunal from
September 27 through October 10, 1999, and presented evidence with regard to
their respective claims.
On February 15, 2000, the arbitration tribunal issued its decision, which ruled
that Publicis' conduct in connection with the Publicis Communication merger
constituted a breach of Publicis' obligations to True North under the Separation
Agreement. No damages were awarded. In addition, the tribunal ordered Publicis
to provide True North with tax and financial information it had withheld, also
in breach of the Separation Agreement. The arbitration tribunal rejected
Publicis' claims against True North for alleged breaches of the Separation
Agreement and other actions which Publicis alleged created liabilities
associated with the arbitration proceeding and therefore did not award any
damages for such claims to Publicis. The tribunal ordered Publicis and True
North to each pay coordination fees to the other resulting
TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT 23
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operation
in a net payable by True North to Publicis of approximately $0.9 million. The
arbitration tribunal also ordered the parties to share the costs of the
arbitration and to each pay their respective attorney's fees and expenses. True
North has provided for these costs in its 1999 financial results.
Quantitative and Qualitative Disclosures about Market Risk-In 1993, True North
entered into an interest rate swap contract with a bank, which became effective
in June 1994. Under this arrangement, True North received LIBOR and paid a fixed
interest rate of 6.1% on a notional amount of $25.0 million in borrowing during
the period from June 1994 to June 1999. True North has not entered into any
market risk sensitive contracts during the past three years.
True North's consolidated financial statements are denominated in U.S. dollars.
In 1999, True North derived approximately 26% of its revenues from operations
outside the United States. Currency fluctuations may give rise to translation
gains and losses when financial statements of foreign operating units are
translated into U.S. dollars. Significant strengthening of the U.S. dollar
against major foreign currencies could have an adverse impact on True North's
results of operations.
In general, True North incurs most of its costs to support the related revenues
in the same currency in which these revenues are billed, thereby reducing
exposure to currency fluctuations. In the past, True North has not hedged
foreign currency profits into U.S. dollars, because management has believed
that, over time, the costs of a hedging program outweigh any benefit of greater
predictability in the Company's U.S. dollar denominated profits. However, as
True North continues to extend the depth and breadth of its foreign operations,
management will from time to time reconsider the issue of whether a foreign
currency hedging program would be beneficial to its operations.
Year 2000 Testing and Remediation-During 1999, True North completed its ongoing
efforts to address the issues created by the Year 2000 compliance issue. To
date, True North has not experienced any disruption of business operations with
respect to the commencement of 2000.
During the period 1997-1999, True North's capital spending to replace non-
compliant hardware and software was approximately $5.7 million and approximately
$5.0 million was expensed to operations as incurred.
Five-Year Selected Financial Data:
Selected historical financial data (in millions, except per share amounts) are
as follows:
<TABLE>
<CAPTION>
==========================================================================================
1999 1998 1997 1996 1995
==========================================================================================
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
Revenues $1,439.4 $1,274.3 $1,240.0 $1,012.9 $ 867.6
Net income (loss) 38.8 27.3 (49.9) 38.0 29.1
Net income (loss) per share
Basic 0.82 0.60 (1.14) 0.89 0.69
Diluted 0.81 0.57 (1.14) 0.86 0.67
Dividends per share 0.60 0.60 0.60 0.60 0.60
- ------------------------------------------------------------------------------------------
At December 31,
Working capital (147.8) (166.1) (234.4) (106.2) (87.6)
Total assets 2,005.3 1,789.1 1,682.6 1,624.5 1,277.7
Long-term debt
(includes current portion) 45.6 58.7 50.3 72.0 48.9
Total liabilities 1,638.9 1,485.5 1,413.4 1,319.5 1,003.7
Stockholders' equity 366.4 303.6 269.2 305.0 274.0
Book value per share 7.50 6.57 5.96 7.13 6.42
==========================================================================================
</TABLE>
24 TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT
<PAGE>
Consolidated Statements of Income
(In 000's, except per share amounts)
===============================================================================
Year ended December 31, 1999 1998 1997
===============================================================================
Commissions and Fees $1,439,414 $1,274,284 $1,240,021
- -------------------------------------------------------------------------------
Operating Expenses:
Salaries and benefits 871,433 806,602 766,687
Office and general 409,238 354,345 428,710
Restructuring and other
charges 76,400 3,278 80,946
- -------------------------------------------------------------------------------
Total operating
expenses 1,357,071 1,164,225 1,276,343
- -------------------------------------------------------------------------------
Operating Income (Loss) 82,343 110,059 (36,322)
- -------------------------------------------------------------------------------
Other Income (Expense):
Interest income 7,300 6,118 7,810
Interest expense (18,128) (22,242) (20,178)
Loss on involuntary
conversion of affiliate
investment -- (30,532) --
Gains on sales of marketable
securities and other 11,172 17,532 2,690
- -------------------------------------------------------------------------------
Total other income
(expense) 344 (29,124) (9,678)
- -------------------------------------------------------------------------------
Income (Loss) Before
Taxes, Minority Interest
and Equity Income 82,687 80,935 (46,000)
Provision for income
taxes 42,206 56,788 11,230
- -------------------------------------------------------------------------------
Income (Loss) Before
Minority Interest and
Equity Income 40,481 24,147 (57,230)
Minority interest expense (4,161) (4,044) (2,385)
Equity in earnings of
affiliated companies 2,470 7,158 9,673
- -------------------------------------------------------------------------------
Net Income (Loss) $ 38,790 $ 27,261 $ (49,942)
===============================================================================
Per Share Information:
Basic earnings (loss)
per share $0.82 $0.60 $(1.14)
Diluted earnings (loss)
per share $0.81 $0.57 (1.14)
Average common shares
outstanding 47,346 45,748 43,832
Average common stock
outstanding-assuming
dilution 48,142 47,595 43,832
Cash dividends per
common share $0.60 $0.60 $0.60
===============================================================================
See accompanying notes to consolidated financial statements.
TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT 25
<PAGE>
Consolidated Balance Sheets
(In 000's)
===============================================================================
At December 31, 1999 1998
===============================================================================
ASSETS
Current Assets:
Cash and cash equivalents $ 118,265 $ 88,685
Short-term investments 16,858 --
Marketable securities 2,076 143,863
Accounts receivable, net of allowance
for doubtful accounts of $15,292 in 1999
and $12,742 in 1998 1,020,701 873,675
Expenditures billable to clients 69,512 56,034
Other current assets 19,529 20,139
- -------------------------------------------------------------------------------
Total current assets 1,246,941 1,182,396
- -------------------------------------------------------------------------------
Property and Equipment:
Land and buildings 1,009 1,072
Leasehold improvements 90,132 79,209
Furniture and equipment 246,635 226,836
- -------------------------------------------------------------------------------
337,776 307,117
Less-Accumulated depreciation and amortization (180,977) (177,302)
- -------------------------------------------------------------------------------
Total property and equipment 156,799 129,815
- -------------------------------------------------------------------------------
Other Assets:
Goodwill, net of accumulated amortization
of $82,410 in 1999 and $65,814 in 1998 487,787 413,395
Investment in affiliated companies 32,871 22,335
Other assets 80,882 41,137
- -------------------------------------------------------------------------------
Total other assets 601,540 476,867
- -------------------------------------------------------------------------------
Total assets $2,005,280 $1,789,078
===============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $1,034,980 $1,016,919
Short-term bank borrowings 117,847 115,452
Income taxes payable 22,642 23,467
Current portion of long-term debt 9,036 43,353
Accrued expenses 210,283 149,297
- -------------------------------------------------------------------------------
Total current liabilities 1,394,788 1,348,488
- -------------------------------------------------------------------------------
Noncurrent Liabilities:
Long-term debt 36,632 15,300
Liability for deferred compensation 67,723 69,193
Other noncurrent liabilities 139,761 52,491
- -------------------------------------------------------------------------------
Total noncurrent liabilities 244,116 136,984
- -------------------------------------------------------------------------------
Stockholders' Equity:
Preferred stock, $1.00 par value,
authorized 100 shares, none issued -- --
Common stock, 33-1/3c par value,
authorized 90,000 shares, 48,881 issued
in 1999 and 45,238 in 1998 16,295 15,479
Paid-in capital 293,435 231,899
Retained earnings 80,615 70,496
Unrealized gain on marketable securities 1,179 5,102
Cumulative translation adjustment (22,304) (14,220)
Less-Treasury stock, at cost: 24 in 1999;
217 in 1998 (983) (5,150)
Less-Deferred compensation (1,861) --
- -------------------------------------------------------------------------------
Total stockholders' equity 366,376 303,606
- -------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,005,280 $1,789,078
===============================================================================
See accompanying notes to consolidated financial statements.
