Exhibit 4.19
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 11th day of March, 2002, by and between BATES
ADVERTISING USA, INC., a New York corporation (the "Company"), with principal
offices at 498 Seventh Avenue, New York, NY 10018, and David Hearn, residing at
16 Marine Parade, Watsons Bay, New South Wales 2030, Australia (the
"Executive").
WITNESSETH:
WHEREAS, the Company wishes to employ the Executive, and the Executive
wishes to be employed by the Company, on the terms and conditions herein
contained;
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements herein set forth, and of other good and valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree as follows:
FIRST: The Company shall employ the Executive at its New York City offices
(subject to its normal travel requirements), and the Executive shall serve the
Company during the Term of Employment (as defined below) in the capacity of
Chairman, Chief Executive Officer and member of the board of directors of the
Company's affiliate, Bates Worldwide, Inc. ("Worldwide"). Each of the regional
heads of the Bates Worldwide Network of companies shall report to the Executive
and Executive shall have supervisory and managerial authority over each of the
various companies in the Bates Worldwide Network and the 141 Worldwide Network
that is owned or controlled by Cordiant Communications Group plc ("CCG") in
accordance with and subject to CCG Group Policies. The Company shall procure the
appointment of the Executive to the Board of Directors of CCG within ten (10)
business days after the Start Date (as defined in
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Paragraph SECOND below), subject always to the Executive not then being
disqualified from acting as a director of an English public company pursuant to
applicable law. The Executive agrees to accept such appointment and to observe
and comply with, and with the policies, procedures and requirements from time to
time reasonably imposed by CCG and its subsidiaries for the purpose of ensuring
compliance with, the Companies Act 1985 and Financial Services and Markets Act
of the United Kingdom, as amended, United States federal and state securities
laws and other applicable laws and regulations, including (without limitation)
the Listing Rules of The Financial Services Authority (the "Listing Rules"), the
City Code on Take-overs and Mergers and the rules and regulations of the United
States Securities and Exchange Commission and of the New York Stock Exchange. In
particular, the Executive shall from time to time supply to the Company
Secretary or Chairman of the Board of CCG such information concerning his
interests and dealings in securities of CCG and those of his immediate family,
family trusts and other connected persons, as is reasonably required to comply
with applicable disclosure requirements and shall comply with the Model Code on
directors' dealings in securities set out in the appendix to Chapter 16 of the
Listing Rules, as implemented by CCG. The Executive shall comply with the CCG
Group Policies Manual as in effect from time to time. The Executive shall report
directly to the Chief Executive Officer of CCG.
SECOND: A. The period during which the Executive shall be employed by the
Company (the "Term of Employment") shall begin on the later of (i) April 1, 2002
and (ii) the date on which the Executive secures a visa permitting the Executive
to be employed in the United States (in either case, the "Start Date"), and
shall continue until such time as the Term of Employment is ended upon ten (10)
business days notice (the "Termination Notice") given by one of the parties
hereto to the other, provided, however, that, except as otherwise specifically
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set forth below: (a) the Company shall not give the Termination Notice prior to
the second anniversary of the Start Date, and (b) any Termination Notice given
by the Executive prior to the second anniversaty of the Start Date shall be on
no less than 180 days prior notice. The Term of Employment shall also be
terminable at an earlier date: (1) by the Company based upon Executive's death
or total disability (as set forth hereinafter at Paragraph EIGHTH); (2) by the
Company for "Cause" (as defined hereinafter at Paragraph EIGHTH); (3) by the
Company following a Change in Control (as set forth hereinafter at Paragraph
NINTH); or (4) by the Executive for "Good Reason" following a Change in Control
(as defined hereinafter at Paragraph NINTH). Upon the termination of the
Executive's employment with the Company, the Executive shall immediately resign
without claim for compensation for loss of office (but without prejudice to any
claim he may have against the Company arising out of any breach of this
Agreement by the Company or for severance in accordance with this Agreement)
from such offices held by him in the Company, CCG and any subsidiary of CCG (a
"Group Company") and from any other offices he may hold as nominee or
representative of the Company, CCG or any Group Company and the Company and CCG
are irrevocably authorized by the Executive to appoint some person in his name
and on his behalf to sign any documents and do any things necessary or requisite
to give effect to such resignations.
