EXHIBIT 10.7d
BBDO WORLDWIDE INC.
1989 SEVERANCE COMPENSATION AGREEMENT
Agreement made the 9th day of January 1989 by and between BBDO Worldwide
Inc. (herein the "Company"), a New York corporation with its place of business
at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, and Xxxxx Xxxxxxxxxx
(herein the "Participant").
I. Definitions.
The following terms shall have the meaning set forth below:
1. "Subsidiary" means any company in which the Company holds, directly or
indirectly, fifty percent (50%) or more of its outstanding voting stock.
2. "Affiliate" means any company in which the Company holds, directly or
indirectly, not less than twenty percent (20%) but not more than forty-nine
percent (49%) of its outstanding voting stock.
3. "Parent" means the company which directly holds all of the outstanding
voting stock of the Company.
4. "Subsidiary of the Parent" means any company in which the Parent holds,
directly or indirectly, fifty percent (50%) or more of its outstanding voting
stock.
5. "Affiliate of the Parent" means any company in which the Parent holds,
directly or indirectly, not less than twenty percent (20%) but not more than
forty-nine percent (49%) of its outstanding voting stock.
6. "Employer" means the Company, a Subsidiary, the Parent, or a Subsidiary
of the Parent.
7. "Employer Group" means the Company, all Subsidiaries, the Parent, and
all Subsidiaries of the Parent.
8. "Beneficiary" means any person, persons, entity or entities designated
in writing by the Participant to the Company to receive payment, if any, to be
made hereunder following the death of the Participant, and in the absence of
such designation, means (i) the Participant's surviving spouse, while living,
and (ii) if there be no surviving spouse or upon the death of the surviving
spouse, then to the estate of the Participant.
9. "Participation" means the highest percentage of the annual net profits
of the Company and the Parent specified by the Company and communicated to the
Participant in writing by the Chairman of the Board, President, Chief Financial
Officer or the Secretary of the Company.
-2-
10(a) "Net profits of the Company" means the consolidated net profits of
the Company for a calendar year determined in accordance with its then current
accounting procedures and practices before deducting any United States income
tax applicable to its taxable income for such year. In determining net profits
of the Company, the following shall apply:
(i) dividends from Subsidiaries and Affiliates shall be excluded
from income;
(ii) the Company's interest in the net profit or loss of
Subsidiaries and Affiliates before deducting any United States or foreign
national income tax shall be included in income;
(iii) any liability to make payments or payments made under this
document or under like documents with others shall not be deducted as an
expense;
(iv) the premiums for and the proceeds of life insurance policies
payable to the Company and/or a Subsidiary shall not be deducted as an
expense or included in income, as the case may be;
(v) the aggregate amount, if any, by which employee compensation
(salary, bonus, service awards, stock awards and the like, but excluding
employer contributions to pension deferred profit sharing plans and/or
savings plans) paid or accrued in respect of a calendar year by the
Company and its Subsidiaries exceeds fifty-two (52%) percent of such
year's consolidated gross income of the Company (income from all sources
except for dividends from Subsidiaries and Affiliates, and before
adjustments, if any, resulting from efficiency incentive compensation
arrangements with clients) shall not be deducted as an expense; and
(vi) in respect of each calendar year commencing with calendar year
1989, the aggregate amount, if any, by which interest and other charges
for the borrowing of funds paid or accrued in respect of a calendar year
by the Company and its Subsidiaries ("Debt Service") exceeds the Allowable
Debt Service for the subject year shall not be deducted as an expense; for
purposes hereof "Allowable Debt Service" means (A) for calendar year 1988
the actual Debt Service for such year, (B) for calendar year 1989, the
Allowable Debt Service for calendar year 1988 increased by 20% or
increased by the percentage increase, if any, in the actual Debt Service
for 1989 over the actual Debt Service for 1988, whichever results in the
lower amount, and (C) for each calendar year subsequent to calendar year
1989, the Allowable Debt Service for the immediately preceding calendar
year increased by 20% or increased by the percentage increase, if any, in
the actual Debt Service for the subject calendar year over the actual Debt
Service for the immediately preceding calendar year, whichever results in
the lower amount.