26
TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
(In 000's)
============================================================================================================
Year ended December 31, 1999 1998 1997
============================================================================================================
<S> <C> <C> <C>
Cash flows provided by operating activities:
Net income (loss) $ 38,790 $ 27,261 $ (49,942)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Restructuring and other charges, net of tax 50,200 -- 80,946
Involuntary conversion of Publicis investment -- 30,532 --
Depreciation and amortization 56,342 45,545 47,884
Provision for doubtful accounts 7,511 3,684 14,594
Provision for deferred compensation 8,515 9,906 633
Equity in earnings of affiliated companies (2,470) (7,158) (9,673)
Dividends received from affiliated companies 1,011 328 2,872
Other non-cash charges (5,251) (17,093) 175
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (115,484) (65,058) 19,409
Other current assets (13,728) 7,072 526
Accounts payable (14,177) 61,816 28,096
Accrued expenses 10,582 (41,698) 14,915
Deferred income taxes 2,281 16,253 (3,796)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 24,122 71,390 146,639
- ------------------------------------------------------------------------------------------------------------
Cash flows used in investing activities:
Purchases of property and equipment (63,056) (41,261) (42,935)
Acquisitions and investments in businesses (82,372) (83,508) (81,724)
Purchases of short-term investments (16,858) -- --
Proceeds from sales of marketable securities 147,313 16,893 --
Other transactions 1,163 (3,092) --
- ------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (13,810) (110,968) (124,659)
- ------------------------------------------------------------------------------------------------------------
Cash flows provided by (used for) financing activities:
Increase (decrease) in short-term bank borrowings 2,395 22,690 (13,347)
Proceeds from issuance of common stock 31,862 15,893 19,202
Proceeds from issuance of long-term debt 28,022 28,780 4,425
Payments of long-term debt (41,005) (14,281) (29,763)
Proceeds from initial public offering of subsidiary 42,048 -- --
Cash dividends paid (28,671) (26,771) (15,050)
Payments for purchases of common stock (12,888) (7,158) (7,115)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities 21,763 19,153 (41,648)
- ------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (2,495) (175) (1,416)
- ------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 29,580 (20,600) (21,084)
Cash, and cash equivalents, at beginning of year 88,685 109,285 130,369
- ------------------------------------------------------------------------------------------------------------
Cash, and cash equivalents, at end of year $ 118,265 $ 88,685 $ 109,285
============================================================================================================
Supplemental cash flow information:
Cash paid during the year for:
Interest $15.0 $17.4 $18.3
Taxes $53.2 $31.5 $40.3
============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT 27
<PAGE>
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
(In 000's)
===================================================================================================================================
Unrealized
Cumulative Gain On Total
Common Paid-in Retained Treasury Deferred Translation Marketable Stockholders'
Stock Capital Earnings Stock Compensation Adjustment Securities Equity
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996,
as previously reported $13,932 $167,797 $ 134,047 $ (4,553) $ (750) $ (6,822) $ -- $ 303,651
Acquisition of pooled
entity 400 3,575 951 -- -- -- -- 4,926
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1996, as restated 14,332 171,372 134,998 (4,553) (750) (6,822) -- 308,577
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income -- -- (49,942) -- -- -- -- (49,942)
Currency translation -- -- -- -- -- (7,799) -- (7,799)
Unrealized gain on
marketable securities -- -- -- -- -- -- -- --
----------
Total comprehensive
income (57,741)
Dividends -- -- (15,050) -- -- -- -- (15,050)
Common stock issuances 888 39,803 -- 2,895 -- -- -- 43,586
Common stock purchases (88) (3,530) -- (3,497) -- -- -- (7,115)
Other -- -- -- -- 600 -- -- 600
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1997 15,132 207,645 70,006 (5,155) (150) (14,621) -- 272,857
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income -- -- 27,261 -- -- -- -- 27,261
Currency translation -- -- -- -- -- 401 -- 401
Unrealized gain on
marketable securities -- -- -- -- -- -- 5,102 5,102
------------
Total comprehensive
income 32,764
Dividends -- -- (26,771) -- -- -- -- (26,771)
Common stock issuances 347 24,254 -- 7,163 -- -- -- 31,764
Common stock purchases -- -- -- (7,158) -- -- -- (7,158)
Other -- -- -- -- 150 -- -- 150
- -----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1998 15,479 231,899 70,496 (5,150) -- (14,220) 5,102 303,606
- -----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income -- -- 38,790 -- -- -- -- 38,790
Currency translation -- -- -- -- -- (8,084) -- (8,084)
Unrealized gain on
marketable securities -- -- -- -- -- -- (3,923) (3,923)
----------
Total comprehensive
income 26,783
Dividends -- -- (28,671) -- -- -- -- (28,671)
Common stock issuances 816 58,898 -- 17,055 -- -- -- 76,769
Common stock purchases -- -- -- (12,888) -- -- -- (12,888)
Gain on issuance of
subsidiary stock -- 2,638 -- -- -- -- -- 2,638
Other -- -- -- -- (1,861) -- -- (1,861)
===================================================================================================================================
Balance at December 31,
1999 $16,295 $293,435 $ 80,615 $ (983) $ (1,861) $(22,304) $ 1,179 $ 366,376
===================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
28 TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT
<PAGE>
Notes to Consolidated Financial Statements
1. Summary of Significant
Accounting Policies
Nature of Operations-True North is a global advertising and communications
holding company. It has three major advertising agencies: FCB Worldwide L.L.C.,
a top-ten global agency and the largest agency brand in the U.S.; and two
national agencies, Bozell Group, Inc., and Temerlin McClain LP. In addition,
True North Diversified Companies L.L.C. group is composed of leading
communications services brands, including BSMG Worldwide, Inc. (public
relations); Marketing Drive Worldwide, Inc. (global marketing services); R/GA
Media Group, Inc. (interactive design and development); Tierney & Partners, Inc.
(advertising and public relations); TN Media, Inc. (media placement); and New
America Strategies Group, L.L.C. (multicultural marketing).
Principles of Consolidation-The consolidated financial statements include the
accounts of True North and its wholly owned and majority-owned subsidiaries.
True North uses the equity method of accounting to record its investments in 20%
to 49% owned affiliated companies.
In February 1999, True North completed its acquisition of The Financial
Relations Board, Inc. (FRB), a Chicago-based investor relations firm. This
acquisition has been accounted for as a pooling of interests and, accordingly,
the consolidated financial statements have been restated for all periods prior
to the acquisition.
Use of Estimates-The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition-Commissions and fees for advertising services are generally
recognized when media placements appear and production costs are billable. Fees
for public relations, sales promotion and other services are generally
recognized when the services are provided.
Cash Equivalents and Investments-Cash equivalents are highly liquid investments,
including certificates of deposit, government securities and time deposits, with
maturities of three months or less at the time of purchase and are stated at
estimated fair value or cost. Short-term investments are similar investments
with maturities of more than three months but less than one year from the date
of purchase.
True North has classified all its marketable equity securities as available for
sale; they are carried at fair value with unrealized gains and losses reported
as a separate component of comprehensive income.
Foreign Currency Translation-The financial statements of True North's foreign
operations, where the local currency is the functional currency, are translated
into U.S. dollars at the exchange rates in effect at each year-end for assets
and liabilities and average exchange rates during the year for the results of
operations. The related unrealized gains or losses resulting from translation
are reported as a separate component of comprehensive income.
Property and Depreciation-The cost of property and equipment is depreciated
generally using the straight-line method over the estimated useful lives of the
related assets, which range from 3 to 10 years for furniture and equipment.
Leasehold improvements are capitalized and amortized over the shorter of the
life of the asset or the lease term.
Intangible Assets-Intangible assets resulting from acquisitions, principally
goodwill, are amortized using the straight-line method over periods not
exceeding 40 years. Amortization of intangible assets included in operating
expenses amounted to $16.6 million, $14.4 million, and $14.5 million for the
years ended December 31, 1999, 1998, and 1997, respectively.
True North periodically evaluates the carrying value of its intangible assets by
projecting operating results over the remaining lives of such assets on an
undiscounted basis. Such projections take into account past financial
performance as well as management's estimate of future operating results.
Income Taxes-Effective January 1, 1992, True North adopted Statement of
Financial Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income
Taxes." The adoption of SFAS No. 109 changed the Company's method of accounting
for income taxes from the deferred method to an asset and liability method
whereby deferred income taxes reflect the net tax effects of temporary
differences between the tax bases and financial reporting bases of assets and
liabilities.
TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT 29
<PAGE>
Notes to Consolidated Financial Statements
Income taxes are generally not provided on undistributed earnings of foreign
subsidiaries because these earnings are considered to be permanently invested or
will not be repatriated unless any additional federal income taxes would be
substantially offset by foreign tax credits.
Fair Value of Financial Instruments-The carrying amounts of cash and cash
equivalents, short-term investments, accounts receivable, accounts payable,
short-term bank borrowings, and accrued expenses approximate fair value because
of the short maturity of those instruments. As of December 31, 1999, True North
estimates that the fair value of its long-term debt is not materially different
from its financial statement carrying value. The fair value of long-term debt
was estimated using quoted market prices or discounted future cash flows.
In 1993, True North entered into an interest rate swap contract with a bank,
which became effective in June 1994. Under this arrangement, True North received
LIBOR and pays a fixed interest rate of 6.1% on a notional amount of $25.0
million in borrowings during the period from June 1994 to June 1999.
Earnings Per Share-Basic earnings per share are computed using the weighted
average number of common shares outstanding during the year. Diluted earnings
per share are also computed using the weighted average number of common shares
outstanding during the year but include the potential issuance of shares under
True North's stock option plans. The share numbers used in the calculations for
the years ended December 31, 1999, 1998, and 1997, were as follows (in
millions):
<TABLE>
<CAPTION>
=========================================================
1999 1998 1997
=========================================================
<S> <C> <C> <C>
Basic 47.3 45.7 43.8
- ---------------------------------------------------------
Diluted 48.1 47.6 43.8
=========================================================
</TABLE>
Derivative Instruments-In June 1998, the FASB issued SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument,
including certain derivative instruments embedded in other contracts, be
recorded in the balance sheet as either an asset or a liability measured at its
fair value. SFAS No. 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. SFAS No. 133 was to be effective for fiscal years beginning after June 15,
1999. In June 1999, the FASB issued SFAS No. 137, which delayed the effective
date of SFAS No. 133 by one year. Management currently believes that the
implementation of SFAS No. 133 will not have a material impact on True North's
results of operations or financial condition.
Presentation-Unless otherwise indicated, all amounts are stated in millions of
U.S. dollars. Certain prior-period amounts have been reclassified to conform
with the current year presentation.
2. Acquisitions
In February 1999, True North issued approximately 1.2 million shares of its
common stock for all the outstanding capital stock of FRB, a Chicago-based
investor relations firm. This acquisition has been accounted for as a pooling of
interests and, accordingly, the consolidated financial statements have been
restated for all periods prior to the acquisition.
The following summarizes the separate results of True North and FRB prior to the
restatement (in millions):
<TABLE>
<CAPTION>
======================================================
True North FRB Combined
======================================================
<S> <C> <C> <C>
Year Ended
December 31, 1998
Revenues $1,242.3 $32.0 $1,274.3
Net income (loss) 36.1 (8.8) 27.3
- ------------------------------------------------------
Year Ended
December 31, 1997
Revenues $1,204.9 $35.1 $1,240.0
Net income (loss) (50.0) 0.1 (49.9)
======================================================
</TABLE>
Included in the 1998 results of FRB are approximately $7.5 million of merger-
related costs and other expense adjustments, consisting primarily of employee
compensation-related expenses and pension costs.