THIRD: At all times during which the Executive is in the employ of the
Company, the Executive shall devote substantially all of his time and attention
during business hours to the business and affairs of the Company, Worldwide and
their affiliates, and shall perform such senior executive and managerial duties
and responsibilities customary to, and consistent with, the positions set forth
in Paragraph FIRST as may be assigned to him by the Board of Directors of the
Company, the Board of Directors of Worldwide, or the CEO of CCG from time to
time. The
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provisions of the foregoing sentence notwithstanding, the Executive shall,
subject to the prior approval of the Remuneration and Nominations Committee of
the Board of Directors of CCG (the "Committee"), be permitted to devote
immaterial amounts of his business time to charity work and to holding
non-executive directorships of companies which do not compete with CCG.
FOURTH: During the Term of Employment:
A. The Company shall pay the Executive, and the Executive shall
accept, for his services to the Company while in its active employ hereunder and
in consideration of his agreement not to compete as set forth hereinafter at
Paragraph FIFTH, salary at the rate of at least $750,000 per annum (the
"Salary"), payable in accordance with the Company's standard payroll practices
in effect at such time as the Salary is paid. The Executive shall be entitled to
such annual increases in Salary as may be determined from time to time by the
Company's, Worldwide's and CCG's Boards of Directors in a manner no less
favorable than that used for other senior executives of the Company and
Worldwide.
B. In addition to the Salary, the Company shall pay to the Executive
an annual bonus of $525,000 subject to Executive's and Worldwide's satisfaction
of performance targets set by the Committee (as defined in Paragraph THIRD
above) (the "Target Bonus"). In the event that such performance targets are
exceeded in any year during the Term of Employment, Executive shall be entitled
to receive an additional amount of bonus compensation for such year as is set
forth in a bonus grid for such year approved by the Committee in its sole
discretion (the "Grid"), provided, however, that such additional bonus
compensation, when added to the Target Bonus shall in no event exceed 100% of
the Salary for such year. Similarly, in the event that the performance targets
for such year are not met, the Executive shall be entitled to receive such
portion of the Target Bonus as may be set forth in the Grid for such year.
Except
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as otherwise expressly set forth herein, bonus compensation (the "Bonus") shall
be payable as and when bonuses are paid by the Company to its employees
generally.
C. In the event that the Term of Employment is terminated by the
Company for any reason other than pursuant to Paragraph NINTH, for "Cause" under
Subparagraph B of Paragraph EIGHTH, or under Subparagraph A of Paragraph EIGHTH,
the Company shall make a lump sum payment to the Executive within sixty (60)
days after the end of the Term of Employment equal to the sum of one and one
half year's Salary (as in effect on the last day of the Term of Employment) and
one year's Expatriate Benefit (as defined in Subparagraph L of this Paragraph
FOURTH) (the "Severance"), provided, however, that: (i) as a condition precedent
to the payment of any such Severance, the Executive shall execute and deliver to
the Company a release in the form annexed hereto as Exhibit A (with only such
modifications thereto as may, in the Company's reasonable opinion, be necessary
to comply with then applicable regulatory and statutory requirements) and the
Revocation Period (as defined in paragraph 12 of Exhibit A) shall have expired
and other conditions applicable to the validity of such release shall have been
fully satisfied; and (ii) if the Executive breaches any of the covenants
contained in Paragraphs FIFTH, SIXTH or SEVENTH below, then the Executive shall
forfeit all rights to any payment of Severance to be made after such breach. In
addition to the Severance set forth above, the Executive shall be entitled to
receive a portion of the Bonus, if any, that the Executive would have earned for
the year in which such termination occurred, prorated to the date on which the
Term of Employment ended and paid at such time as bonuses are paid to executive
employees of the Company generally. The amounts payable pursuant to this
Subparagraph C shall be in lieu of any severance payments to which the Executive
may be entitled on termination of the Term of Employment, with the exception of
the Executive's vested
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rights under any employee benefit plan in which he is a participant and the
Executive acknowledges that he shall not, thereupon, be entitled to payment of
severance pursuant to the Company's severance plans, policies or practices on
the date of this Agreement or in effect from time to time.
