UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------------- --------------------
Commission file number: 0 - 21460
NFO WORLDWIDE, INC.
-------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-1327424
- --------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
TWO PICKWICK PLAZA, GREENWICH, CT. 06830
- --------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)
(203) 629 - 8888
---------------------------------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
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
-------- --------
APPLICABLE ONLY TO CORPORATE ISSUERS:
At November 5, 1999, Registrant had outstanding 22,342,360 shares of Common
Stock.
<PAGE>
NFO WORLDWIDE, INC.
INDEX
PAGE
PART I FINANCIAL INFORMATION NUMBER
Financial Statements:
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 4
Condensed Consolidated Statements of Cash Flows 5
Condensed Consolidated Statement of Stockholders' Equity 6
Notes to Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 14
Signature 15
2
<PAGE>
NFO WORLDWIDE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
--------- ---------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 13,642 $ 17,739
Receivables:
Trade, Less Allowance for Doubtful Accounts 90,212 98,250
Unbilled Receivables 33,736 22,524
Prepaid Expenses and Other Current Assets 16,160 15,524
--------- ---------
Total Current Assets 153,750 154,037
Property and Equipment, Net 48,318 44,472
Customer List, Goodwill and Other Intangible Assets 225,988 231,225
Other Assets 22,504 22,064
--------- ---------
Total Assets $ 450,560 $ 451,798
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities:
Current Maturities of Long-Term Debt $ 1,068 $ 396
Accounts Payable 16,896 31,945
Accrued Liabilities 47,963 63,122
Customer Billings in Excess of Revenues Earned 35,792 26,659
--------- ---------
Total Current Liabilities 101,719 122,122
--------- ---------
Long-Term Debt, Less Current Portion 193,384 190,657
Accrued Pension, Postretirement Benefits and Other 14,085 14,092
--------- ---------
Total Long-Term Liabilities 207,469 204,749
--------- ---------
Total Liabilities 309,188 326,871
--------- ---------
Minority Interests 3,205 3,164
--------- ---------
Stockholders' Equity:
Common Stock, Par Value $.01 Per Share;
60,000 Shares Authorized; 22,265 and
21,401 Issued and Outstanding
in 1999 and 1998, respectively 223 214
Additional Paid-In Capital 71,449 63,723
Retained Earnings 72,122 60,535
Accumulated Other Comprehensive Loss:
Minimum Pension Liability, Net of Income Taxes (631) (631)
Foreign Currency Translation Adjustment (4,996) (2,078)
--------- ---------
Total Stockholders' Equity 138,167 121,763
--------- ---------
Total Liabilities and Stockholders' Equity $ 450,560 $ 451,798
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
NFO WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 111,172 $ 65,486 $ 337,019 $ 180,732
Costs and Expenses:
Cost of Revenues 57,187 30,276 173,814 82,393
Selling, General and Administrative 39,499 27,690 118,424 73,107
Amortization 2,443 1,052 7,266 3,318
Depreciation 2,519 891 7,270 3,011
--------- --------- --------- ---------
Operating Income 9,524 5,577 30,245 18,903
Interest Expense, Net 3,798 716 10,557 1,788
Equity Interest in Net (Income) Loss
of Affiliated Companies
and Other Expenses (1,009) 117 (1,892) 394
--------- --------- --------- ---------
Income Before Income Taxes
and Minority Interests 6,735 4,744 21,580 16,721
Provision for Income Taxes 2,866 2,158 9,434 6,885
--------- --------- --------- ---------
Net Income Before
Minority Interests 3,869 2,586 12,146 9,836
Minority Interests 307 25 559 428
--------- --------- --------- ---------
Net Income $ 3,562 $ 2,561 $ 11,587 $ 9,408
========= ========= ========= =========
Earnings Per Share:
Basic $ .16 $ .12 $ .53 $ .45
========= ========= ========= =========
Diluted $ .16 $ .12 $ .52 $ .44
========= ========= ========= =========
Weighted Average Number of
Shares Outstanding:
Basic 22,252 21,273 21,899 21,093
========= ========= ========= =========
Diluted 22,557 21,605 22,374 21,621
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
NFO WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Cash Flow From Operating Activities:
Net Income $ 3,562 $ 2,561 $ 11,587 $ 9,408
Adjustments to Reconcile to Net Cash
Provided By Operating Activities:
Minority Interests 307 25 559 428
Amortization Expense 2,443 1,052 7,266 3,318
Depreciation Expense 2,519 891 7,270 3,011
Equity Interest in Net (Income) Loss of
Affiliated Companies (1,056) 79 (1,986) 251
Other 686 -- 830 --
-------- -------- -------- --------
Subtotal 8,461 4,608 25,526 16,416
Change in Assets and Liabilities that Provided (Used)
Cash, Net of Effects of Acquisitions:
Trade Receivables 9,098 2,638 5,037 875
Unbilled Receivables (5,997) 4,948 (11,425) (2,212)
Prepaid Expenses & Other Current Assets 624 (2,476) (2,110) (4,568)
Accounts Payable & Accrued Liabilities (289) 1,106 (20,758) (2,915)
Customer Billings in Excess
of Revenues Earned 3,157 (4,108) 6,176 (5,646)
-------- -------- -------- --------
Net Cash Provided By Operating Activities 15,054 6,716 2,446 1,950
-------- -------- -------- --------
Cash Flow From Investing Activities:
Acquisitions (Net of Cash Acquired) (331) (990) (2,965) (18,148)
Capital Expenditures (Net of Minor Disposals) (3,905) (2,386) (11,999) (10,519)
-------- -------- -------- --------
Net Cash Used By Investing Activities (4,236) (3,376) (14,964) (28,667)
-------- -------- -------- --------
Cash Flow From Financing Activities:
Issuance of Common Stock, Net of Expenses 351 -- 2,608 1,057
Payments on Long-Term Debt (5,739) (3,552) (35,894) (61,307)
Proceeds from Line of Credit and
Other Long-Term Debt 1,977 3,000 43,251 85,641
-------- -------- -------- --------
Net Cash (Used) Provided By
Financing Activities (3,411) (552) 9,965 25,391
-------- -------- -------- --------
Effect of Exchange Rate Changes on Cash (1,068) (125) (1,544) (244)
-------- -------- -------- --------
Change in Cash 6,339 2,663 (4,097) (1,570)
Cash and Cash Equivalents, Beg. of Period 7,303 3,822 17,739 8,055
-------- -------- -------- --------
Cash and Cash Equivalents, End of Period $ 13,642 $ 6,485 $ 13,642 $ 6,485
======== ======== ======== ========
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Period for:
Interest $ 2,679 $ 1,385 $ 8,964 $ 2,048
Income Taxes $ 2,874 $ 1,756 $ 11,017 $ 4,142
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
NFO WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(unaudited, in thousands)
<TABLE>
<CAPTION>
Accumulated Total
Additional Other Comp- Stock Compre-
Common Common Paid-In Retained rehensive Holders' hensive
Shares Stock Capital Earnings (Loss) Equity Income
------ ----- ------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 21,401 $214 $63,723 $60,535 $(2,709) $121,763
Net Income 11,587 11,587 $11,587
Translation Adjustments (2,918) (2,918) (2,918)
-------
Comprehensive Income $ 8,669
=======
Other Issuances 864 9 7,726 7,735
------ ---- ------- ------- ------- --------
Balance at September 30, 1999 22,265 $223 $71,449 $72,122 $(5,627) $138,167
====== ==== ======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of this statement.
6
<PAGE>
NFO WORLDWIDE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Financial Statements:
These condensed consolidated financial statements include the accounts of NFO
Worldwide, Inc., and its subsidiaries (the Company). All significant
intercompany amounts have been eliminated. In the opinion of management, the
accompanying unaudited condensed consolidated financial statements reflect all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position of the Company as of September 30, 1999,
and the results of its operations for the three and nine month periods ended
September 30, 1999, and September 30, 1998.
These financial statements are presented in accordance with the requirements of
Form 10-Q. Accordingly, the financial statements and related notes in the
Company's Audited Financial Statements for the fiscal year ended December 31,
1998, included in the Company's Form 10-K filed with the SEC on March 31, 1999,
should be read in conjunction with the accompanying condensed consolidated
financial statements. The information included herein may not be indicative of
the results to be expected for a full year.
Note 2. Earnings Per Share:
The following table reconciles the net income and weighted average number of
shares included in the basic earnings per share calculation to the net income
and weighted average number of shares used to compute diluted earnings per share
(in thousands):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Income Used for Basic and Diluted
Earnings Per Share $ 3,562 $ 2,561 $11,587 $ 9,408
======= ======= ======= =======
Weighted Average Number of Shares Outstanding
Used for Basic Earnings Per Share 22,252 21,273 21,899 21,093
Dilutive Stock Options 305 328 256 478
Contingently Issuable Common Shares -- 4 219 50
------- ------- ------- -------
Weighted Average Number of Shares Outstanding
and Common Share Equivalents Used for
Diluted Earnings Per Share 22,557 21,605 22,374 21,621
======= ======= ======= =======
</TABLE>
Note 3. Credit Facilities:
On March 26, 1999, the Company successfully completed the private placement of
$7 million in Senior Notes and $8 million in Senior Subordinated Notes, the
proceeds of which were used to reduce then-existing debt. The Senior and
Subordinated Notes bear interest at the fixed rates of 7.52 percent and 9.84
percent, respectively, and are due November 15, 2008. The Senior and
Subordinated Notes are to be repaid in equal annual installments of $1 million
and $2.67 million beginning in 2002 and 2006, respectively. With the placement
of these Notes, the Company satisfied certain provisions contained in its Series
A and Series B Senior Notes dated November 20, 1998, thereby reducing the annual
interest rates on those Notes from 7.48 percent and 7.82 percent, respectively,
to 7.18 percent and 7.52 percent, respectively.
7
<PAGE>
Note 4. Segment Data:
The Company has three operating segments as defined by the provisions of
Financial Accounting Standards Board Statement No. 131, Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131"), North America,
Europe and Australasia and the Middle East. Intersegment sales are generally
recorded at market or equivalent value. Operating income by segment consists of
net sales less related costs and expenses.