Prior to the merger, FRB operated as an S Corporation; therefore, their results
do not reflect corporate income taxes. Pro forma net income for FRB, assuming
income taxes were charged (or credited) to operations, would be $(4.8 million)
and $.01 million for the years ended December 31, 1998 and 1997, respectively.
30 TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT
<PAGE>
Notes to Consolidated Financial Statements
On December 30, 1997, True North consummated its acquisition of Bozell, Jacobs,
Kenyon & Eckhardt, Inc. (BJK&E) by issuing approximately 18.6 million shares of
its common stock in exchange for all outstanding common stock of BJK&E. True
North also assumed and exchanged all outstanding BJK&E stock options into
options to purchase shares of True North's common stock. The transaction was
accounted for as a pooling of interests.
The cost of business acquired by True North in transactions accounted for as
purchases aggregated $61.6 million in 1999, including 0.5 million shares of
common stock and treasury stock, and $48.8 million in 1998, including 0.5
million shares of common stock and treasury stock. The excess of the purchase
price over the fair value of net tangible assets acquired was approximately
$59.3 million and $48.2 million, respectively, and is being amortized over
periods not exceeding 40 years.
3. Restructuring and Other Charges
In September 1999, management of True North committed to a formal plan to
restructure its operations and recorded a $76.4 million pre-tax charge ($50.2
million after-tax, or $1.04 per diluted share) in the third quarter of 1999. The
charge covers primarily severance, lease termination and other exit costs in
connection with the combination and integration of True North's two independent
worldwide advertising agency networks. Bozell Worldwide's international
operations, along with Bozell Detroit and Bozell Costa Mesa, were merged with
FCB Worldwide and now operate under the FCB Worldwide name. The restructuring
initiatives also include the sale or closing of certain underperforming business
units.
A summary of components of the 1999 restructuring charge is as follows (in
millions):
<TABLE>
<CAPTION>
================================================================================================
Severance Lease
and Termination
Termination and Other Impairment
Benefits Exit Costs Loss Total
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restructuring reserve, beginning of period $41.4 $24.2 $ 10.8 $ 76.4
Write-down of impaired assets -- (.9) (10.8) (11.7)
1999 cash payments (9.7) (3.2) -- (12.9)
- ------------------------------------------------------------------------------------------------
Balance, December 31, 1999 $31.7 $20.1 -- $ 51.8
================================================================================================
</TABLE>
The involuntary severance and termination benefits portion of the charge amounts
to $41.4 million and reflects the elimination of approximately 640 positions
worldwide, primarily in international locations. The employee groups affected
include executive and regional management and administrative personnel. As of
December 31, 1999, approximately 400 positions were eliminated and True North
anticipates that the severance actions will be completed during 2000.
The charge of $24.2 million associated with lease terminations and other exit
costs represents primarily the closure, abandonment and downsizing of office
space globally, including approximately 30 international locations. The costs
include $13.5 million of remaining lease obligations net of estimated sublease
income, as well as $5.9 million of impairment charges pertaining to leasehold
improvements and fixed assets that will no longer be used in the combined
operation. As of December 31, 1999, approximately 15 facilities were abandoned
or downsized. The remaining actions are expected to be completed by mid-to-late
2000, with the cash portion of the charge to be paid out over the remaining
lease periods, which range from one to five years.
The impairment loss on the sale or closing of certain business units amounts to
$10.8 million and results from the decision to sell two business units, one in
the U.S. and one in the United Kingdom, and to close four other business units
and joint ventures, including the R/GA Digital Studios, which specialized in
digital production for advertising and film companies. The impairment loss was
computed based upon the difference between the estimated sales proceeds (if any)
and the carrying value of the related assets and investments and primarily
represents the impairment of goodwill associated with such units. These sales or
closures are expected to be completed by mid 2000.
TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT 31
<PAGE>
Notes to Consolidated Financial Statements
As a result of its acquisition of BJK&E in the fourth quarter of 1997 (see Note
2), True North recorded a pre-tax charge of $80.9 million related to merger-
related costs and the impact of restructuring the combined operations. The 1997
restructuring initiative, which was completed in the fourth quarter of 1998,
involved the closure and/or merger of both U.S. and international offices in
True North's agency networks.
These restructuring activities resulted in the identification of leased
facilities that True North no longer required for its operations. As a result,
in the fourth quarter of 1997 True North recorded its best estimate of the net
costs of these subleases ($11.1 million) as an element of the restructuring
charge. During 1998, True North completed actions to sublet these leased
facilities. Certain of these facilities were subleased at terms more favorable
to True North than originally estimated in 1997. As a result, in the fourth
quarter of 1998 True North reversed $0.8 million in excess lease reserves into
pre-tax income.
These restructuring activities included plans for the elimination of 604
positions within True North. During 1997 and 1998, 589 employees were terminated
in accordance with the plans. The remaining positions were eliminated without
incurring severance costs due to normal employee turnover. As a result, True
North reversed $0.2 million in excess severance reserve into pre-tax income in
the fourth quarter of 1998.
The write-down of long-lived assets primarily represents goodwill associated
with offices that were closed or were sold as a part of the restructuring plans.
In the case of offices sold, True North computed the goodwill write-off as the
difference between the fair value of the related business and its net tangible
and intangible assets. These sales were completed in 1998.
During the third quarter of 1998, True North reorganized its Poppe Tyson
subsidiary prior to its merger with Modem Media into Modem Media.Poppe Tyson,
Inc. The impact of the reorganization was a charge of $4.3 million. These costs
included severance, the write-down of computer equipment that was not being used
in the ongoing operations to net realizable value, and the costs to buy out
minority shareholders.
4. Marketable Securities
True North's marketable securities consisted of (in millions):
<TABLE>
<CAPTION>
==========================================
December 31, 1999 1998
==========================================
<S> <C> <C>
Publicis S.A. $ -- $140.9
DoubleClick, Inc. 2.1 3.0
- ------------------------------------------
Total $ 2.1 $143.9
==========================================
</TABLE>
True North has designated its investments in the above securities as available
for sale, and the investments are carried at fair value, with any unrealized
gains or losses, net of tax, reported as a separate component of comprehensive
income.
On June 14, 1999, True North sold its entire investment in Publicis S.A. for net
cash proceeds of $135.3 and realized a pre-tax gain of $1.4 million ($0.8
million after taxes, or $0.02 per share).
5. 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
$186.1 million in 1999 and $230.0 million in 1998, and the maximum amounts
outstanding were $332.0 million in 1999 and $353.9 million in 1998. The weighted
average interest rates for short-term borrowings were 5.5%, 6.1% and 6.5% in
1999, 1998 and 1997, respectively.
On May 29, 1998, True North entered into a Revolving Credit Agreement, totaling
$250.0 million, with eight banks. This agreement has two parts: a $175.0 million
five-year revolving-credit facility and a $75.0 million 364-day revolving-credit
facility. True North may borrow under this agreement at a Eurodollar rate plus a
spread, a base reference rate, or a competitive bid. In addition, True North is
required to pay a facility fee ranging from 0.1% to 0.2%, depending upon True
North's financial performance. While True North borrowed under the $175.0
million five-year revolving-credit facility during 1999, there was no
outstanding balance as of December 31, 1999.
32 TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT
<PAGE>
Notes to Consolidated Financial Statements
On May 27, 1999, True North extended its 364-day credit agreement for up to
$75.0 million of borrowings as part of its $250.0 million Revolving Credit
Agreement. The terms of the extension include the payment of a commitment fee to
the bank of 0.07% and the increase in the spread over the Euro currency rate of
0.25%. As of December 31, 1999, there was no outstanding balance under the 364-
day credit agreement.
As of December 31, 1999 and 1998, long-term debt consisted of (in millions):
<TABLE>
<CAPTION>
=====================================================
1999 1998
=====================================================
<S> <C> <C>
Three-year term loan $25.0 $ 25.0
Obligations under
capitalized leases 2.3 3.6
Demand notes payable 5.0 11.6
Three-year Deutsche
Mark term loan 10.4 12.9
Other notes and obligations 2.9 5.6
- -----------------------------------------------------
45.6 58.7
Less: current portion (9.0) (43.4)
- -----------------------------------------------------
Total long-term debt $36.6 $ 15.3
=====================================================
</TABLE>
Scheduled maturities of long-term debt are $8.5 million, $9.2 million, $26.2
million, and $1.7 million in 2000, 2001, 2002, and 2003, respectively.
In May 1999, True North obtained two three-year term loans totaling $25.0
million, which refinanced similar loans expiring on May 24, 1999. A $15.0
million loan carries a fixed interest rate of 6.52%, and a $10.0 million loan
carries a fixed rate of 6.785%.
The terms of the obligations under capitalized leases provide for payment of
principal and interest (7.85% to 11.5%) in annual installments, with the final
purchase payments of 10% or $1.0 million due on various dates through November
2000. The leases were for the acquisition of equipment.
The demand notes payable were issued during 1999 and 1998 to the former owners
of foreign businesses that True North had acquired. These notes, which are
payable on demand, have final maturity dates in 2009 and carry interest rates of
5.5% to 6%.
During 1998 True North entered into a three-year term loan with a bank totaling
21.5 million Deutsche Marks to finance an acquisition. The loan calls for six
semi-annual payments through October 2001. The interest rate (which was
approximately 5% in 1999) is set at market rates plus a spread.
In addition to these agreements, True North had available at various banks
uncommitted lines of credit aggregating approximately $194.2 million as of
December 31, 1999, of which $76.4 million 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.
The Revolving Credit Agreement and certain other debt agreements contain various
restrictive covenants and conditions which include, but are not limited to, the
following: True North must maintain a minimum net worth of $175.0 million, a
debt leverage ratio of no greater than 3.5:1, and a fixed-charge coverage ratio
of at least 1.5:1.
As of December 31, 1999, True North was in compliance with all covenants and
conditions related to these agreements.