-3-
(b) "Net profits of the Parent" means the consolidated net profits of the
Parent for a calendar year determined in accordance with its then current
accounting procedures and practices before deducting any United States income
tax applicable to its taxable income for such year. In determining net profits
of the Parent, the following shall apply:
(i) dividends from Subsidiaries and Affiliates of the Parent shall
be excluded from income;
(ii) the Parent's interest in the net profit or loss of Subsidiaries
and Affiliates of the Parent before deducting any United States or foreign
national income tax shall be included in income;
(iii) any liability of the Company to make payments or payments made
by the Company under this document, or any liability of the Company or the
Parent to make payments or payments made by the Company or the Parent
under like or substantially similar documents with others shall not be
deducted as an expense;
(iv) the premiums for and the proceeds of life insurance policies
payable to the Parent and/or a Subsidiary of the Parent shall not be
deducted as an expense or included in income, as the case may be;
(v) the aggregate amount, if any, by which employee compensation
(salary, bonus, service awards, stock awards and the like, but excluding
employer contributions to pension and/or deferred profit sharing plans)
paid or accrued in respect of a calendar year by the Parent and the
Subsidiaries of the Parent exceeds fifty-two (52%) percent of such year's
consolidated gross income of the Parent (income from all sources except
for dividends from Subsidiaries and Affiliates of the Parent, and before
adjustments, if any, resulting from efficiency incentive compensation
arrangements with clients) shall not be deducted as an expense; and
(vi) in respect of each calendar year commencing with calendar year
1989, the aggregate amount, if any, by which interest and other charges
for the borrowing of funds paid or accrued in respect of a calendar year
by the Parent and Subsidiaries of the Parent ("Parent Debt Service")
exceeds the Allowable Debt Service for the subject year shall not be
deducted as an expense; for purposes hereof "Allowable Debt Service" means
(A) for calendar year 1988 the actual Parent Debt Service for such year,
(B) for calendar year 1989, the Allowable Debt Service for calendar year
1988 increased by 20% or increased by the percentage increase, in any, in
the actual Parent Debt Service for 1989 over the actual Parent Debt
Service for 1988, whichever results in the lower amount, and (C) for each
calendar year subsequent to calendar year 1989, the Allowable Debt Service
-4-
for the immediately preceding calendar year increased by 20% or increased
by the percentage increase, if any, in the actual Parent Debt Service for
the subject calendar year over the actual Parent Debt Service for the
immediately preceding calendar year, whichever results in the lower
amount.
(c) The Company, upon its own initiative may, or shall upon receipt of
written demand from the Participant or the Beneficiary, as the case may be,
designate a firm of public accountants, which may or may not be the firm of
accountants regularly employed by the Company to verify the Company's
determination of net profits of the Company, and to determine any question
arising in the course of such verification not herein specifically provided for.
The determination by such firm of public accountants shall be binding and
conclusive. In computing net profits of the Company and the Parent, the public
accountants shall conform to the accounting procedures and practices of the
entity as modified by the provisions of subparagraph (a) and (b) of this Section
10. A condition of the right to demand verification as aforesaid is that the
person requesting verification shall reimburse the Company to the extent of
one-half of the cost of the services of such public accountants, and, at the
request of the Company and before the accountants shall have commenced the
verification work, shall pay to the Company one-half of the cost of the services
of the said accountants as estimated by them.
11(a) "Year of Service" means each consecutive period of 365 days the
Participant is in the continuous employ of a member or members of the Employer
Group.
(b) A Participant shall be in the employ of the Employer regardless of
absences by reason of:
(i) sick leave, vacation leave, maternity leave or other special
leave approved by the Employer which does not exceed 6 months, provided
the Participant returns to work for the Employer not later than the
expiration date of the authorized leave of absence; and
(ii) time spent in the service of others at the request of, or with
the approval of, the Employer, provided the Participant returns to work
for the Employer within 15 days following cessation of work for such other
party.