Operating segment disclosures as required by SFAS 131 are as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
North America $ 51,229 $ 49,092 $ 150,768 $ 131,772
Europe 51,283 6,920 156,039 19,336
Australasia and the Middle East 10,646 9,605 33,272 29,755
--------- --------- --------- ---------
Total Operating Segments 113,158 65,617 340,079 180,863
Intersegment Revenues (1,986) (131) (3,060) (131)
--------- --------- --------- ---------
Total Revenues $ 111,172 $ 65,486 $ 337,019 $ 180,732
========= ========= ========= =========
Operating Income:
North America $ 5,573 $ 6,874 $ 20,017 $ 19,324
Europe 5,264 191 13,606 1,320
Australasia and the Middle East 643 6 2,186 2,457
--------- --------- --------- ---------
Total Operating Segments 11,480 7,071 35,809 23,101
Unallocated Corporate Expenses (1,956) (1,494) (5,564) (4,198)
--------- --------- --------- ---------
Total Operating Income $ 9,524 $ 5,577 $ 30,245 $ 18,903
========= ========= ========= =========
</TABLE>
Note 5. Subsequent Event:
On October 19, 1999, the Company announced the formation of InsightExpress LLC,
a new Internet company formed to provide real-time consumer input to the
desktops of decision-makers in companies of all sizes worldwide. InsightExpress
is a fully automated web-enabled survey system that will allow its customers to
test new ideas, screen new concepts, gauge customer satisfaction, survey
employees, test advertising, and gather insight into the needs, attitudes, and
behaviors of consumers. InsightExpress is designed to provide these capabilities
at a fraction of the time and the cost of existing market research methods. The
new company will leverage the worldwide client experience and panel expertise of
NFO. To fund its development and growth, InsightExpress has raised a total of
$25 million in new venture capital from General Atlantic Partners and Engage.
Assuming certain put/call rights are exercised, NFO Worldwide will maintain a
50% equity interest in the consolidated venture.
8
<PAGE>
NFO WORLDWIDE, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the unaudited
condensed consolidated financial statements and the notes thereto included in
this Quarterly Report.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain operating
statement data for the Company, expressed as a percentage of revenues, and the
percentage change in such items compared to amounts for the prior year.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
Percentage of Percentage Percentage of Percentage
Revenues Change From Revenues Change From
1999 1998 Prior Year 1999 1998 Prior Year
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 69.8% 100.0% 100.0% 86.5%
Costs and Expenses:
Cost of Revenues 51.4 46.2 88.9 51.6 45.6 111.0
Selling, General & Administrative 35.5 42.3 42.6 35.1 40.5 62.0
Amortization 2.2 1.6 132.2 2.1 1.8 119.0
Depreciation 2.3 1.4 182.7 2.2 1.6 141.4
------- ------- ------- ------- ------- -------
Operating Income 8.6 8.5 70.8 9.0 10.5 60.0
Interest Expense, Net 3.4 1.1 430.4 3.1 1.0 490.4
Equity Interest in Net (Income) Loss
of Affiliated Companies and
Other Expenses (.9) 0.2 (962.4) (.5) 0.2 (580.2)
------- ------- ------- ------- ------- -------
Income Before Income Taxes
and Minority Interests 6.1 7.2 42.0 6.4 9.3 29.1
Provision for Income Taxes 2.6 3.3 32.8 2.8 3.9 37.0
------- ------- ------- ------- ------- -------
Net Income Before
Minority Interests 3.5 3.9 49.6 3.6 5.4 23.5
Minority Interests .3 0.0 1,128.0 .2 0.2 30.6
------- ------- ------- ------- ------- -------
Net Income 3.2% 3.9% 39.1% 3.4% 5.2% 23.2%
======= ======= ======= ======= ======= =======
</TABLE>
9
<PAGE>
OPERATIONS
The majority of the increases in the various components of the Company's results
of operations for the three and nine month periods ended September 30, 1999,
compared with the same periods in 1998, are the result of the Company's 1998
acquisitions (principally Infratest Burke) as discussed in the Company's Annual
Report on Form 10-K filed with the SEC on March 31, 1999.
The Company's revenues for the three months ended September 30, 1999, increased
$45.7 million, or 70%, to $111.2 million from $65.5 million for the same period
last year. For the nine months ended September 30, 1999, revenues increased 87%
to $337.0 million compared with $180.7 million in the prior year.
The third quarter's 70% revenue increase was marked by growth in all three of
the Company's business sectors, particularly in Europe. In total, organic
revenue growth was 3.4% for the quarter, lead by strong double-digit organic
growth in Europe. Revenues within the Company's North American sector increased
4% for the third quarter, led by strong growth within the Company's Healthcare
Group. In addition to strong double-digit organic growth, Europe's performance
was also bolstered by the inclusion of Infratest Burke's operations. Revenues
within AustralAsia and the Middle East, meanwhile, increased 11% for the quarter
as a result of the inclusion of acquisitions, positive organic growth and
favorable currency effects. Consolidated currency translation effects were not
material for the quarter and the nine-month periods.
For the nine months ended September 30, 1999, North American revenues increased
14%, with 5% from organic growth and 9% driven by acquisitions. The Healthcare,
Financial Services, and Continuous Tracking Groups all registered strong
double-digit revenue growth, with the Panel Group also showing a strong
increase. Revenues within Europe increased dramatically, primarily due to
organic growth of 9% and the first time inclusion of Infratest Burke. Revenue
growth in the Australasia and the Middle East was 12%, 5% through organic growth
and 6% related to acquisitions.
Cost of revenues increased $26.9 million, or 89%, in the third quarter to $57.2
million from $30.3 million a year ago. For the nine month period, cost of
revenues increased $91.4 million, or 111%, to $173.8 million from $82.4 million
in the prior year. The majority of these increases were the result of inclusion
of the newly acquired companies.
Selling, general and administrative expenses increased $11.8 million, or 43%, in
the third quarter to $39.5 million from $27.7 million in the same period last
year. Year-to-date selling, general and administrative expenses increased $45.3
million, or 62%, to $118.4 million from $73.1 million in the prior year. These
increases were predominately the result of the inclusion of the newly acquired
companies, as well as increased staffing expenses, offset slightly by declines
in various other costs. Increases were also affected by inflationary factors.
As a result of the items above, operating income for the quarter ended September
30, 1999, increased $3.9 million, or 71%, to $9.5 million from $5.6 million in
the same quarter a year ago. Year-to-date operating income increased $11.3
million, or 60%, to $30.2 million from $18.9 million in the prior year. The
third quarter operating margin was 8.6% compared with 8.5% for the same period
last year.
Year-to-date operating margins decreased to 9.0% from 10.5% in the prior year.
The overwhelming majority of the year-to-date decline in margins from 1998 to
1999 is attributed to the inclusion of the operating results of the newly
acquired international companies.
10
<PAGE>
Net interest expense increased to $3.8 million from $.7 million for the third
quarter and increased to $10.6 million from $1.8 million for the nine months
ended September 30, 1999, compared to the respective periods in the prior year.
The increases were due to additional borrowings in late 1998 to fund
acquisitions, primarily the Infratest Burke acquisition in November 1998.
The effective tax rate for the third quarter declined to 42.6% compared to 45.5%
for the same period last year. For the nine months ended September 30, 1999, the
Company's effective tax rate increased to 43.7% from 41.2% in the prior year.
The year-to-date increase is principally the result of the Company's recent
acquisitions being located in higher tax jurisdictions as well as the effect of
non-deductible goodwill associated with these acquisitions. The year-to-date
effective rate of 43.7% reasonably approximates what the Company believes the
effective tax rate will be for the full year 1999.
Net income for the third quarter of 1999 increased 39% to $3.6 million from $2.6
million for the same period in 1998. For the nine months ended September 30,
1999, net income increased 23% to $11.6 million from $9.4 million in the prior
year. Third quarter diluted earnings per share were $.16 compared to last year's
$.12 per share, an increase of 33%. Year-to-date diluted earnings per share
increased 18% to $.52 from $.44 for the same period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Working capital as of September 30, 1999, was $52.0 million compared to $31.9
million at December 31, 1998. The $20.1 million increase in working capital
resulted primarily from a decline in accounts payable and accrued liabilities of
$30.2 million and an increase in receivables of $3.2 million, partially offset
by a decrease in cash and cash equivalents of $4.1 million, an increase in
advance billings of $5.7 million, and a decrease in other net current assets of
$3.5 million.
The decreases in accounts payable and accrued liabilities were attributed to
payment in 1999 of earnouts accrued as of year end totaling $4.6 million,
payment of accrued bonuses totaling $4.0 million, as well as normal fluctuations
in the timing of the payment of invoices. The decrease in cash was attributed to
routine fluctuations as well as the cash portion of the 1999 earnout payments
totaling $5.3 million. The fluctuations in receivables and advance billings are
attributed to routine fluctuations in the timing of client projects and related
billings.
As of September 30, 1999, the Company had $45.9 million outstanding on its $75.0
million credit facility, $127.0 million outstanding in Senior Notes payable, and
$19.4 million of debt outstanding outside the United States. Total stockholders'
equity as of September 30, 1999, was $138.2 million.
Capital expenditures for the quarter ended September 30, 1999, were $3.9 million
compared to $2.4 million for the same period last year. Capital expenditures for
the nine months ended September 30, 1999, were $12.0 million compared to $10.5
million in the prior year. Capital expenditures for 1999 are anticipated to be
approximately $14 million.
The Company anticipates that existing cash, together with internally generated
funds and its credit and stock availabilities, will provide the Company with the
resources that are needed to satisfy potential acquisitions, capital
expenditures and the Company's growing working capital requirements. The timing
and magnitude of future acquisitions will be the single most important factor in
determining the Company's long-term capital needs.
11
<PAGE>
YEAR 2000 ISSUES
The Company is currently working to resolve the Year 2000 issue. In early 1997,
the Company completed an impact analysis across all proprietary custom software
programs and systems. As a result of this analysis, affected programs are being
modified by the Company's programming departments to ensure future compliance.
Any new programs being developed are being made Year 2000 compliant from the
outset, while certain existing systems are being made Year 2000 compliant as
they are reengineered.
The Company operates subsidiaries and divisions worldwide. While many of these
operations are already Year 2000 compliant in hardware, software and embedded
systems, other operations are still in the process of upgrading their systems
for Year 2000 compliance. The Company is in the process of testing its mission
critical and non-critical systems and software for Year 2000 compliance by using
a series of Year 2000 test dates. In instances where the Year 2000 dates are not
properly processed, the systems and software are upgraded and re-tested as
necessary for Year 2000 compliance. Mission critical applications and systems
have been prioritized for Year 2000 compliance, and the majority of those
systems are already compliant.
The Company believes the most likely worst case scenario would be for a
non-critical application or system to not be Year 2000 compliant on January 1,
2000. The Company's contingency plan includes manually addressing non-critical
applications and systems compliance problems. Additionally, the Company has the
ability to readily outsource many of its data collection and processing
processes should the need arise.