6. Contingencies
On December 2, 1997, Mazda Motor of America, Inc. (Mazda), a former client of
the True North's subsidiary Foote, Cone & Belding Advertising, Inc. (FCB),
initiated an arbitration against FCB before the American Arbitration Association
in Los Angeles, California. Mazda seeks indemnity and reimbursement for
liabilities it incurred or expects to incur in connection with automobile lease
advertising that aired in 1996 and 1997. Mazda is currently seeking from FCB
approximately $9.0 million in damages, exclusive of interest, costs and
attorney's fees, arising from (a) Mazda's settlement of false advertising claims
asserted by the Federal Trade Commission (FTC), various state attorneys general,
and a class of consumers and (b) Mazda's settlement on or about September 30,
1999, of claims asserted by the FTC and various state attorneys general, which
alleged that Mazda violated the consent orders entered in the previous FTC and
state attorney general actions. FCB intends to defend Mazda's claims vigorously.
In addition, FCB has filed a counterclaim in the arbitration, seeking
approximately $5.5 million in unpaid commissions for planning and placing
advertising during the final months of FCB's relationship with Mazda.
On November 6, 1998, Publicis S.A. announced its intention to convert True
North's 26.5% investment in Publicis Communication to approximately 0.8 million
of its publicly traded shares. Despite True North's objections, this transaction
was approved by the shareholders of Publicis S.A. and
TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT 33
<PAGE>
Notes to Consolidated Financial Statements
Publicis Communication in special shareholders' meetings held in December 1998
and closed shortly thereafter. As a result, True North owned approximately 8.8%
of Publicis S.A., which was recorded as an "available-for-sale security" in
marketable securities.
The book value of True North's 26.5% investment in Publicis Communication at the
date of conversion was $164.5 million. The fair value of the Publicis S.A.
shares (based on a December 14, 1998, closing price of $169.15 per share) was
$134.0 million. Accordingly, True North recorded a pre-tax loss of $30.5 million
in the fourth quarter of 1998 as a result of the involuntary conversion of its
investment in Publicis Communication to shares of Publicis S.A. In addition,
True North recorded a deferred tax obligation of approximately $3.2 million upon
the exchange. As a result, the after-tax impact of this transaction was a loss
of approximately $33.7 million.
As described in Note 4, on June 14, 1999, True North sold its entire investment
in Publicis S.A.
On May 5, 1998, Publicis S.A., a greater than 5% shareholder, and Publicis
Communication (together, Publicis), filed counterclaims in international
arbitration proceedings which had been instituted by True North with the London
Court of International Arbitration. Publicis sought damages in the amount of 382
million French Francs (approximately $62 million) for, among other things, the
alleged breaches of the May 1997 Separation Agreement between the parties and
other actions which Publicis alleged created liabilities associated with the
arbitration proceedings. The counterclaims followed True North's direct claims
against Publicis in the amount of $106 million for alleged breaches by Publicis
of its obligations under the Separation Agreement and for additional
compensation for its investment in Publicis Communication. The alleged breaches
related principally to the merger of Publicis S.A. and Publicis Communication.
The parties also submitted claims for their respective attorney's fees and
expenses. True North and Publicis appeared before the arbitration tribunal from
September 27 through October 10, 1999 and presented evidence with regard to
their respective claims.
On February 15, 2000, the arbitration tribunal issued its decision, which ruled
that Publicis' conduct in connection with the Publicis Communication merger
constituted a breach of Publicis' obligations to True North under the Separation
Agreement. No damages were awarded. In addition, the tribunal ordered Publicis
to provide True North with tax and financial information it had withheld, also
in breach of the Separation Agreement. The arbitration tribunal rejected
Publicis' claims against True North for alleged breaches of the Separation
Agreement and other actions which Publicis alleged created liabilities
associated with the arbitration proceeding and therefore did not award any
damages for such claims to Publicis. The tribunal ordered Publicis and True
North to each pay coordination fees to the other, resulting in a net payable by
True North to Publicis of approximately $0.9 million. The arbitration tribunal
also ordered the parties to share the costs of the arbitration and to each pay
their respective attorney's fees and expenses. True North has provided for these
costs in its 1999 financial results.
True North is a party to several other lawsuits incidental to its business. It
is not possible at the present time to estimate the ultimate liability, if any,
of True North with respect to litigation matters; however, management believes
that any ultimate liability will not be material in relation to True North's
consolidated results of operations or financial position.
7. Subsidiary Initial Public Offering
Effective February 10, 1999, a majority-owned subsidiary of True North, Modem
Media.Poppe Tyson, Inc. (MMPT), completed an initial public offering of its
common stock. The number of shares issued was 3.0 million, at a price of $16 per
share, with net proceeds totaling $42.0 million. As a result of the IPO, True
North owned approximately 48% of MMPT, down from its previous 70% ownership, and
controlled approximately 80% of the related stockholder votes. MMPT will use the
proceeds from the IPO for working capital, capital expenditures, and
acquisitions.
As a result of this transaction, True North recorded a $2.6 million gain, net of
$2.0 million of deferred income taxes, as a credit to stockholders' equity.
In May 1999, True North and MMPT entered into a Stockholders' Agreement which
stipulated, among other things, that upon the earlier of (i) the date True North
and its affiliates no longer own at least 35% of the outstanding capital stock
of MMPT and (ii) June 30, 2000, True North agrees that it and its affiliates
will convert all of their shares
34 TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT
<PAGE>
Notes to Consolidated Financial Statements
of Class B common stock of MMPT into shares of Class A common stock of MMPT and
thereby be entitled to only one vote per share versus the five votes per share
of Class B common stock.
In August 1999, True North and MMPT entered into a Registration Rights Agreement
that contains provisions granting the holders of Class B common stock the right
to participate in any underwritten public offering that MMPT may initiate,
subject to certain limitations. In addition, the agreement also provides the
holders of Class B common stock the right to initiate the registration of their
securities, subject to certain timing and other limitations.
In March 2000, MMPT announced that it had filed a registration statement with
the Securities and Exchange Commission relating to a proposed public offering of
4.5 million shares of its common stock.
As part of the proposed public offering of 4.5 million shares, True North is
offering to sell 2.5 million shares, a stake which represents about 12% of MMPT.
As of March 1, 2000, True North holds approximately 46% of Modem, or 11.1
million shares. Assuming the proposed offering is completed, True North's
remaining Class B shares will convert to Class A shares and True North will own
approximately 34% of MMPT. Accordingly, True North will account for its
investment in Modem Media under the equity method of accounting.
True North will explore a number of opportunities for reinvestment of its
proceeds from the proposed sale, including the repurchase of True North common
stock and further investments in its portfolio of digital brands.
8. Stock-Based Compensation Plans
True North has established various stock option plans for directors, officers
and other 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
generally over three or five years and expire after ten years. As of December
31, 1999, a total of 3.3 million shares had been reserved for future stock
option grants under these plans.
True North 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 the election under
FASB Statement No. 123, True North's net income and earnings per share would
have been reduced to the following pro forma amounts (in millions):
<TABLE>
<CAPTION>
- ----------------------------------------------------
1999 1998 1997
- ----------------------------------------------------
<S> <C> <C> <C>
Net income (loss):
As reported $38.8 $27.3 $(49.9)
Pro forma 32.3 22.7 (51.3)
- ----------------------------------------------------
Basic EPS:
As reported 0.82 0.60 (1.14)
Pro forma 0.68 0.50 (1.17)
- ----------------------------------------------------
Diluted EPS:
As reported 0.81 0.57 (1.14)
Pro forma 0.67 0.48 (1.17)
- ----------------------------------------------------
</TABLE>
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 True North's stock option plans as of December 31,
1999, 1998 and 1997, and changes made during the years then ended is presented
in the following table and narrative (shares in thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
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 6,926.2 $20.47 4,334.9 $15.08 4,767.9 $11.71
Granted 1,781.6 24.62 3,180.0 26.93 812.0 20.49
Exercised (1,743.8) 18.43 (472.9) 14.41 (1,036.0) 2.76
Forfeited (790.2) 23.04 (115.8) 21.65 (209.0) 20.15
- ------------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 6,173.8 $21.92 6,926.2 $20.47 4,334.9 $15.08
- ------------------------------------------------------------------------------------------------------------------------------
Exercisable at end of year 3,238.5 $19.65 2,835.5 $13.77 2,653.9 $12.13
- ------------------------------------------------------------------------------------------------------------------------------
Weighted average fair value of options granted $ 8.86 $ 9.92 $ 6.63
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT 35
<PAGE>
Notes to Consolidated Financial Statements
Of the 6,173.8 options outstanding as of December 31, 1999, 870.0 have exercise
prices between $3.78 and $13.81, with a weighted average exercise price of $5.31
and a weighted average remaining contract life of 3.22 years; all these options
are exercisable. 5,172.8 options have exercise prices between $15.50 and $28.88,
with a weighted average price of $24.49 and a weighted average remaining
contract life of 8.01 years; 2,353.5 of these options are exercisable. The
remaining 131.0 options have exercise prices between $30.75 and $42.88, with a
weighted average exercise price of $33.66 and a weighted average contract life
of 9.52 years; 15.0 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 1999, 1998, and 1997, respectively: risk-free interest
rates of 5.39%, 5.92%, and 6.01%; expected dividend yields of 2.46%, 2.21%, and
2.93%; expected life of 10 years; and expected volatility of 29.7%, 27.1%, and
26.5%.
Effective in 1998, True North initiated a Restricted Stock Program for certain
key employees whereby participants of the program can elect or are required to
exchange 30% of their executive cash incentive compensation for 115% of such
cash compensation payable in restricted stock of True North. One-third of the
shares vest immediately and the remaining shares vest equally over the next two
years.
For the year ended December 31, 1999, 0.2 million shares of restricted stock
were issued. The shares issued under this plan were recorded at their market
value on date of grant with a corresponding charge to stockholder's equity for
the unearned portion. The unearned portion is being amortized as compensation
expense on a straight-line basis over the vesting period.
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 2008, are exercisable only if a
person or group (excluding True North) acquires 15% (22% 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 15% or more of True
North's common stock. Each right entitles the holder to purchase 1/2000 of a
share of Series B Junior Participating Preferred Stock ("preferred stock") of
True North at a purchase price of $100.00, subject to adjustment under certain
conditions. As of December 31, 1999, 45,000 shares of 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 $.01 per right and (ii) adjust the thresholds at which these rights
become exercisable.
10. Segment Reporting
True North has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." True North's businesses provide advertising
and related communications services to clients throughout the world on a
collaborative basis. One or more of True North's agency networks may service a
particular client's needs, and a significant percentage of costs incurred by the
agencies are attributable to other business units, particularly media placement.