12. "Salary" means the base salary paid by the Employer, excluding all
other forms of compensation, such as bonuses, special awards, severance pay,
contributions under benefit plans, and the compensatory elements of stock
awards. The payroll records of the Employer shall be conclusive and binding on
the Participant, the Beneficiary and the Employer as to the salary of the
Participant. "One Year's Salary" means the highest annual rate of salary at
which the Participant was paid by the Employer at any time within five (5) years
of the termination of the Participant's employment giving rise to the Company's
obligation to make payments under Article III hereof.
-5-
13. "Salary Limitation" means the highest percentage of One Year's Salary,
specified by the Company and communicated to the Participant in writing by the
Chairman of the Board, President, Chief Financial Officer or the Secretary of
the Company.
14. "Disability" means the inability of the Participant, by reason of
physical condition, mental illness or accident, to perform substantially all of
the duties of the position at which he was employed by the Employer when such
disability commenced.
15. "Cause" means the Participant's misconduct involving willful
malfeasance, such as breach of trust, fraud or dishonesty.
All determinations as to "Disability" or "Cause" shall be made by the
Board of Directors of the Employer, after a hearing at which the Participant may
be present, and the determination by the Board of Directors shall be final and
conclusive.
II. Employment Is Unrestricted.
Nothing herein contained shall be deemed to give the Participant the right
to remain in the employ of the Employer or to interfere with the right of the
Employer to terminate the Participant's employment at any time, nor to give the
Employer the right to require the Participant to remain in its employ or to
interfere with the Participant's right to terminate employment at any time.
III. Compensation.
1. In the event (a) the Participant dies while in the employ of the
Employer, (b) the Employer determines, in the manner provided in Article 1,
Section 14 hereof, that the Participant is disabled and the employment of the
Participant is terminated by the Employer by reason of Disability, (c) the
Participant terminates his or her employment with the Employer for a reason
other than to enter the employ of another member of the Employer Group or (d)
the employment of the Participant is terminated by the Employer for a reason
other than Cause, then upon the happening of any such event the Company, subject
to all the terms and conditions hereof, shall become obligated to pay to the
Participant, or to the Beneficiary if the obligation arises under (a) above,
each year, for the number of consecutive calendar years determined in accordance
with the schedule on page 7 hereof, an amount equal to the lesser of (i) the
Salary Limitation applied to One Year's Salary, or (ii) the greater of the
Participation applied to the net profits of the Company or the net profits of
the Parent for the calendar year immediately preceding the calendar year of
payment, the resulting amount being subject to adjustment as provided in
Sections 2 and 3 of this Article.
-6-
2.(a) In the event of the Participant's death after the occurrence of an
event described in (b), (c) or (d) of Section 1 of this Article and before the
Participant has received payment(s) in respect of the total number of calendar
years as to which the Company is obligated to make payment hereunder ("Payment
Period"), the Company shall thereafter be obligated to make an annual payment to
the Beneficiary during the Payment Period or the remainder thereof, as the case
may be, equal to seventy five (75%) percent of the amount which the Company
would have been obligated to pay to the Participant had the Participant lived to
receive all payments.
(b) In the event of the Participant's death while in the employ of the
Employer, the Company shall be obligated to make an annual payment to the
Beneficiary in the same manner and to the same extent as provided in (a) of this
Section 2.
3. If during any period of twenty-four consecutive months assets of the
Parent are sold or otherwise disposed of having a value or aggregate value of
thirty (30%) percent or more of the total assets of the Parent as at the
commencement date of said period ("Disposal Transaction"), then beginning with
the calendar year in which the Disposal Transaction occurs the amount of the
annual payments the Company may be obligated to make under the provisions of
Section 1 of this Article shall be the Salary Limitation applied to One Year's
Salary. If the asset sold or disposed of is stock of a Subsidiary of the Parent,
the value of the total assets, not net assets, of such Subsidiary shall be used
for purposes of this Section 3.