The Company is also coordinating with clients, vendors, affiliates and other
outside parties who may affect, or be affected by, the Company's plans to
address the Year 2000 issue. The Company sent surveys to these outside parties
inquiring as to their status in addressing the Year 2000 issue within their
respective organizations. The Company has gathered and analyzed the results of
those surveys, and although the Company does not foresee any Year 2000 issues
associated with these outside parties, the Company does not believe the effect
of non-compliance with Year 2000 on the part of any individual or group of
outside parties would have a material negative impact on the Company's
day-to-day operations.
The Company originally targeted January 1, 1999, to complete Year 2000
compliance of mission critical systems, including third-party and supply chain
vendors. Although the majority of the Company's subsidiaries have met this
target, the Company continues to perform testing, analysis and remediation as
necessary for Year 2000 compliance. While management believes the Company's Year
2000 compliance process will resolve any remaining Year 2000 issues in a timely
manner, the Company is also developing contingency plans as discussed above as
it is not possible to anticipate all possible future outcomes. Although the
Company has taken the steps outlined above to address the Year 2000 issue,
management cannot fully assure Year 2000 compliance due to the unprecedented
nature of the Year 2000 issue.
The Company estimates that total Year 2000 compliance costs incurred from 1997
through September 30, 1999, were approximately $930,000, and the estimated
future cost to complete Year 2000 compliance is approximately $260,000,
including capital expenditures of approximately $165,000.
12
<PAGE>
THE EURO CONVERSION
On January 1, 1999, certain member countries of the European Union established
fixed conversion rates between their existing currencies and the European
Union's common currency, the Euro. The Company conducts business in member
countries. The transition period for the Euro is from January 1, 1999, to June
30, 2002. The Company is addressing the issues involved with the introduction of
the Euro. The more important issues include converting information technology
systems, reassessing currency risk, and processing accounting and tax records.
Based upon progress to date, the Company believes that use of the Euro will not
have a significant impact on the manner in which the Company conducts its
business and processes its accounting records. Accordingly, conversion to the
Euro is not expected to have a material effect on the Company's financial
condition or results of operations.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
As certain of the statements made in this Form 10-Q are "forward-looking
statements" (within the meaning of the Private Securities Litigation Reform Act
of 1995), they involve known and unknown risks, uncertainties and other factors
that may cause actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, clients' timing of new product introductions and reformulations,
clients' marketing budgets, industry and economic conditions, changes in
management or ownership of a client, the effect of the Company's competition on
client purchasing decisions, the strategic decisions of the Company's management
team, the extent to which the Company is successful in developing and marketing
its interactive marketing research techniques, the effect of foreign exchange
rate fluctuations, and other factors referenced in this report. In addition, the
success of the Company's worldwide expansion efforts is dependent in part upon
the successful application of NFO's methodologies to different business and
consumer environments. To understand the additional risks which may affect the
Company's future performance, please refer to Part 1 of NFO's 1998 Annual Report
on Form 10-K filed on March 31, 1999.
13
<PAGE>
PART II OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amendment No. 1, dated as of November 9, 1999, to the Employment Agreement,
dated as of March 15, 1995, between the Company and William E. Lipner.
10.2 Change in Control and Severance Agreement, dated as of November 9, 1999,
between the Company and William E. Lipner.
10.3 Change in Control and Severance Agreement, dated as of November 9, 1999,
between the Company and Patrick G. Healy.
10.4 Change in Control and Severance Agreement, dated as of November 9, 1999,
between the Company and Joseph M. Migliara.
(b) The Company filed a report on Form 8-K with the Commission on October 19,
1999, which announced the Company's launch of InsightExpress, a new
internet company.
14
<PAGE>
NFO WORLDWIDE, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NFO WORLDWIDE, INC.
-------------------
(Registrant)
Dated: November 15, 1999 /s/ Patrick G. Healy
-----------------------------------------------
Patrick G. Healy,
President - Australasia and the Middle East,
and Chief Financial Officer
(Authorized Officer of Registrant and
Principal Financial Officer)
15
AMENDMENT NO. 1 TO
NFO WORLDWIDE, INC.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of November 9, 1999 by and between NFO
Worldwide, Inc., a Delaware corporation (the "Company"), and William E. Lipner
(the "Executive").
Whereas, the Executive entered into an employment agreement (the
"Original Agreement") with the Company on March 15, 1995;
Whereas the Executive and the Company desire to amend certain terms of
the Original Agreement;
In consideration of the foregoing and the respective covenants and
agreements of the parties herein contained, the parties hereto agree as follows:
A. Sections 5 (a), (b) and (c) of the Original Agreement shall be
amended and restated as follows:
5. Term.
(a) The Employment Period shall end on November 9, 2002,
provided that (i) the Employment Period shall terminate prior to such date upon
the Executive's resignation, death or permanent disability or incapacity (as
determined in good faith by the Board in its good faith judgment), (ii) the
Employment Period may be terminated by the Company at any time prior to such
date for Cause (as defined below) or without Cause, and (iii) the Employment
Period shall be extended automatically for an unlimited number of successive
three-year periods unless either the Company or the Executive gives written
notice to the other party of its or his desire not to extend the Employment
Period beyond the term of the then current Employment Period, which written
notice must be given at least 30 days prior to the date one year before the end
of the then current Employment Period.
(b) If at any time the Employment Period is terminated by the
Company without Cause, the Executive shall be entitled to receive his Base
Salary through the third anniversary of such termination, the pro rata portion
of the Annual Bonus paid to the Executive for the twelve-month period most
recently completed prior to such termination and his Annual Bonus for each of
the three years following such termination, which Annual Bonus shall be an
amount equal to the highest Annual Bonus received by the Executive during the
last five (5) fiscal years of the Company completed prior to such termination,
so long as the Executive has not materially breached the provisions of
paragraphs 6, 7 and 8 hereof. If the Company elects not to extend the Employment
Period by delivering the written notice specified in clause (a)(iii) above, the
Executive shall be entitled to receive his Base Salary and Annual Bonus through
the end of the Employment Period and shall be entitled to receive his Base
Salary and his Annual Bonus for two years following the end of the Employment
<PAGE>
2
Period, which Annual Bonus shall be an amount equal to the highest Annual Bonus
received by the Executive during the last five (5) fiscal years of the Company
completed prior to the end of the Employment Period.
(c) If the Employment Period is terminated by the Company for
Cause or is terminated pursuant to clause (a)(i) above, the Executive shall be
entitled to receive his Base Salary through the date of termination and the pro
rata portion of the Annual Bonus paid to the Executive for the twelve-month
period most recently completed prior to such termination, which Annual Bonus
shall be payable to the Executive if approved in the good faith judgment of the
Compensation Committee of the Board; provided, however, that, notwithstanding
the foregoing, if the Employment Period shall be terminated pursuant to clause
(a)(i) above either by the resignation of the Executive for "Good Reason" at any
time following a "Change in Control" of the Company, or by the Board's
determination of the Executive's permanent disability or incapacity, the
Executive shall be entitled to receive his Base Salary through the third
anniversary of such resignation and his Annual Bonus for each of the three years
following such resignation or Board determination, as the case may be, which
Annual Bonus shall be an amount equal to the highest Annual Bonus received by
the Executive during the last five (5) fiscal years of the Company completed
prior to such "Change in Control" or Board determination, as the case may be.
For purposes of this Agreement, the phrase "Change in Control"
shall mean the following and shall be deemed to have occurred if any of the
following events shall have occurred: (i) any "person" or "group" (as such terms
are used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, (the "Exchange Act")) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act as in effect on the date hereof, except
that a person shall be deemed to be the "beneficial owner" of all shares that
any such person has the right to acquire pursuant to any agreement or
arrangement or upon exercise of conversion rights, warrants, options or
otherwise, without regard to the sixty-day period referred to in such Rule),
directly or indirectly, of securities representing 30% or more of the combined
voting power of the Company's then outstanding voting securities; (ii) at any
time during any period of two consecutive years (not including any period prior
to the execution of this Agreement), individuals who at the beginning of such
period constituted the Board and any new directors, whose election by the Board
or nomination for election by the Company's stockholders was approved by a vote
of at least two-thirds (2/3) of the Company directors then still in office who
either were the Company directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or (iii) the Company shall consolidate,
merge or exchange securities with any other entity. Notwithstanding the
foregoing, a Change in Control shall not be deemed to occur merely by reason of
an acquisition of Company securities by, or any consolidation, merger or
exchange of securities with, any entity that, immediately prior to such
acquisition, consolidation, merger or exchange of securities, was a
"subsidiary", as such term is defined below. For these purposes, the term
"subsidiary" means (i) any corporation of which 95% of the capital stock of such
<PAGE>
3
corporation is owned, directly or indirectly, by the Company and (ii) any
unincorporated entity in respect of which the Company has, directly or
indirectly, an equivalent degree of ownership.
For purposes of this Agreement "Good Reason" shall mean the
following and shall be deemed to have occurred if any of the following events
shall have occurred: (i) the Executive is removed from any of the positions of
Chairman, President or Chief Executive Officer, or is assigned duties and
responsibilities that are inconsistent, in a material adverse respect, with the
scope of duties and responsibilities associated with the Executive's positions
as Chairman, President or Chief Executive Officer; (ii) the Company fails to pay
the Executive any amounts otherwise due hereunder; (iii) the Executive's Base
Salary is reduced or his Fringe Benefits are reduced; or (iv) the Executive's
principal office is relocated outside of Greenwich, Connecticut without his
consent; provided, in any such case, that the Executive has notified the Company
in writing of the basis for claiming his entitlement to resign from his
employment for Good Reason and the Company has failed to cure such condition
within 10 days following the receipt of such notice from the Executive.
B. Capitalized Terms. Capitalized terms utilized herein and not
otherwise defined shall have the meanings assigned to them in the Original
Agreement.
C. Notices. Any notice or communication required or permitted hereunder
shall be in writing and shall be delivered by certified, registered or express
mail, postage prepaid. Any such notice shall be deemed given when so delivered
as follows:
(i) If to the Company, to:
NFO Worldwide, Inc.
2 Pickwick Plaza
Greenwich, Connecticut 06830
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: James M. Dubin, Esq.
(ii) If the Executive, to the Executive in care of the
Company at the above address, with a copy to the Executive at his then-current
residence.
<PAGE>
4
Any party may change its address for notices hereunder by notice to the
other parties in accordance with this Section C.
D. Governing Law. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Connecticut applicable to agreements
made and to be performed entirely within such state.
E. Entire Agreement; Amendments and Waivers. Except to the extent
modified hereby, the Original Agreement remain in full force and effect. The
parties do not intend to confer any benefit hereunder on any third person, and,
without limiting the generality of the foregoing, the parties may, in writing,
without notice to or consent of any third person, at any time waive any rights
hereunder or amend this Agreement in any respect or terminate this Agreement. If
either party should waive any breach of any provision of this Agreement, such
party will not thereby be deemed to have waived any preceding or succeeding
breach of the same provision or any breach of any other provision of this
Agreement.
F. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
G. Assignment. This Agreement, and any rights and obligations
hereunder, may not be assigned by any party hereto without the prior written
consent of the other party.
H. Headings. Section headings are inserted herein for convenience only
and do not constitute a part, and shall not affect the interpretation, of this
Agreement.
<PAGE>
5
I. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
NFO WORLDWIDE, INC.
By: /s/ Patrick G. Healy
--------------------
Name: Patrick G. Healy
Title: Chief Financial Officer
/s/ William E. Lipner
---------------------
William E. Lipner
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the 9th day of November, 1999 by
and between NFO Worldwide, Inc., a Delaware corporation (the "Company"), and
Patrick G. Healy ("Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders;
WHEREAS, the Company recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control may arise and that
such possibility may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Company and Executive are party to an Employment Agreement
dated December 1, 1997 (the "Employment Agreement");
WHEREAS, the Board (as defined in Section 1) has determined that it is
in the best interests of the Company and its stockholders to provide incentives
to the Executive in addition to those in the Employment Agreement in order to
ensure Executive's continued and undivided dedication to his duties in the event
of any threat or occurrence of a Change in Control (as defined in Section 1) of
the Company; and
WHEREAS, the Board has authorized the Company to enter into this
Agreement which shall amend the Employment Agreement as provided for herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Executive hereby
agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the respective meanings set forth below:
(a) "Annual Bonus" shall have the meaning set forth in the
Employment Agreement.
(b) "Board" means the Board of Directors of the Company.
(c) "Bonus Amount" means the highest Annual Bonus earned by
Executive from the Company (or its affiliates) during the last five (5)
completed fiscal years of the Company immediately preceding Executive's Date of
Termination
<PAGE>
2
(annualized in the event Executive was not employed by the Company (or its
affiliates) for the whole of any such fiscal year).
(d) "Cause" shall have the meaning set forth in the Employment
Agreement.
(e) "Change in Control" shall have the meaning set forth in
the Employment Agreement.
(f) "Date of Termination" means (1) the effective date on
which Executive's employment by the Company terminates as specified in a prior
written notice by the Company or Executive, as the case may be, to the other,
delivered pursuant to Section 10 or (2) if Executive's employment by the Company
terminates by reason of death, the date of death of Executive.
(g) "Disability" shall have the meaning set forth in the
Employment Agreement.
(h) "Fringe Benefits" shall have the meaning set forth in the
Employment Agreement.
(i) "Good Reason" shall mean the following and shall be deemed
to have occurred if any of the following events shall have occurred: (i) the
Executive is removed from any of the positions he holds as of the date hereof,
or is assigned duties and responsibilities that are inconsistent with the scope
of duties and responsibilities associated with such positions; (ii) the Company
fails to pay the Executive any amounts otherwise due hereunder; (iii) the
Executive's Base Salary is reduced or his Fringe Benefits are reduced; (iv) the
Executive's principal office is relocated outside of Greenwich, Connecticut
without his consent; or (v) the failure of the Company to obtain the assumption
(and, if applicable, guarantee) agreement from any successor (and Parent, if
applicable) as contemplated in Section 9(b).
(j) "Qualifying Termination" means a termination of
Executive's employment (i) by the Company other than for Cause, (ii) by
Executive for Good Reason, or (iii) on account of death or Disability.
(k) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the election
of directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% of the assets upon liquidation or dissolution.
(l) "Termination Period" means the period of time beginning
with a Change in Control and ending 30 months following such Change in Control.
<PAGE>
3
Notwithstanding anything in this Agreement to the contrary, if (i) Executive's
employment is terminated prior to a Change in Control for reasons that would
have constituted a Qualifying Termination if they had occurred following a
Change in Control; (ii) Executive reasonably demonstrates that such termination
(or Good Reason event) was at the request of a third party who had indicated an
intention or taken steps reasonably calculated to effect a Change in Control;
and (iii) a Change in Control involving such third party (or a party competing
with such third party to effectuate a Change in Control) does occur, then for
purposes of this Agreement, the date immediately prior to the date of such
termination of employment or event constituting Good Reason shall be treated as
a Change in Control. For purposes of determining the timing of payments and
benefits to Executive under Section 4, the date of the actual Change in Control
shall of treated as Executive's Date of Termination under Section l(f).
2. OBLIGATION OF EXECUTIVE. In the event of a tender or exchange offer,
proxy contest, or the execution of any agreement which, if consummated, would
constitute a Change in Control, Executive agrees not to voluntarily leave the
employ of the Company, other than as a result of Disability, or an event which
would constitute Good Reason if a Change in Control had occurred, until the
Change in Control occurs or, if earlier, such tender or exchange offer, proxy
contest, or agreement is terminated or abandoned.
3. TERM OF AGREEMENT. This Agreement shall be effective on the date
hereof and shall continue in effect until the Company shall have given three (3)
years' written notice of cancellation; provided, that, notwithstanding the
delivery of any such notice, this Agreement shall continue in effect for a
period of 30 months after a Change in Control, if such Change in Control shall
have occurred during the term of this Agreement. Notwithstanding anything in
this Section to the contrary, this Agreement shall terminate if Executive or the
Company terminates Executive's employment prior to a Change in Control except as
provided in Section l(l).
4. PAYMENTS UPON QUALIFYING TERMINATION. If during the Termination
Period the employment of Executive shall terminate pursuant to a Qualifying
Termination, in lieu of the compensation and benefits provided for pursuant to
Section 5 of the Employment Agreement, the Company shall:
(a) within ten (10) days following the Date of Termination
provide to Executive a lump-sum cash amount equal to the sum of (A) Executive's
Base Salary through the Date of Termination and any bonus amounts which have
become payable, to the extent not theretofore paid or deferred, (B) a pro rata
portion of Executive's Annual Bonus for the fiscal year in which Executive's
Date of Termination occurs in an amount at least equal to (1) Executive's Bonus
Amount, multiplied by (2) a fraction, the numerator of which is the number of
days in the fiscal year in which the Date of Termination occurs through the Date
of Termination
<PAGE>
4
and the denominator of which is three hundred sixty-five (365), (C) any
compensation previously deferred by Executive other than pursuant to a
tax-qualified plan (together with any interest and earnings thereon) which shall
be fully vested as of the date of the Change of Control and any accrued vacation
pay, in each case to the extent not theretofore paid, and (D) the value of any
pension and profit sharing (401(k)) benefits which Executive would have accrued
in the two years following the Date of Termination under the plans of the
Company or its affiliates in which he participated immediately prior to the Date
of Termination had he remained employed by the Company during such period
calculated, with respect to the NFO Research, Inc. Pension Plan (the "Pension
Plan") and the Executive Deferred Benefit Plan (the "Supplemental Plan"), as the
difference between (1) an amount equal to the value (determined using the
actuarial assumptions then applied by the PBGC for determining immediate annuity
present values) of the Executives accrued benefits under such plans calculated
as though Executive (A) continued to accrue benefits under the plans for 2 years
following the Date of Termination, and (B) received compensation during each
year during such 2 year period equal to the sum of the Executive's Base Salary
and Bonus in the year immediately preceding the Change in Control and (2) the
amount accrued by or otherwise paid to the Executive through the Date of
Termination. With respect to the Company's 401(k) plan, the amount shall be
calculated assuming that both the Executive and the Company contributed the
highest permissible amounts to the plans during such period;
(b) within ten (10) days following the Date of Termination
provide to Executive a lump-sum cash amount equal to (i) two and one-fourth
(2.25) times Executive's highest annual rate of base salary during the 12-month
period immediately prior to Executive's Date of Termination, plus (ii) two and
one-fourth (2.25) times Executive's Bonus Amount;
(c) continue to provide, for a period of two (2) years
following Executive's Date of Termination, Executive (and Executive's
dependents, if applicable) with the same level of Fringe Benefits upon
substantially the same terms and conditions (including contributions required by
Executive for such benefits) as existed immediately prior to Executive's Date of
Termination (or, if more favorable to Executive, as such benefits and terms and
conditions existed immediately prior to the Change in Control); provided, that,
if Executive cannot continue to participate in the Company plans providing such
benefits, the Company shall otherwise provide such benefits on the same
after-tax basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event Executive becomes reemployed with
another employer and becomes eligible to receive welfare benefits from such
employer, the welfare benefits described herein shall be secondary to such
benefits during the period of Executive's eligibility, but only to the extent
that the Company reimburses Executive for any increased cost and provides any
additional benefits necessary to give Executive the benefits provided hereunder;
and
<PAGE>
5
(d) accelerate the vesting and exercisability of all options
held by Executive and granted under the NFO Research, Inc. Stock Option Plan
(the "Option Plan") or any other stock option plan or agreement of the Company
or its affiliates. In addition, all options shall remain exercisable for two
years following such termination, except to the extent the Committee (as defined
in the Option Plan) permits exercise after such date.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) or any entity
which effectuates a Change in Control (or any of its affiliated entities) to or
for the benefit of Executive (whether pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (the "Payments") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay to Executive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Executive of all taxes (including any Excise Tax)
imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up
Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y)
the product of any deductions disallowed because of the inclusion of the
Gross-Up Payment in Executive's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to (i) pay federal income taxes
at the highest marginal rates of federal income taxation for the calendar year
in which the Gross-Up Payment is to be made, (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes (and (iii) have otherwise allowable deductions for federal income
tax purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Executive's adjusted gross income.
(b) Subject to the provisions of Section 5(a), all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations, shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which shall
provide detailed
<PAGE>
6
supporting calculations both to the Company and Executive within fifteen (15)
business days of the receipt of notice from the Company or the Executive that
there has been a Payment, or such earlier time as is requested by the Company
(collectively, the "Determination"). In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, Executive may appoint another nationally recognized
public accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company
and the Company shall enter into any agreement reasonably requested by the
Accounting Firm in connection with the performance of the services hereunder.