Financial resources are allocated based upon need rather than financial
performance of a particular agency brand, and the businesses share similar
economic characteristics. As a result, True North operates in one business
segment.
36 TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT
<PAGE>
Notes to Consolidated Financial Statements
Information about True North's operations in different geographic areas for
1999, 1998 and 1997 is as follows (in millions):
<TABLE>
<CAPTION>
- --------------------------------------------------------
1999 1998 1997
- --------------------------------------------------------
<S> <C> <C> <C>
Revenues:
U.S. $1,064.0 $ 931.6 $ 933.5
International 375.4 342.7 306.5
- --------------------------------------------------------
$1,439.4 $1,274.3 $1,240.0
- --------------------------------------------------------
Long-lived
Assets:
U.S. $ 395.3 $ 282.9 $ 237.2
International 282.2 282.6 391.4
- --------------------------------------------------------
$ 677.5 $ 565.5 $ 628.6
- --------------------------------------------------------
</TABLE>
11. Retirement and Other
Employee Benefit Plans
True North and participating U.S. subsidiaries have a 401(k) and profit sharing
plan covering certain eligible employees. The plan allows participants to make
pre-tax contributions and True North matches up to 3-1/3% of the employee's
covered compensation, subject to the limits deductible under the Internal
Revenue Code. The profit sharing portion of the plan is discretionary and
noncontributory. The combined 401(k) and profit sharing plan expenses were $15.4
million in 1999, $15.6 million in 1998, and $15.3 million in 1997.
Prior to 1998, True North provided supplemental retirement benefits to employees
of certain of its U.S. subsidiaries through a supplemental pension plan. The
plan was terminated in early 1998 through the purchase of annuity contracts for
individuals with vested benefits. Plan assets at the date of termination were
sufficient to cover the costs of these annuities. As a result, True North
reversed $0.9 million of accrued pension costs into 1998 earnings in connection
with the termination of this plan. Pension plan expense for 1997 was $0.2
million.
True North 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 $13.3 million in 1999, $12.9 million in 1998, and $17.1
million in 1997.
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, True North 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, True North is amortizing the actuarial present value
of the accumulated postretirement benefit obligation as of January 1, 1993, over
a twenty-year period. In addition, True North provides for current-year service
costs, interest costs and actuarially determined plan gains and losses.
The components of expense for these postretirement benefits for 1999, 1998, and
1997 are as follows (in millions):
<TABLE>
<CAPTION>
- -------------------------------------------------------------
1999 1998 1997
- -------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during the year $ 0.6 $ 0.6 $ 0.4
Interest cost on accumulated
postretirement benefit
obligation 0.6 0.6 0.5
Net amortization and
deferral 0.2 0.3 0.2
- -------------------------------------------------------------
$ 1.4 $ 1.5 $ 1.1
- -------------------------------------------------------------
</TABLE>
The following table sets forth the funded status and amounts recognized for True
North's postretirement benefit plans in its consolidated balance sheet as of
December 31, 1999 and 1998 (in millions):
<TABLE>
<CAPTION>
- --------------------------------------------------------------
1999 1998
- --------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement
benefit obligation
Retirees $ 3.0 $ 3.6
Fully eligible active participants 1.0 1.5
Other active plan participants 3.0 5.2
- --------------------------------------------------------------
Total accumulated postretirement
benefit obligation 7.0 10.3
Plan assets at fair value -- --
- --------------------------------------------------------------
Accumulated postretirement
benefit obligation in excess
of plan assets 7.0 10.3
Unrecognized net transition
obligation (2.0) (5.4)
Unrecognized prior service costs -- (0.1)
Unrecognized net gain 1.2 0.5
- --------------------------------------------------------------
Accrued postretirement benefit cost $ 6.2 $ 5.3
- --------------------------------------------------------------
</TABLE>
TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT 37
<PAGE>
Notes to Consolidated Financial Statements
Discount rates of 6.8%, 7.3%, and 7.3% were used in 1999, 1998 and 1997,
respectively. The rates of increase in covered medical benefits used to
determine accumulated postretirement benefits were 8% in 1999, 8.5% in 1998, and
8.7% in 1997. This rate is assumed to decrease by 0.5% per annum to 6% in 2003
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%
change in the medical benefits cost trend rate would change the accumulated
postretirement benefit obligation as of December 31, 1999, by $0.2 million and
the 1999 cost by $0.1 million.
True North has a deferred compensation plan which permits certain of its key
officers and employees to defer a portion of their salary and incentive
compensation. True North has purchased whole life insurance policies on each
participant's life to assist in the funding of the deferred compensation
liability. As of December 31, 1999, the cash surrender value of these policies
was $4.0 million. True North's obligation under the plan, including accumulated
interest, was $8.6 million as of December 31, 1999, and is included in Other
Noncurrent Liabilities in the Consolidated Balance Sheets.
12. Lease Obligations
True North leases substantially all of its office facilities under operating
leases. Net rental expense on these leases was $84.3 million in 1999, $80.0
million in 1998 and $80.3 million in 1997, after deducting sublease income of
$16.3 million, $19.0 million, and $20.0 million, respectively.
As of December 31, 1999, the future minimum rental obligations for these leases
(net of sublease income of approximately $112.1 million) is as follows (in
millions):
- ------------------------------------------------
Year Amount
- ------------------------------------------------
2000 $ 75.3
- ------------------------------------------------
2001 68.4
- ------------------------------------------------
2002 59.6
- ------------------------------------------------
2003 55.5
- ------------------------------------------------
2004 57.1
- ------------------------------------------------
Thereafter 254.4
- ------------------------------------------------
13. Income Taxes
The components of income (loss) before income taxes are as follows (in
millions):
- -----------------------------------------------------
1999 1998 1997
- -----------------------------------------------------
Domestic $82.2 $53.9 $(34.4)
Foreign 0.5 27.0 (11.6)
- -----------------------------------------------------
Total $82.7 $80.9 $(46.0)
- -----------------------------------------------------
The components of the provision for income taxes consist of the following
(in millions):
- -----------------------------------------------------
1999 1998 1997
- -----------------------------------------------------
U.S. -current $25.9 $17.5 $ 10.9
-deferred 6.1 16.3 (5.3)
Foreign 1.1 11.9 6.4
State 9.1 11.1 (0.8)
- -----------------------------------------------------
Total $42.2 $56.8 $ 11.2
- -----------------------------------------------------
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, 1999 and 1998, are as
follows (in millions):
- -----------------------------------------------------------------
1999 1998
- -----------------------------------------------------------------
Restructuring charges $ 32.8 $ --
Deferred compensation 17.6 26.8
Lease reserves 7.6 10.5
Accrued revenues (5.4) (4.5)
Unrealized gain on
marketable securities (0.9) (4.7)
Depreciation and amortization (9.4) (5.7)
Safe harbor leases (3.3) (3.8)
Reserve for doubtful accounts 1.4 3.5
Other, net 1.8 (3.8)
- -----------------------------------------------------------------
Total $ 42.2 $ 18.3
- -----------------------------------------------------------------
38 TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT
<PAGE>
Notes to Consolidated Financial Statements
Net current deferred taxes as of December 31, 1999 and 1998, were $3.0 million
and $1.7 million, respectively. Net noncurrent deferred taxes were $39.2 and
$16.6 million, respectively. Valuation allowances have been provided for
potentially unrealizable foreign tax loss carryforwards.
In the fourth quarter of 1997, True North established tax reserves of $7.0
million related to its plan to reorganize its foreign operations. As further
described in Note 6, the 1998 effective tax rate was adversely impacted by the
involuntary conversion of True North's equity investment in Publicis
Communication. The reconciliation of the U.S. statutory rate to the effective
income tax rate is as follows (in millions):
<TABLE>
<CAPTION>
==========================================================================
1999 1998 1997
==========================================================================
<S> <C> <C> <C>
At statutory rate 35.0% 35.0% 35.0%
- --------------------------------------------------------------------------
State taxes, net of federal
tax benefit 7.2 8.0 1.1
Higher (lower) aggregate
effective tax rate on
foreign operations 1.1 2.8 (8.7)
Tax effect of nondeductible
amortization 6.0 5.2 (7.9)
Involuntary conversion of
Publicis equity investment -- 14.1 --
Reorganization of foreign
operations -- -- (15.2)
Intangible write-offs 2.1 -- (13.9)
Nondeductible transaction
expenses -- -- (11.3)
S Corporation losses not
tax-benefited -- 7.0 --
Other (0.4) (1.9) (3.5)
- --------------------------------------------------------------------------
Total 51.0% 70.2% (24.4)%
==========================================================================
</TABLE>
Federal income taxes have not been provided on undistributed earnings of foreign
subsidiaries that aggregated approximately $41.3 million as of December 31,
1999, because such earnings are permanently invested or will not be repatriated
unless any additional income taxes would be substantially offset by foreign tax
credits. It is not practicable to determine the amount of unrecognized deferred
income tax liabilities on these undistributed earnings.
14. Reserve for Bad Debts
An analysis of True North's reserve for bad debts is as follows (in millions):
<TABLE>
<CAPTION>
=========================================================================================
Impact of
Balance at Provision for Write-offs, currency Balance
Year ended beginning of doubtful net of translation and at end of
December 31, year accounts recoveries acquisitions year
=========================================================================================
<S> <C> <C> <C> <C> <C>
1999 $12.7 $ 7.5 $ (5.3) $0.4 $15.3
=========================================================================================
1998 11.5 3.7 (3.6) 1.1 12.7
- -----------------------------------------------------------------------------------------
1997 7.5 14.6 (12.1) 1.5 11.5
=========================================================================================
</TABLE>
TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT 39
<PAGE>
Notes to Consolidated Financial Statements
15. Quarterly Financial Data (Unaudited)
Quarterly operating results for 1999 and 1998 are summarized below (in millions,
except per share amounts):
<TABLE>
<CAPTION>
================================================================================
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
================================================================================
<S> <C> <C> <C> <C>
1999
================================================================================
Revenues $303.4 $355.7 $ 356.7 $423.6
- --------------------------------------------------------------------------------
Pre-tax income (loss) 12.4 37.7 (42.1) 74.7
- --------------------------------------------------------------------------------
Net income (loss) 7.2 21.0 (31.6) 42.2
- --------------------------------------------------------------------------------
Net income (loss) per share:
Basic 0.16 0.45 (0.66) 0.87
Diluted 0.15 0.43 (0.66) 0.85
================================================================================
================================================================================
1998
================================================================================
Revenues $287.8 $319.2 $ 303.1 $364.2
- --------------------------------------------------------------------------------
Pre-tax income (loss) 8.2 29.3 25.8 17.6
- --------------------------------------------------------------------------------
Net income (loss) 3.6 17.7 13.2 (7.2)
- --------------------------------------------------------------------------------
Net income (loss) per share:
Basic 0.08 0.39 0.29 (0.16)
Diluted 0.08 0.37 0.28 (0.16)
================================================================================
Note: The full-year net income (loss) per share may not equal the sum of the
quarterly amounts.