4. The first calendar year of payment, if any, shall be the second
calendar year following the calendar year in which the event that gave rise to
the Company's obligation to pay occurred. If, however, such event is the death
of the participant while in the employ of the Employer, the first calendar year
of payment shall be the first calendar year following the calendar year in which
the Participant's death occurred. Payment shall be made by the Company in each
calendar year of payment during the first ninety (90) days of the subject
calendar year.
5. If requested by a Participant, the Board of Directors of the Company
may, in its sole discretion, extend a Payment Period of ten (10) calendar years
to fifteen (15) and/or twenty (20) calendar years and correspondingly decrease
the obligations of the Company to pay the Participant or the Beneficiary, as the
case may be, in each of the calendar years of the applicable extended Payment
Period, such decrease to be actually determined on the basis of life expectancy
and interest rates.
-7-
NUMBER OF YEARS OF PAYMENT
Years of Service
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
Age at 30 1 1 1 2 2
Termination 31 1 1 1 2 2 2
32 1 1 1 2 2 3
33 1 1 2 2 2 3 3
34 1 2 2 2 3 3 3 4
35 1 1 2 2 3 3 3 4 4 4
36 1 1 2 2 3 3 3 4 4 4 5
37 1 1 2 3 3 4 4 4 5 5 5 6
38 1 2 3 3 4 4 4 5 5 5 6 6 6
39 1 2 3 3 4 4 4 5 5 5 6 6 6 7
40 1 1 2 3 3 4 4 5 5 5 6 6 6 7 7 7
41 1 1 2 3 4 4 4 5 5 5 6 6 6 7 7 7 8
42 1 2 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8
43 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9
44 1 2 2 3 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9
45 1 1 2 3 4 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10
46 1 1 2 3 4 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10
47 1 2 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10
48 1 2 3 4 5 5 6 6 6 7 7 7 8 8 8 9 9 9 10
49 1 2 3 4 5 5 6 6 7 7 7 8 8 8 9 9 9 10
50 1 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10
51 1 2 3 4 5 6 6 7 7 7 8 8 8 9 9 9 10
52 1 2 3 4 5 6 6 7 7 8 8 8 9 9 9 10
53 1 2 3 4 5 6 7 7 8 8 8 9 9 9 10
54 1 2 3 4 5 6 7 8 8 8 9 9 9 10
55 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10
56 0 1 2 3 4 5 6 7 8 8 8 9 9 9 10
57 0 1 2 3 4 5 6 7 8 8 9 9 9 10
58 0 1 2 3 4 5 6 7 8 8 9 9 9 10
59 0 1 2 3 4 5 6 7 8 8 9 9 10
60 0 1 2 3 4 5 6 7 8 8 9 9 10
and up
-8-
IV. Company's Payment Obligation Conditional on Participant's Refraining from
Competitive and Harmful Activities After Severance of Employment.
It is a condition of the Company's obligation to make payments hereunder
that from the date of the occurrence of an event described in (b), (c) or (d) of
Section 1 of Article III hereof that shall have given rise to the obligation to
pay and until the close of the last calendar year in respect of which the
Participant may become entitled to receive payments hereunder:
(a) that the Participant shall not directly or indirectly, engage in, nor
become employed by or otherwise associated with any persons or entities engaged
in, business of the same nature as or competitive with the business engaged in,
at the time of Participant's severance of employment, by the Participant's
Employer ("Protected Business") in (i) the United States and (ii) any other
country in which at the time of Participant's severance of employment the
Employer holds, directly or indirectly, more than fifty percent (50%) of the
voting stock or its equivalent of an entity engaged in the same or a related
business as that of the Employer; and the Participant shall not make any
financial investment, direct or indirect, in any sole proprietorship or entity
engaged in the same business as that of the Employer at the time of
Participant's severance of employment ("Protected Investment"), provided nothing
herein shall prohibit the purchase of less than a controlling interest in
publicly traded securities of any such entity for bona fide investment only;
(b) that the Participant shall not wilfully engage in any activity which
is harmful to the interest of the Company.