D. CCG operates an Executive Share Option Scheme governed by rules
adopted on June 12, 2001 (the "Scheme"). Under the Scheme options are granted by
the Trustee of an employee benefit trust after consulting the Committee (as
defined in Paragraph THIRD above). During the Term of Employment, the Company
will cause the Committee to recommend to the Trustee that options to acquire
ordinary shares of CCG be granted to the Executive (the "Options") as follows.
In each of the one year periods ending on the first, second and third
anniversaries of the Start Date, the Company will cause the Committee to
recommend to the Trustee that it grant Options to the Executive under the rules
of the Scheme, at the same times as it grants options generally to executive
directors of CCG, to acquire 416,667 ordinary shares, of which Options to
acquire 250,000 ordinary shares shall be "discounted" Options and Options to
acquire 166,667 ordinary shares shall be "market value" Options. Each of the
three (3) above mentioned Options grants (each with respect to 416,667 ordinary
shares) shall be subject to the date of grant falling within the Term of
Employment and subject to the requirements of any statute, order, regulation,
government directive, the Model Code for transactions in securities by directors
published from time to time by The Financial Services Authority, and any code of
practice published by The Financial Services Authority in addition to or
replacement of such publication which may restrict or prevent the grant of
Options. The Company shall also cause the Committee to impose performance
conditions on the Options which provide that the Options shall vest in full and,
subject to the provisions of the Model Code, be exercisable, if: (i) the Term
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of Employment is terminated by the Company without Cause (as defined hereinafter
in Subparagraph B of Paragraph EIGHTH) or (ii) upon a Change in Control (as
defined hereinafter in Subparagraphs B (1), (3) and (4) of Paragraph NINTH). The
obligations imposed on the Company under this Subparagraph D shall cease
immediately following a Change in Control (as defined in Subparagraph B of
Paragraph NINTH) or earlier at the end of the Term of Employment. After the end
of the Term of Employment, the Executive shall have no claim against CCG, the
Company or any Group Company for loss arising out of any ineligibility (in
accordance with the terms of the Scheme and of the Options in effect when such
Options are granted) to exercise any Options granted to him. The rights of the
Executive shall be determined solely by the rules of the Scheme and the
performance conditions imposed on his Options on the dates of the respective
grants.
E. The Executive shall be eligible to participate in those benefit
plans which the Company shall make available to its employees generally, and
those which it shall make available to its senior executive officers generally,
according to the terms and administration of said plans, including, but not
limited to, 401K profit sharing plan and worldwide health and disability
insurance coverage.
F. The Executive shall be entitled to reimbursement of businesses
expenses (including first class travel and accommodations) in accordance with
the Company's practices with respect to its senior executive officers,
including, but not limited to, reimbursement for the Executive's costs of using
his home telephone and cellular telephone for business purposes.
G. The Company shall provide the Executive a monthly car allowance of
$1,200.
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H. For each calendar year, the Company shall reimburse the Executive
up to $2,000 for membership dues in a health club of the Executive's choosing.
I. The Company shall reimburse the Executive for the initiation fee
paid by the Executive for membership in a country club of the Executive's choice
in an amount up to $20,000. For each calendar year, the Company shall reimburse
the Executive for dues payable to such country club in an amount up to $15,000.
J. Executive shall be entitled to four (4) weeks vacation annually,
calculated and taken in accordance with the Company's normal vacation policies,
plus such paid holidays and sick days as are provided by the Company under its
policies applicable to senior executive officers in effect from time to time.