</TABLE>
The following table shows the high and low sale price of True North's common
stock and dividends paid each quarter since January 1, 1998:
<TABLE>
<CAPTION>
===========================================================
Price Range Dividends
High Low Declared
===========================================================
<S> <C> <C> <C>
1999
===========================================================
1st quarter $34 1/8 $22 1/2 $0.15
- -----------------------------------------------------------
2nd quarter 30 23 1/16 0.15
- -----------------------------------------------------------
3rd quarter 36 7/8 28 1/8 0.15
- -----------------------------------------------------------
4th quarter 47 35 3/16 0.15
===========================================================
===========================================================
1998
===========================================================
1st quarter $33 5/8 $23 9/16 $0.15
- -----------------------------------------------------------
2nd quarter 34 26 5/16 0.15
- -----------------------------------------------------------
3rd quarter 32 1/2 21 5/8 0.15
- -----------------------------------------------------------
4th quarter 29 1/4 18 13/16 0.15
===========================================================
</TABLE>
40 TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT
<PAGE>
Notes to Consolidated Financial Statements
Management's Report on Financial Statements
The financial statements and related financial information included in this
financial 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 public accountants, and the
internal auditors. This Committee reviews audit plans and assesses the adequacy
of internal controls and financial reporting. Both the independent public
accountants and the internal auditors have direct access to the Audit Committee.
/s/ David A. Bell
David A. Bell, Chief Executive Officer
/s/ Kevin J. Smith
Kevin J. Smith, Chief Financial Officer
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 (the "Company") as
of December 31, 1999 and 1998, and the related consolidated statements of
income, stockholders' equity and cash flows for each of three years in the
period ended December 31, 1999. 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 Communication for each of the two years in the
period ended December 31, 1998, the investment in which is reflected in the
Company's consolidated financial statements using the equity method of
accounting. The equity in its net earnings was $5.5 million and $8.8 million for
the years ended December 31, 1998 and 1997, respectively. The financial
statements of Publicis Communication 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 Communication, is based solely upon 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, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Chicago, Illinois, March 1, 2000
TRUE NORTH COMMUNICATIONS INC. 1999 ANNUAL REPORT 41
<PAGE>
Corporate Information
TRUE NORTH
COMMUNICATIONS INC.
David A. Bell
Chairman and Chief Executive Officer
Kevin J. Smith
Executive Vice President
Chief Financial Officer
Kenneth Ashley
Vice President
Treasurer
Suzanne S. Bettman
Executive Vice President
General Counsel
Terry D. Peigh
Executive Vice President
TN Services
Dale F. Perona
Senior Vice President
Secretary
Ramesh Rajan
Executive Vice President
Operations and Business Development
Richard P. Sneeder, Jr.
Vice President
Controller
OTHER EXECUTIVE OFFICERS
Gene Bartley
Chairman & Chief Executive Officer
Bozell Group
Harris Diamond
President & Chief Executive Officer
BSMG Worldwide
Chairman
True North Diversified Companies
Edward Harrigan
Chief Financial Officer
FCB Worldwide
Valentine J. Zammit
President & Chief Executive Officer
True North Diversified Companies
DIRECTORS
David A. Bell
Chairman and Chief Executive Officer
True North Communications Inc.
Joseph A. Califano, Jr.
Chairman and President
The National Center on Addiction and
Substance Abuse at Columbia University
Donald M. Elliman, Jr.
President
Ascent Sports Holdings
H. John Greeniaus
President, G-Force LLC
Former CEO, Nabisco, Inc.
Leo-Arthur Kelmenson
Chairman
FCB Worldwide
Michael E. Murphy
Retired Director and Vice Chairman
Sara Lee Corporation
Charles D. Peebler, Jr.
Chairman Emeritus
True North Communications Inc.
J. Brendan Ryan
Chief Executive Officer
FCB Worldwide
Donald L. Seeley
Former Chief Financial Officer
True North Communications Inc.
Marilyn R. Seymann
President and Chief Executive Officer
M ONE, Inc.
Stephen T. Vehslage
Retired Group Vice President
IBM Corporation
TRUE NORTH
MANAGEMENT
EXECUTIVE COMMITTEE
David A. Bell
Gene Bartley
Suzanne S. Bettman
Harris Diamond
Leo-Arthur Kelmenson
Dennis McClain
Terry D. Peigh
Ramesh Rajan
J. Brendan Ryan
Donald L. Seeley
Kevin J. Smith
Valentine J. Zammit
BOARD COMMITTEES
NOMINATING COMMITTEE
Donald M. Elliman, Jr., Chairman
David A. Bell
Joseph A. Califano, Jr.
Leo-Arthur Kelmenson
Michael E. Murphy
COMPENSATION COMMITTEE
Marilyn R. Seymann, Chairman
Donald M. Elliman, Jr.
H. John Greeniaus
AUDIT COMMITTEE
Michael E. Murphy, Chairman
H. John Greeniaus
Marilyn R. Seymann
Stephen T. Vehslage
FINANCE COMMITTEE
Donald L. Seeley, Chairman
David A. Bell
Donald M. Elliman, Jr.
Michael E. Murphy
Charles D. Peebler, Jr.
Stephen T. Vehslage
EXECUTIVE COMMITTEE
Donald M. Elliman, Jr., Chairman
David A. Bell
H. John Greeniaus
J. Brendan Ryan
Donald L. Seeley
Marilyn R. Seymann
GENERAL
STOCK LISTING
True North Communications Inc.
common stock is traded on
the New York Stock Exchange.
The ticker symbol is TNO.
ANNUAL MEETING
The Annual Meeting of Stockholders
will be held on Wednesday,
May 17, 2000, at 10:00 a.m., at
The University of Chicago
Graduate School of Business
The Conference Center-Sixth Floor
450 N. Cityfront Plaza Drive
Chicago, IL 60611
STOCK TRANSFER AGENT
To assist in handling matters
relating to stock transfers,
automatic dividend reinvestment,
lost certificates or change of
address, please contact the
Company's transfer agent:
First Chicago Trust Company
A Division of EquiServe
P.O. Box 2500
Jersey City, NJ 07303-2500
201/324-0498 or 800/446-2617
INVESTOR RELATIONS
For information or publications, contact:
Susan Geanuleas
VP, Corporate Communications
True North Communications Inc.
312/425-6570
42
<PAGE>
Exhibit 21.1
<TABLE> -------------------------------------------------------------
STATE
OF COMPANY NAME
INCORPORATION
(Domestic)
- --------------------------------------------------------------------------------
TRUE NORTH COMMUNICATIONS INC.
List of Domestic Companies
- --------------------------------------------------------------------------------
<S> <C>
Delaware FCB Worldwide L.L.C.
- --------------------------------------------------------------------------------
Delaware FCB Worldwide, Inc.
- --------------------------------------------------------------------------------
Florida FCB Worldwide (Florida), Inc.
- --------------------------------------------------------------------------------
Delaware FCB Japan, Inc.
- --------------------------------------------------------------------------------
Delaware The Hacker Group, Inc.
- --------------------------------------------------------------------------------
Georgia Health Science Media, Inc.
- --------------------------------------------------------------------------------
New York Bozell Group, Inc.
- --------------------------------------------------------------------------------
Delaware Berenter, Greenhouse & Webster, Inc.
- --------------------------------------------------------------------------------
Delaware BJK&E Holdings, Inc.
- --------------------------------------------------------------------------------
Delaware Bozell Kamstra, Inc.
- --------------------------------------------------------------------------------
Delaware Sixty Foot Spider, Inc.
- --------------------------------------------------------------------------------
Texas Temerlin McClain of Texas, Inc.
- --------------------------------------------------------------------------------
Delaware TM Holdings, Inc.
- --------------------------------------------------------------------------------
Delaware Temerlin McClain LP
- --------------------------------------------------------------------------------
Canada Temerlin McClain Ltd.
- --------------------------------------------------------------------------------
Delaware True North Holdings (Latin America), Inc.
- --------------------------------------------------------------------------------
Delaware True North Holdings (Europe), Inc.
- --------------------------------------------------------------------------------
Delaware True North Holdings (Asia-Pacific), Inc.
- --------------------------------------------------------------------------------
Texas Custom Production Service, Inc.
- --------------------------------------------------------------------------------
Delaware True North Diversified Companies L.L.C.
- --------------------------------------------------------------------------------
Delaware Wellness Worldwide, Inc.
- --------------------------------------------------------------------------------
Delaware TN Directory Services, L.L.C.
- --------------------------------------------------------------------------------
Delaware R/GA Media Group, Inc.
- --------------------------------------------------------------------------------
New York R/GA Mixed Media, Inc.
- --------------------------------------------------------------------------------
Delaware TN Media, Inc.
- --------------------------------------------------------------------------------
New York BSMG Worldwide, Inc.
- --------------------------------------------------------------------------------
Delaware Marketing Drive Worldwide, Inc.
- --------------------------------------------------------------------------------
Delaware KSL Media, Inc.
- --------------------------------------------------------------------------------
Pennsylvania Tierney & Partners, Inc.
- --------------------------------------------------------------------------------
Delaware New America Strategies Group L.L.C.
- --------------------------------------------------------------------------------
California The Benjamin Group / BSMG Worldwide, Inc.
- --------------------------------------------------------------------------------
Delaware McCracken Brooks Maier Communications, Inc.
- --------------------------------------------------------------------------------
California Wells Marketing, Inc.