The determination of (i) whether a business is of the same nature as,
competitive with, or related to that of the Employer, (ii) whether any activity
of a Participant is harmful to the interest of the Company and (iii) whether the
Participant has wilfully engaged in such harmful activity, shall be made by the
Board of Directors of the Company after a hearing at which the Participant shall
be entitled to be present, and the determination by the Board of Directors shall
be final and conclusive; and
(c) Nothing herein prohibits or restricts the Participant from engaging in
Protected Business in the areas described in Subsection (a) above, making a
Protected Investment, or wilfully engaging in activity harmful to the interest
of the Company (collectively "Activities"), and in the event the Participant
chooses to engage in any of such Activities the Company's obligation to make
payments hereunder shall forthwith terminate as to payments which might
otherwise have become payable to the Participant in respect of the calendar year
in which such Activity occurred and to the Participant or the Beneficiary in
respect of all calendar years thereafter, but the Participant
-9-
shall not be obligated to refund to the Company any payments theretofore
paid to Participant hereunder. If requested in writing by the Company, the
Participant shall, within 30 days after receipt of such request, advise
the Company in writing whether the Participant has or has not engaged in
such Activities for a specified calendar year, and the Company shall have
no obligation to make a payment in respect of such calendar year until the
Company has received such written advice from the Participant.
V. Company's Payment Obligation Conditional On Participant's Availability for
Advisory and Consultative Services after Severance of Employment.
(a) It is a further condition of the Company's obligation to make payments
hereunder that from the date of the occurrence of an event described in (b), (c)
or (d) of Section 1 of Article III hereof that shall have given rise to the
obligation to pay and until the close of the last calendar year in respect of
which the Participant may become entitled to receive payments hereunder, that
the Participant, if not physically or mentally disabled, shall, as an
independent contractor and upon not less than thirty (30) days prior written
notice from the Company, make his or her services available to the Company for
such periods of time as may be specified in the notice, as an advisor and
consultant with respect to activities of the department or unit of the
Employer's business to which the Participant was last assigned, provided,
however, that the Participant shall not be obligated to make his or her services
available (i) for more than sixty (60) days in the aggregate and for more than
twenty (20) consecutive days in any one calendar year, and (ii) during the
period December 15 through January 15. The Company shall reimburse the
Participant for reasonable traveling, transportation and living expenses
necessarily incurred by the Participant while away from his or her regular place
of residence in the performance of such advisory and consultative services for
the Company.
(b) In the event the Participant chooses not to render advisory and
consultative services when requested by the Company as provided in Subsection
(a) above, the Company's obligation to make payments hereunder shall forthwith
terminate as to payments which might otherwise have become payable to the
Participant in respect of the calendar year in which such event occurred and to
the Participant or the Beneficiary in respect of all calendar years thereafter,
but the Participant shall not be obligated to refund to the Company any payments
theretofore paid to Participant hereunder.
-10-
VI. Prepayments.
Following the occurrence of an event described in Section 1 of Article III
hereof, the Company may, at any time and from time to time, make a prepayment,
in whole or in part, of its obligation hereunder in respect of any one or more
calendar years and any such prepayment shall be irrevocable and non-refundable.
VII. Participant's and Beneficiary's Rights Hereunder Are Personal,
Nonassignable and Nontransferable.
1. The right of the Participant or Beneficiary to receive payments
hereunder is personal, non-assignable and non-transferable by operation of law
or otherwise. The word "otherwise" in the preceding sentence shall include,
without limitation, any execution, levy, garnishment, attachment or seizure by
any other legal process.
2. If at the time the Company is to make a payment to the Participant or a
Beneficiary hereunder the Participant or Beneficiary is not entitled to receive
such payment by reason of non-compliance with the provisions of Section 1 of
this Article, the obligation of the Company to make such payment shall forthwith
terminate.