The Gross-Up Payment under this Section 5 with respect to any Payments shall be
made no later than thirty (30) days following such Payment. If the Accounting
Firm determines that no Excise Tax is payable by Executive, it shall furnish
Executive with a written opinion to such effect, and to the effect that failure
to report the Excise Tax, if any, on Executive's applicable federal income tax
return will not result in the imposition of a negligence or similar penalty. The
Determination by the Accounting Firm shall be binding upon the Company and
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the Determination, it is possible that Gross-Up Payments
which will not have been made by the Company should have been made
("Underpayment") or Gross-Up Payments are made by the Company which should not
have been made ("Overpayment"), consistent with the calculations required to be
made hereunder. In the event that the Executive thereafter is required to make
payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the
benefit of Executive. In the event the amount of the Gross-Up Payment exceeds
the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he
has received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Executive shall
cooperate, to the extent his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
6. WITHHOLDING TAXES. The Company may withhold from all payments due to
Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
7. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall arise
under this Agreement involving termination of Executive's employment with the
Company or involving the failure or refusal of the Company to
<PAGE>
7
perform fully in accordance with the terms hereof, the Company shall reimburse
Executive, on a current basis, for all reasonable legal fees and expenses, if
any, incurred by Executive in connection with such contest or dispute
(regardless of the result thereof), together with interest in an amount equal to
the prime rate from time to time in effect, but in no event higher than the
maximum legal rate permissible under applicable law, such interest to accrue
from the date the Company receives Executive's statement for such fees and
expenses through the date of payment thereof, regardless of whether or not
Executive's claim is upheld by an arbitration panel; provided, however,
Executive shall be required to repay any such amounts to the Company to the
extent that an arbitration panel issues a final and non-appealable order setting
forth the determination that the position taken by Executive was frivolous or
advanced by Executive in bad faith.
8. SCOPE OF AGREEMENT. Nothing in this Agreement shall be deemed to
entitle Executive to continued employment with the Company or its Subsidiaries,
and if Executive's employment with the Company shall terminate prior to a Change
in Control, Executive shall have no further rights under this Agreement (except
as otherwise provided hereunder); provided, however, that any termination of
Executive's employment during the Termination Period shall be subject to all of
the provisions of this Agreement.
9. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall not be terminated by any Business
Combination. In the event of any Business Combination, the provisions of this
Agreement shall be binding upon the Surviving Corporation, and such Surviving
Corporation shall be treated as the Company hereunder.
(b) The Company agrees that in connection with any Business
Combination, it will cause any successor entity to the Company unconditionally
to assume (and for any Parent Corporation in such Business Combination to
guarantee), by written instrument delivered to Executive (or his beneficiary or
estate), all of the obligations of the Company hereunder. Failure of the Company
to obtain such assumption and guarantee prior to the effectiveness of any such
Business Combination that constitutes a Change in Control, shall be a breach of
this Agreement and shall constitute Good Reason hereunder and shall entitle
Executive to compensation and other benefits from the Company in the same amount
and on the same terms as Executive would be entitled hereunder if Executive's
employment were terminated following a Change in Control other than by reason of
a Qualifying Termination. For purposes of implementing the foregoing, the date
on which any such Business Combination becomes effective shall be deemed the
date Good Reason occurs, and shall be the Date of Termination if requested by
Executive.
(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
<PAGE>
8
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die while any amounts would be payable to Executive hereunder
had Executive continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to such
person or persons appointed in writing by Executive to receive such amounts or,
if no person is so appointed, to Executive's estate.
10. Notice. (a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Patrick G. Healy
41 Knollwood Lane
New Canaan, CT 06840
If to the Company:
NFO Worldwide, Inc.
2 Pickwick Plaza
Greenwich, CT 06830
or 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.
(b) A written notice of Executive's Date of Termination by the
Company or Executive, as the case may be, to the other, shall (i) indicate the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated and (iii) specify the termination date (which date shall be not
less than fifteen (15) (thirty (30), if termination is by the Company for
Disability) nor more than sixty (60) days after the giving of such notice). The
failure by Executive or the Company to set forth in such notice any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of Executive or the Company hereunder or preclude Executive or
the Company from asserting such fact or circumstance in enforcing Executive's or
the Company's rights hereunder.
11. FULL SETTLEMENT; RESOLUTION OF DISPUTES. The Company's obligation
to make any payments provided for in this Agreement and
<PAGE>
9
otherwise to perform its obligations hereunder in the event of a Qualifying
Termination during the Termination Period shall be in lieu and in full
settlement of all other severance payments to Executive under any other
severance or employment agreement between Executive and the Company, and any
severance plan of the Company, including, but not limited to, the Employment
Agreement; provided, however, that the provisions of the Employment Agreement
shall remain in effect to the extent otherwise applicable pursuant to its terms
for all other purposes, including with respect to any termination that is not a
Qualifying Termination and any termination that would have constituted a
Qualifying Termination but is not covered by this Agreement because it does not
occur during the Termination Period. The Company's obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against Executive or others.
In no event shall Executive be obligated to seek other employment or take other
action by way of mitigation of the amounts payable to Executive under any of the
provisions of this Agreement and, except as provided in Section 4(c), such
amounts shall not be reduced whether or not Executive obtains other employment.
Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in Connecticut by three arbitrators
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The Company shall bear all costs and expenses arising in
connection with any arbitration proceeding pursuant to this Section.
12. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for
purposes of this Agreement shall include employment with any Subsidiary.
13. SURVIVAL. The respective obligations and benefits afforded to the
Company and Executive as provided in Sections 4 (to the extent that payments or
benefits are owed as a result of a termination of employment that occurs during
the term of this Agreement), 5 (to the extent that Payments are made to
Executive as a result of a Change in Control that occurs during the term of this
Agreement), 6, 7, 9(c) and 11 shall survive the termination of this Agreement.
14. GOVERNING LAW; VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CONNECTICUT WITHOUT REGARD TO
THE PRINCIPLE OF CONFLICTS OF LAWS. THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF
ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN
FULL FORCE AND EFFECT.
<PAGE>
10
15. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
16. MISCELLANEOUS. No provision of this Agreement may be modified or
waived unless such modification or waiver is agreed to in writing and signed by
Executive and by a duly authorized officer of the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Failure by Executive
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right Executive or the Company may have hereunder,
including, without limitation, the right of Executive to terminate employment
for Good Reason, shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement. Except as otherwise
specifically provided herein, the rights of, and benefits payable to, Executive,
his estate or his beneficiaries pursuant to this Agreement are in addition to
any rights of, or benefits payable to, Executive, his estate or his
beneficiaries under any other employee benefit plan or compensation program of
the Company.
<PAGE>
11
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer of the Company and Executive has executed
this Agreement as of the day and year first above written.
NFO WORLDWIDE, INC.
By: /s/ Patrick G. Healy
--------------------
Name: Patrick G. Healy
Title: Chief Financial Officer
/s/ Patrick G. Healy
--------------------
Patrick G. Healy
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the 9th day of November, 1999 by
and between NFO Worldwide, Inc., a Delaware corporation (the "Company"), and
Joseph M. Migliara ("Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders;
WHEREAS, the Company recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control may arise and that
such possibility may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Company and Executive are party to an Employment Agreement
dated March 1, 1999 (the "Employment Agreement");
WHEREAS, the Board (as defined in Section 1) has determined that it is
in the best interests of the Company and its stockholders to provide incentives
to the Executive in addition to those in the Employment Agreement in order to
ensure Executive's continued and undivided dedication to his duties in the event
of any threat or occurrence of a Change in Control (as defined in Section 1) of
the Company; and
WHEREAS, the Board has authorized the Company to enter into this
Agreement which shall amend the Employment Agreement as provided for herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Executive hereby
agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the respective meanings set forth below:
(a) "Annual Bonus" shall have the meaning set forth in the
Employment Agreement.
(b) "Board" means the Board of Directors of the Company.
(c) "Bonus Amount" means the highest Annual Bonus earned by
Executive from the Company (or its affiliates) during the last five (5)
completed fiscal years of the Company immediately preceding Executive's Date of
Termination
<PAGE>
2
(annualized in the event Executive was not employed by the Company (or its
affiliates) for the whole of any such fiscal year).
(d) "Cause" shall have the meaning set forth in the Employment
Agreement.
(e) "Change in Control" shall have the meaning set forth in
the Employment Agreement.
(f) "Date of Termination" means (1) the effective date on
which Executive's employment by the Company terminates as specified in a prior
written notice by the Company or Executive, as the case may be, to the other,
delivered pursuant to Section 10 or (2) if Executive's employment by the Company
terminates by reason of death, the date of death of Executive.
(g) "Disability" shall have the meaning set forth in the
Employment Agreement.
(h) "Fringe Benefits" shall have the meaning set forth in the
Employment Agreement.
(i) "Good Reason" shall mean the following and shall be deemed
to have occurred if any of the following events shall have occurred: (i) the
Executive is removed from any of the positions he holds as of the date hereof,
or is assigned duties and responsibilities that are inconsistent with the scope
of duties and responsibilities associated with such positions; (ii) the Company
fails to pay the Executive any amounts otherwise due hereunder; (iii) the
Executive's Base Salary is reduced or his Fringe Benefits are reduced; (iv) the
Executive's principal office is relocated outside of Owings Mills, Maryland
without his consent; or (v) the failure of the Company to obtain the assumption
(and, if applicable, guarantee) agreement from any successor (and Parent, if
applicable) as contemplated in Section 9(b).
(j) "Qualifying Termination" means a termination of
Executive's employment (i) by the Company other than for Cause, (ii) by
Executive for Good Reason, or (iii) on account of death or Disability.
(k) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the election
of directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% of the assets upon liquidation or dissolution.
(l) "Termination Period" means the period of time beginning
with a Change in Control and ending 30 months following such Change in Control.
<PAGE>
3
Notwithstanding anything in this Agreement to the contrary, if (i) Executive's
employment is terminated prior to a Change in Control for reasons that would
have constituted a Qualifying Termination if they had occurred following a
Change in Control; (ii) Executive reasonably demonstrates that such termination
(or Good Reason event) was at the request of a third party who had indicated an
intention or taken steps reasonably calculated to effect a Change in Control;
and (iii) a Change in Control involving such third party (or a party competing
with such third party to effectuate a Change in Control) does occur, then for
purposes of this Agreement, the date immediately prior to the date of such
termination of employment or event constituting Good Reason shall be treated as
a Change in Control. For purposes of determining the timing of payments and
benefits to Executive under Section 4, the date of the actual Change in Control
shall of treated as Executive's Date of Termination under Section l(f).
2. OBLIGATION OF EXECUTIVE. In the event of a tender or exchange offer,
proxy contest, or the execution of any agreement which, if consummated, would
constitute a Change in Control, Executive agrees not to voluntarily leave the
employ of the Company, other than as a result of Disability, or an event which
would constitute Good Reason if a Change in Control had occurred, until the
Change in Control occurs or, if earlier, such tender or exchange offer, proxy
contest, or agreement is terminated or abandoned.