- --------------------------------------------------------------------------------
Illinois The Financial Relations Board / BSMG Worldwide, Inc.
- --------------------------------------------------------------------------------
Delaware Market Growth Resources, Inc.
- --------------------------------------------------------------------------------
Delaware Bozell, Jacobs, Kenyon & Eckhardt, Inc.
- --------------------------------------------------------------------------------
Delaware TN Technologies, Inc.
- --------------------------------------------------------------------------------
Delaware Modem Media.Poppe Tyson, Inc.
- --------------------------------------------------------------------------------
Delaware Stein Rogan Inc.
- --------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
<S> <C>
Country
of COMPANY NAME
Incorporation
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
TRUE NORTH COMMUNICATIONS INC.
List of Foreign Companies
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Argentina XYZ Produciones, S.A.
- -----------------------------------------------------------------------------------------
Argentina Pragma/FCB, S.A.
- -----------------------------------------------------------------------------------------
Argentina Bozell Holdings Argentina S.A.
- -----------------------------------------------------------------------------------------
Argentina Bozell Vasquez, S.A.
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Australia Forbes Macfie Hansen Pty. Ltd.
- -----------------------------------------------------------------------------------------
Australia Bozell Worldwide Pty. Limited
- -----------------------------------------------------------------------------------------
Australia Foote, Cone & Belding Sydney Pty Limited
- -----------------------------------------------------------------------------------------
Australia FCB Adelaide Pty Ltd.
- -----------------------------------------------------------------------------------------
Australia FCB Melbourne Pty. Limited
- -----------------------------------------------------------------------------------------
Australia Shorter/FCB Pty Ltd.
- -----------------------------------------------------------------------------------------
Australia Foote, Cone & Belding Australia Pty Ltd.
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Austria Borsch Stengel & Partner Wien GmbH
- -----------------------------------------------------------------------------------------
Austria Bozell - Kobza
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Belgium Bozell Worldwide Brussels
- -----------------------------------------------------------------------------------------
Belgium Lewis Gace Bozell International SA
- -----------------------------------------------------------------------------------------
Belgium Adamson Associates Scrl
- -----------------------------------------------------------------------------------------
Belgium Charles Barker BSMG SA
- -----------------------------------------------------------------------------------------
Belgium FCB Belgium, SA
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Brazil FCB do Brazil Publicidade, Ltda.
- -----------------------------------------------------------------------------------------
Brazil Quality Communications
- -----------------------------------------------------------------------------------------
Brazil Bozell Brasil Publicidade Ltda.
- -----------------------------------------------------------------------------------------
Brazil Poppe Tyson Do Brasil Ltda.
- -----------------------------------------------------------------------------------------
Brazil Giovanni, FCB S/A
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Canada Temerlin McClain Canada, Inc.
- -----------------------------------------------------------------------------------------
Canada Bozell Worldwide Canada Inc.
- -----------------------------------------------------------------------------------------
Canada Dome Advertising
- -----------------------------------------------------------------------------------------
Canada FCB/ Canada, Ltd.
- -----------------------------------------------------------------------------------------
Canada Modem Media.Poppe Tyson, Inc.
- -----------------------------------------------------------------------------------------
Canada Mondialis Communications Marketing Inc.
- -----------------------------------------------------------------------------------------
Canada Programmes, Inc.
- -----------------------------------------------------------------------------------------
Canada Generations Research, Inc.
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Chile Impact Promotions
- -----------------------------------------------------------------------------------------
Chile Israel & De Bianchi/Foote, Cone & Belding S.A.
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
China Lang Fang Megacom Advertising Co., Ltd.
- -----------------------------------------------------------------------------------------
China Da Qiao International Advertising Communication Co. Ltd. (Bozell China)
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Colombia Artefilme Limitada
- -----------------------------------------------------------------------------------------
Colombia FCB Colombia S.A.
- -----------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------
Costa Rica Arte y Cinema S.A.
- -----------------------------------------------------------------------------------------
Costa Rica Atitlan
- -----------------------------------------------------------------------------------------
Costa Rica FCB de Costa Rica, S.A.
- -----------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
<S> <C>
Country
of COMPANY NAME
Incorporation
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
TRUE NORTH COMMUNICATIONS INC.
List of Foreign Companies
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Czech Republic Foote, Cone & Belding s.r.o.
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Domin. Republic FCB / Impact
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Ecuador Foote, Cone & Belding - Ecuador
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Egypt FCB / Horizon
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
El Salvador FCB El Salvador Publicidad, S.A. de C.V.
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
France Bozell Iceberg
- --------------------------------------------------------------------------------------
France Bozell Terre-Lune
- --------------------------------------------------------------------------------------
France Formes et Facons
- --------------------------------------------------------------------------------------
France Groupe Bozell France S.A.
- --------------------------------------------------------------------------------------
France AXE Publicite
- --------------------------------------------------------------------------------------
France Foote, Cone & Belding S.A.
- --------------------------------------------------------------------------------------
France Empir Media S.A.
- --------------------------------------------------------------------------------------
France Empir S.A.
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Germany FCB/Wilkens Hamburg Werbeagentur GmbH
- --------------------------------------------------------------------------------------
Germany DIE SEITE: Atelier fur Gestaltung und Realisation von Katalogen GmbH
- --------------------------------------------------------------------------------------
Germany Produkta Direct Service fur Druck und Werbemittel-Production GmbH
- --------------------------------------------------------------------------------------
Germany Meditel Kommunikationsdesign GmbH
- --------------------------------------------------------------------------------------
Germany Bozell Direct Friends Werbeagentur fur Directmarketing GmbH
- --------------------------------------------------------------------------------------
Germany Bozell, Jacobs Holding GmbH
- --------------------------------------------------------------------------------------
Germany Management Profile Consulting GmbH
- --------------------------------------------------------------------------------------
Germany Borsch Stengel Korner Bozell Brand Pharma GmbH
- --------------------------------------------------------------------------------------
Germany FCB Werbeagentur GmbH
- --------------------------------------------------------------------------------------
Germany APR Wilkens Agentur fur Public Relations GmbH
- --------------------------------------------------------------------------------------
Germany ComInterest Holding GmbH
- --------------------------------------------------------------------------------------
Germany FCB Wilkens Direct GmbH
- --------------------------------------------------------------------------------------
Germany Borsch, Stengel, Korner, Bozell Werbeagentur GmbH
- --------------------------------------------------------------------------------------
Germany FCB/Technics Werbeagentur GmbH
- --------------------------------------------------------------------------------------
Germany FCB/Wilkens GmbH
- --------------------------------------------------------------------------------------
Germany Gesellschaft fur Direktmarketing-Wissen GmbH
- --------------------------------------------------------------------------------------
Germany Erste "Borderless AD" Verwaltungs GmbH
- --------------------------------------------------------------------------------------
Germany Kramer-Pape Wilkens GmbH
- --------------------------------------------------------------------------------------
Germany Media Satel GmbH
- --------------------------------------------------------------------------------------
Germany Zweite "Borderless AD" GmbH
- --------------------------------------------------------------------------------------
Germany Enjoy F Werbeagentur GmbH
- --------------------------------------------------------------------------------------
Germany MEX Multimedia Experts GmbH
- --------------------------------------------------------------------------------------
Germany Borsch Stengel Korner Bozell Markendesign GmbH
- --------------------------------------------------------------------------------------
Germany Schumacher Werbeagentur GmbH
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Guatemala Publicidade Siboney S.A.
- --------------------------------------------------------------------------------------
Guatemala Arte Filme S.A.
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Honduras Publicidade Siboney S.A.
- --------------------------------------------------------------------------------------
Honduras FCB/Honduras
- --------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Country
of COMPANY NAME
Incorporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUE NORTH COMMUNICATIONS INC.
List of Foreign Companies
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
Hong Kong Foote, Cone & Belding, Ltd.
- --------------------------------------------------------------------------------
Hong Kong AFM Productions Limited
- --------------------------------------------------------------------------------
Hong Kong Modem Media.Poppe Tyson
- --------------------------------------------------------------------------------
Hong Kong MNC/FCB (HK) Limited
- --------------------------------------------------------------------------------
Hong Kong Bozell Asia (Holding) Ltd.
- --------------------------------------------------------------------------------
Hong Kong TN Technologies Limited Hong Kong
- --------------------------------------------------------------------------------
Hong Kong Bozell Ltd.
- --------------------------------------------------------------------------------
Hong Kong Park Advertising Ltd.
- --------------------------------------------------------------------------------
Hong Kong Megacom Holdings Limited
- --------------------------------------------------------------------------------
Hong Kong True North Communications (HK) Ltd.
- --------------------------------------------------------------------------------
Hong Kong Grant Advertising Limited
- --------------------------------------------------------------------------------
Hong Kong CAL/Bozell Limited
- --------------------------------------------------------------------------------
Hong Kong Pope Kiernan & Black
- --------------------------------------------------------------------------------
Hong Kong Foote, Cone & Belding (Taiwan) Ltd.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Hungary FCB Budapest
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
India Interface Communications Limited
- --------------------------------------------------------------------------------
India ULKA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Isle of Man Horizon Advertising Ltd.
- --------------------------------------------------------------------------------
Isle of Man Horizon FCB Holdings
- --------------------------------------------------------------------------------
Isle of Man Frontline Marketing
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Italy Foote, Cone & Belding, Srl.
- --------------------------------------------------------------------------------
Italy Bozell Marketing Service Srl.
- --------------------------------------------------------------------------------
Italy Bozell Italia Spa
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Japan K.K. Bozell Worldwide
- --------------------------------------------------------------------------------
Japan Modem Media.Poppe Tyson Japan
- --------------------------------------------------------------------------------
Japan FCB (Japan) K.K.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Lebanon Horizon-FCB
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Malaysia Foote, Cone & Belding Sdn. Bhd.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mauritius Adcom
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Mexico CPV Publicidad
- --------------------------------------------------------------------------------
Mexico Interimagen S.A.de C.V.
- --------------------------------------------------------------------------------
Mexico Bozell Healthcare
- --------------------------------------------------------------------------------
Mexico Publicidad Tiempo Espacio
- --------------------------------------------------------------------------------
Mexico Poppe Tyson S.A. de C.V.