VIII. Designation and Identity of Beneficiary.
1. The Participant may designate a Beneficiary by signing, dating and
filing with the Secretary of the Company a written instrument setting forth the
name(s) and address(es) of the Beneficiary, and if the Beneficiary be more than
one person or entity, describing the allocation of the payment benefit among
them. The Participant may change his or her designation of a Beneficiary and
thereby revoke a prior designation of a Beneficiary at any time and from time to
time by filing a new such written instrument with the Secretary. The Beneficiary
named in the last unrevoked designation of Beneficiary so filed by the
Participant prior to his or her death shall be the Beneficiary for purposes of
this Agreement. In the absence of a designation of Beneficiary by the
Participant, or in the event the last written designation of Beneficiary on file
with the Secretary has been revoked by the Participant, the Beneficiary shall be
as described in Section 8 of Article I of this Agreement.
2. It is a condition of the Company's obligation to make payments to the
Beneficiary hereunder that (a) in making payments the Company may, in its sole
and absolute discretion, rely upon signed, written declarations, verifying the
identity of a Beneficiary filed with the Secretary of the Company by a person or
-11-
entity claiming to be such Beneficiary; (b) any payment made by the Company in
good faith to any claimant, whether or not such declarations shall have been
filed with the Company, shall pro tanto, discharge any obligation the Company
might otherwise have to make payment to any and all other actual or possible
claimants; (c) any person or entity claiming to be entitled to receive payments
hereunder following the death of the Participant shall have recourse only
against the person or entity to whom the Company shall have made payment in good
faith; and (d) in the event the Company, on advice of counsel, delays payment of
any sums becoming due to a Beneficiary by reason of a dispute as to the
legitimacy of the claim of such Beneficiary, no interest, penalty or damage
shall accrue, become payable by or be assessed against the Company by reason of
such delay in payment.
IX. Payment to Minors.
Any payment to be made by the Company to a person under the age of
twenty-one (21) years may be made to such person or to a guardian of the
property of such person or to a parent of such person as the Company may, in its
sole and absolute discretion, determine. As to any payment becoming due or
payable to a person under the age of twenty-one (21) years, the Company may
defer such payment until the Company has received notice of the appointment and
qualification of a guardian of the property of such person, and no interest,
penalty or damage shall accrue, become payable by or be assessed against the
Company by reason of such delay in payment.
X. Miscellaneous Provisions.
1. An act or determination by the Board of Directors of the Company or the
Employer may be made by a committee of directors, numbering not less than three,
appointed by the respective Board for such purpose.
2. Notices shall be sent by registered or certified mail, return receipt
requested, to the Participant at the Participant's last address on file with his
or her Employer or to such other address as may hereafter be designated by the
Participant to the Company, and to the Beneficiary at the address listed in the
latest written designation of beneficiary filed with the Company by the
Participant or to such other address as may hereafter be designated by the
Beneficiary to the Company subsequent to the death of the Participant.
3. The failure of any party to insist upon strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver of any right
hereunder, nor shall it deprive that party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement. Any
waiver must be in writing.
-12-
4. This Agreement sets forth the entire understanding of the parties in
respect of the subject matter hereof, superseding, and evidencing and confirming
the termination of, any and all prior agreements, arrangements or understandings
between the parties relating to such subject matter, and neither party has
relied on any representations of the other party except as expressly set forth
herein. This Agreement may be amended only by a written instrument signed by
both parties.
5. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York, and is subject to all applicable federal,
state and municipal laws and regulations now or hereafter in force.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
/s/ Xxxxx Xxxxxxxxxx
----------------------------
Participant
BBDO Worldwide Inc.
By /s/ Xxxxxx X. Xxxxxxxx
-------------------------
Chairman of the Board and
Chief Executive Officer
Name of Participant: Xxxxx Xxxxxxxxxx
----------------
Date of Birth: March 14, 1939
--------------
Date First Commenced Service: May 17, 1965
------------
Name of Employer: Omnicom Group, Inc.
-------------------