K. (1) The Company shall pay the reasonable costs of Executive's and
his family's move to New York, in accordance with Company policy, including:
(a) transportation to New York for Executive's and his immediate
family's personal and household goods;
(b) first class transportation to New York for Executive and his
spouse and children;
(c) temporary living expenses in New York for Executive, his
spouse and his immediate family for up to 60 days, in an
amount not to exceed $20,000;
(d) a resettlement allowance of $60,000; and
(e) the cost of obtaining a visa (which the Company shall assist
the Executive in procuring).
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(2) In addition, in the event that the Company terminates the Term
of Employment for a reason other than for "Cause" and the Executive does not
immediately secure employment with another company owned or controlled by CCG,
the Company shall pay the reasonable costs of Executive's move from New York to
Australia or England, including:
(a) transportation to Australia or England for Executive's and his
immediate family's personal and household goods; and
(b) first class transportation to Australia or England for
Executive, his spouse and their children.
L. The Executive shall receive an annual expatriate housing and
education allowance in a combined total annual amount of $150,000 (the
"Expatriate Benefit"), payable in 24 equal bimonthly installments on the regular
payroll dates of the Company.
FIFTH: A. The Executive shall not, while he is in the Company's employ, and
for a period of one (1) year thereafter:
(1) attempt in any manner to persuade any client of the Company,
Worldwide or any of their affiliates, which was a client during the Executive's
employment with the Company, to cease to do business or to reduce the amount of
business which any such client has customarily done or contemplates doing with
the Company, Worldwide or any of their affiliates, whether or not the
relationship between the Company, Worldwide or any of their affiliates and such
client was originally established in whole or in part through the Executive's
efforts;
(2) attempt in any manner to persuade any potential client to which
the Company, Worldwide or any of their affiliates have made a presentation
within twelve (12) months prior to the termination of the Executive's
employment, or with which the Company,
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Worldwide or any of their affiliates have been having discussions, within twelve
(12) months prior to the termination of the Executive's employment not to hire
the Company, Worldwide or such affiliate, or to hire another agency;
(3) solicit for the Executive or for any person other than the
Company, Worldwide or their affiliates, the business of any company which is a
client of the Company, Worldwide or of any of their affiliates, or was the
Company's or Worldwide's client or a client of one of their affiliates within
twelve (12) months prior to the termination of the Executive's employment.
(4) persuade or attempt to persuade any employee of the Company,
Worldwide or any of their affiliates, or any individual who was employed by the
Company, Worldwide or any of their affiliates during the twelve (12) months
prior to the Executive's termination of employment, to leave the Company,
Worldwide or their affiliates' employ, or to become employed by any person other
than the Company, Worldwide or their affiliates;
(5) render any advertising, marketing or merchandising services,
other than on behalf of the Company, Worldwide or their affiliates, for or in
connection with any client of the Company, Worldwide or any of their affiliates
for whom the Company, Worldwide or their affiliates rendered services at any
time during the twelve (12) months immediately preceding the termination of the
Executive's employment with the Company.
B. If any of the covenants contained in this Paragraph FIFTH, or
any part hereof, is held to be unenforceable because of the duration of such
provision or the area covered thereby, or for any other overinclusiveness, the
parties agree that the duration of such provision or the area covered thereby or
such other overinclusiveness shall be automatically
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reduced to the maximum scope permitted by law, and that, in its reduced form,
said provision shall then be fully enforceable.
C. Since the Company may be irreparably damaged if the provisions
of this Paragraph FIFTH are not specifically enforced, in the event of a breach
or threatened breach of any of the terms of this Paragraph FIFTH by the
Executive, in addition to any other remedy that may be available to it, the
Company shall be entitled to injunctive relief without showing that monetary
damages will not provide an adequate remedy.
SIXTH: The Executive agrees that he will not divulge to anyone (other than
the Company, Worldwide and their affiliates or any persons employed or
designated by the Company or Worldwide or in connection with the Executive's
duties hereunder) any knowledge or information of any type whatsoever of a
confidential nature relating to the business of the Company, Worldwide, their
clients or any of their affiliates or their affiliates' clients, including,
without limitation, all types of trade secrets (unless readily ascertainable
from public or published information or trade sources). The Executive further
agrees not to disclose, publish or make use of any such knowledge or information
of a confidential nature without the prior written consent of the Company. The
provisions of this Paragraph SIXTH shall apply both during the time that the
Executive is employed by the Company and thereafter.