3. TERM OF AGREEMENT. This Agreement shall be effective on the date
hereof and shall continue in effect until the Company shall have given three (3)
years' written notice of cancellation; provided, that, notwithstanding the
delivery of any such notice, this Agreement shall continue in effect for a
period of 30 months after a Change in Control, if such Change in Control shall
have occurred during the term of this Agreement. Notwithstanding anything in
this Section to the contrary, this Agreement shall terminate if Executive or the
Company terminates Executive's employment prior to a Change in Control except as
provided in Section 1(l).
4. PAYMENTS UPON QUALIFYING TERMINATION. If during the Termination
Period the employment of Executive shall terminate pursuant to a Qualifying
Termination, in lieu of the compensation and benefits provided for pursuant to
Section 5 of the Employment Agreement, the Company shall:
(a) within ten (10) days following the Date of Termination
provide to Executive a lump-sum cash amount equal to the sum of (A) Executive's
Base Salary through the Date of Termination and any bonus amounts which have
become payable, to the extent not theretofore paid or deferred, (B) a pro rata
portion of Executive's Annual Bonus for the fiscal year in which Executive's
Date of Termination occurs in an amount at least equal to (1) Executive's Bonus
Amount, multiplied by (2) a fraction, the numerator of which is the number of
days in the fiscal year in which the Date of Termination occurs through the Date
of Termination
<PAGE>
4
and the denominator of which is three hundred sixty-five (365), (C) any
compensation previously deferred by Executive other than pursuant to a
tax-qualified plan (together with any interest and earnings thereon) which shall
be fully vested as of the date of the Change of Control and any accrued vacation
pay, in each case to the extent not theretofore paid, and (D) the value of any
pension and profit sharing (401(k)) benefits which Executive would have accrued
in the two years following the Date of Termination under the plans of the
Company or its affiliates in which he participated immediately prior to the Date
of Termination had he remained employed by the Company during such period
calculated, with respect to the NFO Research, Inc. Pension Plan (the "Pension
Plan") and the Executive Deferred Benefit Plan (the "Supplemental Plan"), as the
difference between (1) an amount equal to the value (determined using the
actuarial assumptions then applied by the PBGC for determining immediate annuity
present values) of the Executives accrued benefits under such plans calculated
as though Executive (A) continued to accrue benefits under the plans for 2 years
following the Date of Termination, and (B) received compensation during each
year during such 2 year period equal to the sum of the Executive's Base Salary
and Bonus in the year immediately preceding the Change in Control and (2) the
amount accrued by or otherwise paid to the Executive through the Date of
Termination. With respect to the Company's 401(k) plan, the amount shall be
calculated assuming that both the Executive and the Company contributed the
highest permissible amounts to the plans during such period;;
(b) within ten (10) days following the Date of Termination
provide to Executive a lump-sum cash amount equal to (i) two and one-fourth
(2.25) times Executive's highest annual rate of base salary during the 12-month
period immediately prior to Executive's Date of Termination, plus (ii) two and
one-fourth (2.25) times Executive's Bonus Amount;
(c) continue to provide, for a period of two (2) years
following Executive's Date of Termination, Executive (and Executive's
dependents, if applicable) with the same level of Fringe Benefits upon
substantially the same terms and conditions (including contributions required by
Executive for such benefits) as existed immediately prior to Executive's Date of
Termination (or, if more favorable to Executive, as such benefits and terms and
conditions existed immediately prior to the Change in Control); provided, that,
if Executive cannot continue to participate in the Company plans providing such
benefits, the Company shall otherwise provide such benefits on the same
after-tax basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event Executive becomes reemployed with
another employer and becomes eligible to receive welfare benefits from such
employer, the welfare benefits described herein shall be secondary to such
benefits during the period of Executive's eligibility, but only to the extent
that the Company reimburses Executive for any increased cost and provides any
additional benefits necessary to give Executive the benefits provided hereunder;
and
<PAGE>
5
(d) accelerate the vesting and exercisability of all options
held by Executive and granted under the NFO Research, Inc. Stock Option Plan
(the "Option Plan") or any other stock option plan or agreement of the Company
or its affiliates. In addition, all options shall remain exercisable for two
years following such termination, except to the extent the Committee (as defined
in the Option Plan) permits exercise after such date.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) or any entity
which effectuates a Change in Control (or any of its affiliated entities) to or
for the benefit of Executive (whether pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (the "Payments") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay to Executive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Executive of all taxes (including any Excise Tax)
imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up
Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y)
the product of any deductions disallowed because of the inclusion of the
Gross-Up Payment in Executive's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to (i) pay federal income taxes
at the highest marginal rates of federal income taxation for the calendar year
in which the Gross-Up Payment is to be made, (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes (and (iii) have otherwise allowable deductions for federal income
tax purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Executive's adjusted gross income.
(b) Subject to the provisions of Section 5(a), all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations, shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which shall
provide detailed
<PAGE>
6
supporting calculations both to the Company and Executive within fifteen (15)
business days of the receipt of notice from the Company or the Executive that
there has been a Payment, or such earlier time as is requested by the Company
(collectively, the "Determination"). In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, Executive may appoint another nationally recognized
public accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company
and the Company shall enter into any agreement reasonably requested by the
Accounting Firm in connection with the performance of the services hereunder.
The Gross-Up Payment under this Section 5 with respect to any Payments shall be
made no later than thirty (30) days following such Payment. If the Accounting
Firm determines that no Excise Tax is payable by Executive, it shall furnish
Executive with a written opinion to such effect, and to the effect that failure
to report the Excise Tax, if any, on Executive's applicable federal income tax
return will not result in the imposition of a negligence or similar penalty. The
Determination by the Accounting Firm shall be binding upon the Company and
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the Determination, it is possible that Gross-Up Payments
which will not have been made by the Company should have been made
("Underpayment") or Gross-Up Payments are made by the Company which should not
have been made ("Overpayment"), consistent with the calculations required to be
made hereunder. In the event that the Executive thereafter is required to make
payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the
benefit of Executive. In the event the amount of the Gross-Up Payment exceeds
the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he
has received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Executive shall
cooperate, to the extent his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
6. WITHHOLDING TAXES. The Company may withhold from all payments due to
Executive (or his beneficiary or estate) hereunder all taxes which, by
applicable federal, state, local or other law, the Company is required to
withhold therefrom.
7. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall arise
under this Agreement involving termination of Executive's employment with the
Company or involving the failure or refusal of the Company to
<PAGE>
7
perform fully in accordance with the terms hereof, the Company shall reimburse
Executive, on a current basis, for all reasonable legal fees and expenses, if
any, incurred by Executive in connection with such contest or dispute
(regardless of the result thereof), together with interest in an amount equal to
the prime rate from time to time in effect, but in no event higher than the
maximum legal rate permissible under applicable law, such interest to accrue
from the date the Company receives Executive's statement for such fees and
expenses through the date of payment thereof, regardless of whether or not
Executive's claim is upheld by an arbitration panel; provided, however,
Executive shall be required to repay any such amounts to the Company to the
extent that an arbitration panel issues a final and non-appealable order setting
forth the determination that the position taken by Executive was frivolous or
advanced by Executive in bad faith.
8. SCOPE OF AGREEMENT. Nothing in this Agreement shall be deemed to
entitle Executive to continued employment with the Company or its Subsidiaries,
and if Executive's employment with the Company shall terminate prior to a Change
in Control, Executive shall have no further rights under this Agreement (except
as otherwise provided hereunder); provided, however, that any termination of
Executive's employment during the Termination Period shall be subject to all of
the provisions of this Agreement.
9. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall not be terminated by any Business
Combination. In the event of any Business Combination, the provisions of this
Agreement shall be binding upon the Surviving Corporation, and such Surviving
Corporation shall be treated as the Company hereunder.
(b) The Company agrees that in connection with any Business
Combination, it will cause any successor entity to the Company unconditionally
to assume (and for any Parent Corporation in such Business Combination to
guarantee), by written instrument delivered to Executive (or his beneficiary or
estate), all of the obligations of the Company hereunder. Failure of the Company
to obtain such assumption and guarantee prior to the effectiveness of any such
Business Combination that constitutes a Change in Control, shall be a breach of
this Agreement and shall constitute Good Reason hereunder and shall entitle
Executive to compensation and other benefits from the Company in the same amount
and on the same terms as Executive would be entitled hereunder if Executive's
employment were terminated following a Change in Control other than by reason of
a Qualifying Termination. For purposes of implementing the foregoing, the date
on which any such Business Combination becomes effective shall be deemed the
date Good Reason occurs, and shall be the Date of Termination if requested by
Executive.
(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
<PAGE>
8
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die while any amounts would be payable to Executive hereunder
had Executive continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to such
person or persons appointed in writing by Executive to receive such amounts or,
if no person is so appointed, to Executive's estate.
10. Notice. (a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Joseph M. Migliara
12604 Bonita Avenue
Owings Mills, MD 21117
If to the Company:
NFO Worldwide, Inc.
2 Pickwick Plaza
Greenwich, CT 06830
or 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.
(b) A written notice of Executive's Date of Termination by the
Company or Executive, as the case may be, to the other, shall (i) indicate the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated and (iii) specify the termination date (which date shall be not
less than fifteen (15) (thirty (30), if termination is by the Company for
Disability) nor more than sixty (60) days after the giving of such notice). The
failure by Executive or the Company to set forth in such notice any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of Executive or the Company hereunder or preclude Executive or
the Company from asserting such fact or circumstance in enforcing Executive's or
the Company's rights hereunder.
11. FULL SETTLEMENT; RESOLUTION OF DISPUTES. The Company's obligation
to make any payments provided for in this Agreement and
<PAGE>
9
otherwise to perform its obligations hereunder in the event of a Qualifying
Termination during the Termination Period shall be in lieu and in full
settlement of all other severance payments to Executive under any other
severance or employment agreement between Executive and the Company, and any
severance plan of the Company, including, but not limited to, the Employment
Agreement; provided, however, that the provisions of the Employment Agreement
shall remain in effect to the extent otherwise applicable pursuant to its terms
for all other purposes, including with respect to any termination that is not a
Qualifying Termination and any termination that would have constituted a
Qualifying Termination but is not covered by this Agreement because it does not
occur during the Termination Period. The Company's obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against Executive or others.
In no event shall Executive be obligated to seek other employment or take other
action by way of mitigation of the amounts payable to Executive under any of the
provisions of this Agreement and, except as provided in Section 4(c), such
amounts shall not be reduced whether or not Executive obtains other employment.
Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in Connecticut by three arbitrators
in accordance with the rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The Company shall bear all costs and expenses arising in
connection with any arbitration proceeding pursuant to this Section.
12. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for
purposes of this Agreement shall include employment with any Subsidiary.