- --------------------------------------------------------------------------------
Mexico Bozell S.A. de C.V.
- --------------------------------------------------------------------------------
Mexico BJK&E Internacional
- --------------------------------------------------------------------------------
Mexico Artest S.A. de C.V.
- --------------------------------------------------------------------------------
Mexico FCB Arellano S.A. de C.V.
- --------------------------------------------------------------------------------
Mexico FCB de Mexico
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Netherlands Bozell Europe Holdings B.V.
- --------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Country
of COMPANY NAME
Incorporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUE NORTH COMMUNICATIONS INC.
List of Foreign Companies
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
Netherlands Bozell BK&P
- --------------------------------------------------------------------------------
Netherlands Wilkens Group BV
- --------------------------------------------------------------------------------
Netherlands Foote, Cone & Belding Reclamebureau BV
- --------------------------------------------------------------------------------
Netherlands True North Holding Netherlands B.V.
- --------------------------------------------------------------------------------
Netherlands BSMG Worldwide, BV
- --------------------------------------------------------------------------------
Netherlands Modem Media.Poppe Tyson (Europe) B.V.
- --------------------------------------------------------------------------------
Netherlands Wilkens Group Netherlands BV
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
New Zealand Foote, Cone & Belding Ltd.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Peru Park Advertising & Direct Marketing S.A.
- --------------------------------------------------------------------------------
Peru Mayo/FCB Publicidade S.A.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Philippines Barona Property Holdings Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Poland FCB Poland/ Wilkens Warsaw
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Portugal Wilkens Lisbon
- --------------------------------------------------------------------------------
Portugal FCB do Portugal Publicidade Ltda.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Puerto Rico Park Advertising, Inc.
- --------------------------------------------------------------------------------
Puerto Rico Foote, Cone & Belding, Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Singapore Foote, Cone & Belding Pte Ltd
- --------------------------------------------------------------------------------
Singapore Bozell Worldwide (Singapore) Pts. Ltd.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
South Africa FCB Holdings (South Africa) Pty, Ltd.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Spain Inversiones Bozell Worldwide Holdings, S.L.
- --------------------------------------------------------------------------------
Spain TFM/Tapsa, S.A.
- --------------------------------------------------------------------------------
Spain True North Bozell Espana, S.L.
- --------------------------------------------------------------------------------
Spain Bozell Worldwide Holdings Espana, S.L.
- --------------------------------------------------------------------------------
Spain Foote, Cone & Belding Barcelona, SA
- --------------------------------------------------------------------------------
Spain Bozell Espana
- --------------------------------------------------------------------------------
Spain FCB/Tapsa
- --------------------------------------------------------------------------------
Spain CICM
- --------------------------------------------------------------------------------
Spain Foote, Cone & Belding Direct, S.A.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Switzerland Typeart AG, Wallisellen
- --------------------------------------------------------------------------------
Switzerland Bozell Leutenegger Krull AG
- --------------------------------------------------------------------------------
Switzerland Bozell Holdings AG
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Taiwan Foote, Cone & Belding (Taiwan) Ltd.
- --------------------------------------------------------------------------------
Taiwan Bozell Taiwan
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Thailand Magnus Nankervis & Curl/FCB (Thailand) Limited
- --------------------------------------------------------------------------------
Thailand Bozell Worldwide (Thailand) Ltd.
- --------------------------------------------------------------------------------
Thailand FCB Worldwide (Thailand) Ltd.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Turkey Foote, Cone & Belding Reklam Hizmetleri Anonim Sirketi
- --------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Country
Of COMPANY NAME
Incorporation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUE NORTH COMMUNICATIONS INC.
List of Foreign Companies
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
United Kingdom Charles Barker Publishing Limited
- --------------------------------------------------------------------------------
United Kingdom Marketing Drive Limited
- --------------------------------------------------------------------------------
United Kingdom MDGS Limited
- --------------------------------------------------------------------------------
United Kingdom Marketing Drive (Manchester) Limited
- --------------------------------------------------------------------------------
United Kingdom Globespan Marketing Services Limited
- --------------------------------------------------------------------------------
United Kingdom BHO Communications Limited
- --------------------------------------------------------------------------------
United Kingdom Marketing Drive Group Limited
- --------------------------------------------------------------------------------
United Kingdom Modem Media.Poppe Tyson, Ltd.
- --------------------------------------------------------------------------------
United Kingdom Delaney Fletcher Delany Limited
- --------------------------------------------------------------------------------
United Kingdom Charles Barker PLC
- --------------------------------------------------------------------------------
United Kingdom Lewis Gace Bozell Health Care Worldwide Limited
- --------------------------------------------------------------------------------
United Kingdom Bozell (UK) Limited
- --------------------------------------------------------------------------------
United Kingdom SCW Bozell (Holdings) Ltd.
- --------------------------------------------------------------------------------
United Kingdom Delany Fletcher Bozell Limited
- --------------------------------------------------------------------------------
United Kingdom True North Holdings Ltd.
- --------------------------------------------------------------------------------
United Kingdom Charles Barker Healthcare Ltd.
- --------------------------------------------------------------------------------
United Kingdom Keith Littlewood Associates Limited
- --------------------------------------------------------------------------------
United Kingdom Charles Barker ESOP Trustee Ltd.
- --------------------------------------------------------------------------------
United Kingdom Banks Hoggins O'Shea / FCB Ltd.
- --------------------------------------------------------------------------------
United Kingdom Business Opinions Ltd.
- --------------------------------------------------------------------------------
United Kingdom Gibbs Associates Limited
- --------------------------------------------------------------------------------
United Kingdom FCB Advertising Limited
- --------------------------------------------------------------------------------
United Kingdom Foote, Cone & Belding International Limited
- --------------------------------------------------------------------------------
United Kingdom TN Technologies Ltd.
- --------------------------------------------------------------------------------
United Kingdom Foote, Cone & Belding Europe Ltd.
- --------------------------------------------------------------------------------
United Kingdom FCB Management Services Ltd.
- --------------------------------------------------------------------------------
United Kingdom SLAM Ltd.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Uruguay EFPZ/FCB
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Venezuela Foote, Cone & Belding Publicidad, C.A.
- --------------------------------------------------------------------------------
Venezuela Publicis Publicidad, C.A.
- --------------------------------------------------------------------------------
Venezuela FCB Publicidad, C.A.
- --------------------------------------------------------------------------------
Venezuela Optimedia Publicidad, C.A.
- --------------------------------------------------------------------------------
Venezuela AJL Park Publicidad, C.A.
- --------------------------------------------------------------------------------
Venezuela Arte Filme Asociados, C.A.
- --------------------------------------------------------------------------------
Venezuela Publicidade Siboney S.A.
- --------------------------------------------------------------------------------
Venezuela TN Medios, C.A.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
5
<PAGE>
10-K EXHIBIT 23.1
[Letterhead of Arthur Andersen LLP]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTS
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 in this Form 10-K into the Company's previously filed
Registration Statements on Form S-8 (File No.'s 33-15126, 33-41128, 33-41129,
33-54273, 33-54279, 333-41189, 333-80239, 333-80217, 333-76225 and 333-52989),
Form S-4 (File 333-58707) and Form S-3 (File No.'s 333-68485, 333-73301,
333-57495, 333-73303, 333-82403) and all previously filed Registration
Statements on Form S-8 and Form S-3.
Arthur Andersen LLP
Chicago, Illinois
March 30, 2000
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints David A. Bell, Donald L. Seeley and Suzanne S. Bettman,
and each of them, his or her true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, in any and all capacities, to
sign the Annual Report on Form 10-K of True North Communications Inc. for its
fiscal year ended December 31, 1999 and any and all amendments thereto, and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto each of
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitutes, may lawfully do or cause to be done by virtue
hereof. This Power of Attorney shall be effective from the date on which it is
signed until June 30, 2000.
Name Date Signed
---- -----------
/s/ David A. Bell January 18, 2000
- ---------------------------------- ------------------------------
David A. Bell
/s/ Joseph A. Califano, Jr. January 20, 2000
- ---------------------------------- ------------------------------
Joseph A. Califano, Jr.
/s/ Donald L. Seeley January 26, 2000
- ---------------------------------- ------------------------------
Donald L. Seeley
/s/ Donald M. Elliman, Jr. January 17, 2000
- ---------------------------------- ------------------------------
Donald M. Elliman, Jr.
/s/ H. John Greeniaus January 17, 2000
- ---------------------------------- ------------------------------
H. John Greeniaus
/s/ Leo-Arthur Kelmenson January 21, 2000
- ---------------------------------- ------------------------------
Leo-Arthur Kelmenson
/s/ Michael E. Murphy January 25, 2000
- ---------------------------------- ------------------------------
Michael E. Murphy
/s/ Charles D. Peebler, Jr. February 12, 2000
- ---------------------------------- ------------------------------
Charles D. Peebler, Jr.
/s/ J. Brendan Ryan February 14, 2000
- ---------------------------------- ------------------------------
J. Brendan Ryan
/s/ Marilyn R. Seymann January 18, 2000
- ---------------------------------- ------------------------------
Marilyn R. Seymann
/s/ Stephen T. Vehslage February 7, 2000
- ---------------------------------- ------------------------------
Stephen T. Vehslage
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 118,265
<SECURITIES> 18,934
<RECEIVABLES> 1,035,993
<ALLOWANCES> 15,292
<INVENTORY> 0
<CURRENT-ASSETS> 1,246,941
<PP&E> 337,776
<DEPRECIATION> 180,977
<TOTAL-ASSETS> 2,005,280
<CURRENT-LIABILITIES> 1,394,788
<BONDS> 0
0
0
<COMMON> 308,747
<OTHER-SE> 57,629
<TOTAL-LIABILITY-AND-EQUITY> 2,005,280
<SALES> 0
<TOTAL-REVENUES> 1,439,414
<CGS> 0
<TOTAL-COSTS> 1,349,560
<OTHER-EXPENSES> 18,472
<LOSS-PROVISION> 7,511
<INTEREST-EXPENSE> 18,128
<INCOME-PRETAX> 82,687
<INCOME-TAX> 42,206
<INCOME-CONTINUING> 38,790
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38,790
<EPS-BASIC> 0.82
<EPS-DILUTED> 0.81
</TABLE>