SEVENTH: The Executive agrees that all ideas, inventions and business plans
developed by him during the Term of Employment which relate, directly or
indirectly, to the business of the Company, its clients, Worldwide or any of
their affiliates, including without limitation, any process, operation, patent
or improvement which may be patentable or copyrightable, will be the property of
the Company and that the Executive will at the Company's
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request and cost, do whatever is necessary to secure the rights thereto by
patent, copyright or otherwise to the Company.
EIGHTH: The Term of Employment may terminate as set forth herein and in
Paragraph NINTH.
A. The Term of Employment hereunder shall terminate upon (i) the death of
the Executive; and (ii) at the option of the Company, upon not less than thirty
(30) days prior written notice to the Executive or his legal representative, in
the event that the Executive becomes totally disabled. The Executive shall be
deemed to be totally disabled if by reason of physical or mental incapacity or
disability, he is unable, either with or without a reasonable accommodation, to
render the material services to be rendered by him pursuant to this Agreement
for a continuous period of one hundred eighty (180) successive days. In the
event of an incapacity or a disability within two years after a Change in
Control, the advice of a reputable physician mutually acceptable to the Company
and the Executive (or his legal representative) as to the existence of such
incapacity or disability will be final and binding on the parties. In the event
that the Term of Employment is terminated because of the Executive's death or
disability, the Company shall pay to the Executive or his representative(s): (i)
all Salary earned but unpaid through the end of the Term of Employment, to be
paid within twenty (20) days of the date on which the Term of Employment ended,
and (ii) all Bonuses earned, but unpaid for the prior year and a portion of the
Bonus, if any, that the Executive would have earned for the year in which such
termination occurred, pro-rated to the date on which the Term of Employment
ended, to be paid when bonuses are paid to executive employees of the Company
generally.
B. The Company may terminate the Term of Employment of the Executive for
"Cause," upon not less than twenty (20) days prior written notice to the
Executive specifying in
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reasonable detail the grounds therefor. For the purposes of this Agreement, an
event or occurrence constituting "Cause" shall mean only:
(1) Executive's willful failure or refusal, after notice thereof, to
perform specific directives of the Board of Directors of the Company, when such
directives are consistent with the scope and nature of the Executive's duties
and responsibilities as set forth in Paragraph FIRST and THIRD hereof;
(2) Willful dishonesty of the Executive affecting the Company;
(3) Drunkenness or use of drugs which interfere with performance of
the Executive's obligations under this Agreement, continuing after notice
thereof;
(4) Executive's conviction of a felony or of any crime involving moral
turpitude or fraud;
(5) Any willful conduct of the Executive resulting in substantial loss
to the Company, substantial damage to the Company's reputation or theft or
defalcation from the Company;
(6) Any material breach (not covered by any of Subparagraphs (1)
through (5) above), of any of the provisions of this Agreement if such breach is
not cured within ten (10) business days after written notice thereof to the
Executive by the Company.
Any act or failure to act by the Executive which is done, or omitted to be done,
by him in good faith and for a purpose which he reasonably believed to be in the
best interests of the Company shall not be deemed to be willful. In the event
that the Term of Employment is terminated by the Company for Cause, the
Executive shall be entitled to all Salary earned but unpaid through the end of
the Term of Employment, to be paid within twenty (20) days of the date on which
the Term of Employment ended.