13. SURVIVAL. The respective obligations and benefits afforded to the
Company and Executive as provided in Sections 4 (to the extent that payments or
benefits are owed as a result of a termination of employment that occurs during
the term of this Agreement), 5 (to the extent that Payments are made to
Executive as a result of a Change in Control that occurs during the term of this
Agreement), 6, 7, 9(c) and 11 shall survive the termination of this Agreement.
14. GOVERNING LAW; VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CONNECTICUT WITHOUT REGARD TO
THE PRINCIPLE OF CONFLICTS OF LAWS. THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR ENFORCEABILITY OF
ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS SHALL REMAIN IN
FULL FORCE AND EFFECT.
<PAGE>
10
15. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
16. MISCELLANEOUS. No provision of this Agreement may be modified or
waived unless such modification or waiver is agreed to in writing and signed by
Executive and by a duly authorized officer of the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Failure by Executive
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right Executive or the Company may have hereunder,
including, without limitation, the right of Executive to terminate employment
for Good Reason, shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement. Except as otherwise
specifically provided herein, the rights of, and benefits payable to, Executive,
his estate or his beneficiaries pursuant to this Agreement are in addition to
any rights of, or benefits payable to, Executive, his estate or his
beneficiaries under any other employee benefit plan or compensation program of
the Company.
<PAGE>
11
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer of the Company and Executive has executed
this Agreement as of the day and year first above written.
NFO WORLDWIDE, INC.
By: /s/ Patrick G. Healy
--------------------
Name: Patrick G. Healy
Title: Chief Financial Officer
/s/ Joseph M. Migliara
----------------------
Joseph M. Migliara
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS AGREEMENT is entered into as of the 9th day of November, 1999 by
and between NFO Worldwide, Inc., a Delaware corporation (the "Company"), and
William E. Lipner ("Executive").
W I T N E S S E T H
WHEREAS, the Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders;
WHEREAS, the Company recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control may arise and that
such possibility may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Company and Executive are party to an Employment Agreement
dated March 15, 1995 (the "Employment Agreement");
WHEREAS, the Board (as defined in Section 1) has determined that it is
in the best interests of the Company and its stockholders to provide incentives
to the Executive in addition to those in the Employment Agreement in order to
ensure Executive's continued and undivided dedication to his duties in the event
of any threat or occurrence of a Change in Control (as defined in Section 1) of
the Company; and
WHEREAS, the Board has authorized the Company to enter into this
Agreement which shall amend the Employment Agreement as provided for herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, the Company and Executive hereby
agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the respective meanings set forth below:
(a) "Annual Bonus" shall have the meaning set forth in the
Employment Agreement.
(b) "Board" means the Board of Directors of the Company.
(c) "Bonus Amount" means the highest Annual Bonus earned by
Executive from the Company (or its affiliates) during the last five (5)
completed fiscal years of the Company immediately preceding Executive's Date of
Termination
<PAGE>
2
(annualized in the event Executive was not employed by the Company (or its
affiliates) for the whole of any such fiscal year).
(d) "Cause" shall have the meaning set forth in the Employment
Agreement.
(e) "Change in Control" shall have the meaning set forth in
the Employment Agreement.
(f) "Date of Termination" means (1) the effective date on
which Executive's employment by the Company terminates as specified in a prior
written notice by the Company or Executive, as the case may be, to the other,
delivered pursuant to Section 10 or (2) if Executive's employment by the Company
terminates by reason of death, the date of death of Executive.
(g) "Disability" shall have the meaning set forth in the
Employment Agreement.
(h) "Fringe Benefits" shall have the meaning set forth in the
Employment Agreement.
(i) "Good Reason" shall mean the following and shall be deemed
to have occurred if any of the following events shall have occurred: (i) the
Executive is removed from any of the positions he holds as of the date hereof,
or is assigned duties and responsibilities that are inconsistent with the scope
of duties and responsibilities associated with such positions; (ii) the Company
fails to pay the Executive any amounts otherwise due hereunder; (iii) the
Executive's Base Salary is reduced or his Fringe Benefits are reduced; (iv) the
Executive's principal office is relocated outside of Greenwich, Connecticut
without his consent; or (v) the failure of the Company to obtain the assumption
(and, if applicable, guarantee) agreement from any successor (and Parent, if
applicable) as contemplated in Section 9(b); provided that, notwithstanding
anything herein to the contrary, termination of employment by Executive for any
reason during the 30-day period commencing two (2) years after the date of a
Change in Control shall also constitute Good Reason.
(j) "Qualifying Termination" means a termination of
Executive's employment (i) by the Company other than for Cause, (ii) by
Executive for Good Reason, or (iii) on account of death or Disability.
(k) "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the election
of directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% of the assets upon liquidation or dissolution.
<PAGE>
3
(l) "Termination Period" means the period of time beginning
with a Change in Control and ending 30 months following such Change in Control.
Notwithstanding anything in this Agreement to the contrary, if (i) Executive's
employment is terminated prior to a Change in Control for reasons that would
have constituted a Qualifying Termination if they had occurred following a
Change in Control; (ii) Executive reasonably demonstrates that such termination
(or Good Reason event) was at the request of a third party who had indicated an
intention or taken steps reasonably calculated to effect a Change in Control;
and (iii) a Change in Control involving such third party (or a party competing
with such third party to effectuate a Change in Control) does occur, then for
purposes of this Agreement, the date immediately prior to the date of such
termination of employment or event constituting Good Reason shall be treated as
a Change in Control. For purposes of determining the timing of payments and
benefits to Executive under Section 4, the date of the actual Change in Control
shall of treated as Executive's Date of Termination under Section l(j).
2. OBLIGATION OF EXECUTIVE. In the event of a tender or exchange offer,
proxy contest, or the execution of any agreement which, if consummated, would
constitute a Change in Control, Executive agrees not to voluntarily leave the
employ of the Company, other than as a result of Disability, or an event which
would constitute Good Reason if a Change in Control had occurred, until the
Change in Control occurs or, if earlier, such tender or exchange offer, proxy
contest, or agreement is terminated or abandoned.
3. TERM OF AGREEMENT. This Agreement shall be effective on the date
hereof and shall continue in effect until the Company shall have given three (3)
years' written notice of cancellation; provided, that, notwithstanding the
delivery of any such notice, this Agreement shall continue in effect for a
period of 30 months after a Change in Control, if such Change in Control shall
have occurred during the term of this Agreement. Notwithstanding anything in
this Section to the contrary, this Agreement shall terminate if Executive or the
Company terminates Executive's employment prior to a Change in Control except as
provided in Section l(k).
4. PAYMENTS UPON QUALIFYING TERMINATION. If during the Termination
Period the employment of Executive shall terminate pursuant to a Qualifying
Termination, in lieu of the compensation and benefits provided for pursuant to
Section 5 of the Employment Agreement, the Company shall:
(a) within ten (10) days following the Date of Termination
provide to Executive a lump-sum cash amount equal to the sum of (A) Executive's
Base Salary through the Date of Termination and any bonus amounts which have
become payable, to the extent not theretofore paid or deferred, (B) a pro rata
portion of Executive's Annual Bonus for the fiscal year in which Executive's
Date of Termination occurs in an amount at least equal to (1) Executive's Bonus
Amount,
<PAGE>
4
multiplied by (2) a fraction, the numerator of which is the number of days in
the fiscal year in which the Date of Termination occurs through the Date of
Termination and the denominator of which is three hundred sixty-five (365), (C)
any compensation previously deferred by Executive other than pursuant to a
tax-qualified plan (together with any interest and earnings thereon) which shall
be fully vested as of the date of the Change of Control and any accrued vacation
pay, in each case to the extent not theretofore paid, and (D) the value of any
pension and profit sharing (401(k)) benefits which Executive would have accrued
in the three years following the Date of Termination under the plan of the
Company or its affiliates in which he participated immediately prior to the Date
of Termination had he remained employed by the Company during such period
calculated, with respect to the NFO Research, Inc. Pension Plan (the "Pension
Plan") and the Executive Deferred Benefit Plan (the "Supplemental Plan"), as the
difference between (1) an amount equal to the value (determined using the
actuarial assumptions then applied by the PBGC for determining immediate annuity
present values) of the Executives accrued benefits under such plans calculated
as though Executive (A) continued to accrue benefits under the plans for 3 years
following the Date of Termination, and (B) received compensation during each
year during such 3 year period equal to the sum of the Executive's Base Salary
and Bonus in the year immediately preceding the Change in Control and (2) the
amount accrued by or otherwise paid to the Executive through the Date of
Termination. With respect to the Company's 401(k) plan, the amount shall be
calculated assuming that both the Executive and the Company contributed the
highest permissible amounts to the plans during such period;
(b) within ten (10) days following the Date of Termination
provide to Executive a lump-sum cash amount equal to (i) three (3) times
Executive's highest annual rate of base salary during the 12-month period
immediately prior to Executive's Date of Termination, plus (ii) three (3) times
Executive's Bonus Amount;
(c) continue to provide, for a period of three (3) years
following Executive's Date of Termination, Executive (and Executive's
dependents, if applicable) with the same level of Fringe Benefits upon
substantially the same terms and conditions (including contributions required by
Executive for such benefits) as existed immediately prior to Executive's Date of
Termination (or, if more favorable to Executive, as such benefits and terms and
conditions existed immediately prior to the Change in Control); provided, that,
if Executive cannot continue to participate in the Company plans providing such
benefits, the Company shall otherwise provide such benefits on the same
after-tax basis as if continued participation had been permitted.
Notwithstanding the foregoing, in the event Executive becomes reemployed with
another employer and becomes eligible to receive welfare benefits from such
employer; the welfare benefits described herein shall be secondary to such
benefits during the period of Executive's eligibility, but only to the extent
that the Company reimburses Executive for any increased cost and provides any
additional benefits necessary to give Executive the benefits provided hereunder;
<PAGE>
5
(d) accelerate the vesting and exercisability of all options
held by Executive and granted under the NFO Research, Inc. Stock Option Plan
(the "Option Plan") or any other stock option plan or agreement of the Company
or its affiliates. In addition, all options shall remain exercisable for two
years following such termination, except to the extent the Committee (as defined
in the Option Plan) permits exercise after such date; and
(e) cause an amount equal to the amount of the present value
of all unpaid premiums for the Executive's split dollar life insurance policy to
be contributed to a "rabbi trust" and cause any successor to continue to
maintain such policy and pay all premiums in accordance with the terms of the
policy.
5. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment, award,
benefit or distribution (or any acceleration of any payment, award, benefit or
distribution) by the Company (or any of its affiliated entities) or any entity
which effectuates a Change in Control (or any of its affiliated entities) to or
for the benefit of Executive (whether pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 5) (the "Payments") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or any interest or penalties are incurred by Executive with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereinafter collectively referred to as the "Excise Tax"), then the Company
shall pay to Executive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by Executive of all taxes (including any Excise Tax)
imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up
Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y)
the product of any deductions disallowed because of the inclusion of the
Gross-Up Payment in Executive's adjusted gross income and the highest applicable
marginal rate of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to (i) pay federal income taxes
at the highest marginal rates of federal income taxation for the calendar year
in which the Gross-Up Payment is to be made, (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in
which the Gross-Up Payment is to be made, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes (and (iii) have otherwise allowable deductions for federal income
tax purposes at least equal to those which could be disallowed because of the
inclusion of the Gross-Up Payment in the Executive's adjusted gross income.
<PAGE>
6
(b) Subject to the provisions of Section 5(a), all
determinations required to be made under this Section 5, including whether and
when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determinations, shall be made by
the public accounting firm that is retained by the Company as of the date
immediately prior to the Change in Control (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from the Company or
the Executive that there has been a Payment, or such earlier time as is
requested by the Company (collectively, the "Determination"). In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, Executive may appoint another
nationally recognized public accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company and the Company shall enter into any agreement reasonably
requested by the Accounting Firm in connection with the performance of the
services hereunder. The Gross-Up Payment under this Section 5 with respect to
any Payments shall be made no later than thirty (30) days following such
Payment. If the Accounting Firm determines that no Excise Tax is payable by
Executive, it shall furnish Executive with a written opinion to such effect, and
to the effect that failure to report the Excise Tax, if any, on Executive's
applicable federal income tax return will not result in the imposition of a
negligence or similar penalty. The Determination by the Accounting Firm shall be
binding upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the Determination, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made ("Underpayment") or Gross-Up Payments are made by the
Company which should not have been made ("Overpayment"), consistent with the
calculations required to be made hereunder. In the event that the Executive
thereafter is required to make payment of any Excise Tax or additional Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code) shall be promptly paid by the Company to
or for the benefit of Executive. In the event the amount of the Gross-Up Payment
exceeds the amount necessary to reimburse the Executive for his Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made
and any such Overpayment (together with interest at the rate provided in Section
1274(b)(2) of the Code) shall be promptly paid by Executive (to the extent he
has received a refund if the applicable Excise Tax has been paid to the Internal
Revenue Service) to or for the benefit of the Company. Executive shall
cooperate, to the extent his expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
6. WITHHOLDING TAXES. The Company may withhold from all payments due to
Executive (or his beneficiary or estate) hereunder all taxes which,
<PAGE>
7
by applicable federal, state, local or other law, the Company is required to
withhold therefrom.
7. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall arise
under this Agreement involving termination of Executive's employment with the
Company or involving the failure or refusal of the Company to perform fully in
accordance with the terms hereof, the Company shall reimburse Executive, on a
current basis, for all reasonable legal fees and expenses, if any, incurred by
Executive in connection with such contest or dispute (regardless of the result
thereof), together with interest in an amount equal to the prime rate from time
to time in effect, but in no event higher than the maximum legal rate
permissible under applicable law, such interest to accrue from the date the
Company receives Executive's statement for such fees and expenses through the
date of payment thereof, regardless of whether or not Executive's claim is
upheld by an arbitration panel; provided, however, Executive shall be required
to repay any such amounts to the Company to the extent that an arbitration panel
issues a final and non-appealable order setting forth the determination that the
position taken by Executive was frivolous or advanced by Executive in bad faith.
8. SCOPE OF AGREEMENT. Nothing in this Agreement shall be deemed to
entitle Executive to continued employment with the Company or its Subsidiaries,
and if Executive's employment with the Company shall terminate prior to a Change
in Control, Executive shall have no further rights under this Agreement (except
as otherwise provided hereunder); provided, however, that any termination of
Executive's employment during the Termination Period shall be subject to all of
the provisions of this Agreement.
9. SUCCESSORS; BINDING AGREEMENT.
(a) This Agreement shall not be terminated by any Business
Combination. In the event of any Business Combination, the provisions of this
Agreement shall be binding upon the Surviving Corporation, and such Surviving
Corporation shall be treated as the Company hereunder.
(b) The Company agrees that in connection with any Business
Combination, it will cause any successor entity to the Company unconditionally
to assume (and for any Parent Corporation in such Business Combination to
guarantee), by written instrument delivered to Executive (or his beneficiary or
estate), all of the obligations of the Company hereunder. Failure of the Company
to obtain such assumption and guarantee prior to the effectiveness of any such
Business Combination that constitutes a Change in Control, shall be a breach of
this Agreement and shall constitute Good Reason hereunder and shall entitle
Executive to compensation and other benefits from the Company in the same amount
and on the same terms as Executive would be entitled hereunder if Executive's
employment were terminated following a Change in Control other than by reason of
a Qualifying
<PAGE>
8
Termination. For purposes of implementing the foregoing, the date on which any
such Business Combination becomes effective shall be deemed the date Good Reason
occurs, and shall be the Date of Termination if requested by Executive.
(c) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive shall die while any amounts would be payable to Executive hereunder
had Executive continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to such
person or persons appointed in writing by Executive to receive such amounts or,
if no person is so appointed, to Executive's estate.
10. Notice. (a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Mr. William E. Lipner
310 Round Hill Road
Greenwich, CT 06831
If to the Company:
NFO Worldwide, Inc.
2 Pickwick Plaza
Greenwich, CT 06830
or 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.
(b) A written notice of Executive's Date of Termination by the
Company or Executive, as the case may be, to the other, shall (i) indicate the
specific termination provision in this Agreement relied upon, (ii) to the extent
applicable, set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of Executive's employment under the provision
so indicated and (iii) specify the termination date (which date shall be not
less than fifteen (15) (thirty (30), if termination is by the Company for
Disability) nor more than sixty (60) days after the giving of such notice). The
failure by Executive or the
<PAGE>
9
Company to set forth in such notice any fact or circumstance which contributes
to a showing of Good Reason or Cause shall not waive any right of Executive or
the Company hereunder or preclude Executive or the Company from asserting such
fact or circumstance in enforcing Executive's or the Company's rights hereunder.
11. FULL SETTLEMENT; RESOLUTION OF DISPUTES. The Company's obligation
to make any payments provided for in this Agreement and otherwise to perform its
obligations hereunder in the event of a Qualifying Termination during the
Termination Period shall be in lieu and in full settlement of all other
severance payments to Executive under any other severance or employment
agreement between Executive and the Company, and any severance plan of the
Company, including, but not limited to, the Employment Agreement; provided,
however, that the provisions of the Employment Agreement shall remain in effect
to the extent otherwise applicable pursuant to its terms for all other purposes,
including with respect to any termination that is not a Qualifying Termination
and any termination that would have constituted a Qualifying Termination but is
not covered by this Agreement because it does not occur during the Termination
Period. The Company's obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against Executive or others. In no event shall Executive be
obligated to seek other employment or take other action by way of mitigation of
the amounts payable to Executive under any of the provisions of this Agreement
and, except as provided in Section 4(c), such amounts shall not be reduced
whether or not Executive obtains other employment. Any dispute or controversy
arising under or in connection with this Agreement shall be settled exclusively
by arbitration in Connecticut by three arbitrators in accordance with the rules
of the American Arbitration Association then in effect. Judgment may be entered
on the arbitrators' award in any court having jurisdiction. The Company shall
bear all costs and expenses arising in connection with any arbitration
proceeding pursuant to this Section.
12. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company for
purposes of this Agreement shall include employment with any Subsidiary.
13. SURVIVAL. The respective obligations and benefits afforded to the
Company and Executive as provided in Sections 4 (to the extent that payments or
benefits are owed as a result of a termination of employment that occurs during
the term of this Agreement), 5 (to the extent that Payments are made to
Executive as a result of a Change in Control that occurs during the term of this
Agreement), 6, 7, 9(c) and 11 shall survive the termination of this Agreement.
14. GOVERNING LAW; VALIDITY. THE INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF CONNECTICUT WITHOUT
<PAGE>
10
REGARD TO THE PRINCIPLE OF CONFLICTS OF LAWS. THE INVALIDITY OR UNENFORCEABILITY
OF ANY PROVISION OF THIS AGREEMENT SHALL NOT AFFECT THE VALIDITY OR
ENFORCEABILITY OF ANY OTHER PROVISION OF THIS AGREEMENT, WHICH OTHER PROVISIONS
SHALL REMAIN IN FULL FORCE AND EFFECT.
15. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
16. MISCELLANEOUS. No provision of this Agreement may be modified or
waived unless such modification or waiver is agreed to in writing and signed by
Executive and by a duly authorized officer of the Company. No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. Failure by Executive
or the Company to insist upon strict compliance with any provision of this
Agreement or to assert any right Executive or the Company may have hereunder,
including, without limitation, the right of Executive to terminate employment
for Good Reason, shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement. Except as otherwise
specifically provided herein, the rights of, and benefits payable to, Executive,
his estate or his beneficiaries pursuant to this Agreement are in addition to
any rights of, or benefits payable to, Executive, his estate or his
beneficiaries under any other employee benefit plan or compensation program of
the Company.
<PAGE>
11
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer of the Company and Executive has executed
this Agreement as of the day and year first above written.
NFO WORLDWIDE, INC.
By: /s/ Patrick G. Healy
--------------------
Name: Patrick G. Healy
Title: Chief Financial Officer
/s/ William E. Lipner
---------------------
William E. Lipner
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in NFO Worldwide, Inc.'s report on Form 10-Q for
the quarter ended September 30, 1999, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000897940
<NAME> NFO Worldwide, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 13,642
<SECURITIES> 0
<RECEIVABLES> 125,118
<ALLOWANCES> 1,170
<INVENTORY> 0
<CURRENT-ASSETS> 153,750
<PP&E> 82,741
<DEPRECIATION> 34,423
<TOTAL-ASSETS> 450,560
<CURRENT-LIABILITIES> 101,719
<BONDS> 194,452
223
0
<COMMON> 0
<OTHER-SE> 137,944
<TOTAL-LIABILITY-AND-EQUITY> 450,560
<SALES> 337,019
<TOTAL-REVENUES> 337,019
<CGS> 173,814
<TOTAL-COSTS> 306,774
<OTHER-EXPENSES> (2,281)
<LOSS-PROVISION> 301
<INTEREST-EXPENSE> 10,946
<INCOME-PRETAX> 21,580
<INCOME-TAX> 9,434
<INCOME-CONTINUING> 11,587
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11,587
<EPS-BASIC> .53
<EPS-DILUTED> .52
</TABLE>