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NINTH: A. Within two (2) years after a Change in Control (defined below),
the Company may, on ten (10) business days prior notice to the Executive,
terminate the Term of Employment. In such circumstances, except where the
Company has previously issued a Notice of Termination for Cause pursuant to
Subparagraph B of Paragraph EIGHTH or the Term of Employment is being terminated
by reason of the Executive's death or disability pursuant to Subparagraph A of
Paragraph EIGHTH, the Company shall, within sixty (60) days after the date on
which the Term of Employment ends:
(1) pay to the Executive a lump sum in cash equivalent to the
aggregate of:
(a) eighteen (18) months' Salary (as at the date on which
the Term of Employment ends); and
(b) a sum equal to the cost the Company would have incurred
in providing the Executive with the benefits set forth
above in Paragraph FOURTH, Subparagraphs E, G, H, I, K
(2) (if by its terms applicable) and L, had the Term of
Employment continued for a period of eighteen (18)
months following the date on which the Term of
Employment ends; and
(2) pay to the Executive in a lump sum in cash any Bonus(es) due to
him pursuant to Paragraph FOURTH with respect to the period prior to the date on
which the Term of Employment ends together with an amount equal to the Bonuses
the Executive would have received had the Term of Employment continued for a
further eighteen (18) months following the date on which the Term of Employment
ends, on the basis that:
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(a) the Executive would have achieved his Target Bonus
(as at the date on which the Term of Employment ends and for the relevant
subsequent periods); and
(b) Bonus entitlements, for the purpose of this
Paragraph NINTH, accrue pro rata from day to day with respect of any partial
financial year of the Company to the date on which the Term of Employment ends
and to the end of such eighteen (18) month period.
The payments set forth in Paragraph NINTH A (1) and (2) above are
hereinafter referred to as the "Change in Control Severance". Payment of the
Change in Control Severance shall be subject to the following conditions: (i) as
a condition precedent to any such Change in Control Severance, the Executive
shall execute and deliver to the Company a release in the form annexed hereto as
Exhibit A (with only such modifications thereto as may, in the Company's
reasonable opinion, be necessary to comply with then applicable regulatory and
statutory requirements) and the Revocation Period (as defined in paragraph 12 of
Exhibit A) shall have expired and other conditions applicable to the validity of
such release shall have been fully satisfied; and (ii) if the Executive breaches
any of the covenants contained in Paragraphs FIFTH, SIXTH or SEVENTH above, then
the Executive shall forfeit all rights to payment of Change in Control Severance
to be made after such breach.
B. "Change in Control" shall, for the purposes of this Agreement, mean:
(1) the acquisition by any person, together with any person "acting
in concert" with that person (as defined in the City Code on Takeovers and
Mergers, issued by the Panel on Takeovers and Mergers, UK from time to time)
(collectively, a "Person") of shares carrying more than fifty percent (50%) of
the voting rights at general meetings of CCG;
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(2) during any period of two (2) consecutive years beginning on or
after the Start Date, individuals who at the beginning of such period
constitute the Board of Directors of CCG, and any new Director (other than a
Director designated by a Person) whose election by CCG's Board of Directors or
nomination for election by the shareholders of CCG was approved by a vote of at
least two-thirds (2/3) of the Directors then still in office who either were
Directors at the beginning of the period or whose election or nomination for
election was previously so approved (unless the approval of the election or
nomination for election of such new Directors was in connection with an actual
or threatened election or proxy contest), cease for any reason to constitute at
least a majority thereof;
(3) the shareholders of CCG approve a merger or consolidation of CCG
with any other company, other than:
(a) a merger or consolidation which would result in the voting
securities of CCG outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than eighty percent (80%) of the combined voting
power of the voting securities of CCG or such surviving entity outstanding
immediately after such merger or consolidation; or
(b) a merger or consolidation effected to implement a
recapitalization of CCG (or similar transaction) in which no Person acquires
more than fifty percent (50%) of the combined voting power of CCG's then
outstanding securities; or
(4) the shareholders of CCG approve a plan of complete liquidation
of CCG or an arrangement for the sale or disposition by CCG of CCG's North
American assets substantially as a whole or at least seventy-five percent (75%)
of CCG's overall assets or any transaction having a similar effect.
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C. Within two (2) years following a Change in Control, the Executive may by
written notice to the Company terminate the Term of Employment for "Good Reason"
(as defined below). In the event that the Executive so terminates the Term of
Employment, he shall be entitled to receive the Change in Control Severance,
subject to the same conditions set forth in Subparagraph A of this Paragraph
NINTH. For the purposes hereof, "Good Reason" shall mean, without the
Executive's express written consent, the occurrence of any of the following
events after a Change in Control:
(1) any of (a) the assignment to the Executive of any duties
inconsistent in any material respect with the Executive's position(s), duties,
responsibilities or status with CCG, the Company or Worldwide immediately prior
to such Change in Control, (b) a change in the Executive's reporting
responsibilities, titles or offices with CCG, the Company or Worldwide as in
effect immediately prior to such Change in Control or (c) any failure to
re-elect the Executive to any position with CCG, the Company or Worldwide held
by Executive immediately prior to such Change in Control;
(2) a reduction by the Company in the Executive's Salary as in
effect immediately prior to such Change in Control or as the same may be
increased from time to time thereafter; or
(3) any requirement of the Company that the Executive (a) be based
anywhere other than at the facility where the Executive is located at the time
of the Change in Control or (b) travel on Company business to an extent
substantially more burdensome than the travel obligations of the Executive
immediately prior to such Change in Control.
D. The amounts payable pursuant to this Paragraph NINTH shall be in lieu of
any severance payments to which the Executive may be entitled on termination of
the Term of
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Employment, with the exception of the Executive's vested rights under any
employee benefit plan in which he is a participant, and the Executive
acknowledges that he shall not, thereupon, be entitled to payment of severance
pursuant to the Company's severance plans, policies or practices on the date of
this Agreement or in effect from time to time.
TENTH: This Agreement is a personal contract, and except as specifically
set forth herein, the rights and interests of the Executive herein may not be
sold, transferred, assigned, pledged or hypothecated. The rights and obligations
of the Company hereunder shall be binding upon and run in favor of the Company
and its successors.
ELEVENTH: The failure of either party to enforce any of the provisions of
this Agreement shall not be deemed a waiver thereof. No provision of this
Agreement shall be deemed to have been waived or modified unless such waiver or
modification shall be in writing and signed by both parties hereto.
TWELFTH: A. Any notice to be given concerning this Agreement shall be given
in writing and either: (1) sent by certified or registered mail, postage
prepaid; (2) sent by reputable overnight courier service; or (3) hand delivered
to the recipient personally. In the case of notice sent by mail, the date of the
giving of the notice shall be deemed to be: (i) three (3) days after the date of
the postmark if postmarked by the United States Postal Service; or (ii) the date
of actual receipt if not postmarked by the United States Postal Service. In the
case of notice being sent by overnight courier service, the date of the giving
of the notice shall be deemed to be the day after the date said notice was given
to the courier service as indicated by the records of such courier service. In
the case of notice being hand delivered, a written dated receipt shall be given
therefor. Hand delivery of any notice to the Company shall be delivered to the
Company's chief financial officer personally. Notice by mail or courier service
shall be sent as follows:
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If to Executive: David Hearn
16 Marine Parade
Watsons Bay
New South Wales 2030
Australia
With a copy to: Pavia & Harcourt LLP
600 Madison Avenue
New York, New York 10022
Attention: Jordan E. Ringel, Esq.
If to the Company: Bates Worldwide, Inc.
498 Seventh Avenue
New York New York 10018
Attention: Chief Financial Officer
With a copy to: Cordiant Communications Group Worldwide, Inc.
498 Seventh Avenue
New York, New York 10018
Attention: Michael J. Kopcsak, Esq.,
General Counsel
B. By giving notice to the other patty, either party may, from time
to time, designate (i) a different address to which notice by mail or courier
service to such party shall be sent and/or (ii) a different person to receive
notices.
THIRTEENTH: This Agreement shall be deemed made under and shall be governed
by the substantive laws of the State of New York, excluding its conflict of laws
rules.
FOURTEENTH: Except for the provisions of Paragraph FIFTH of this Agreement,
any dispute or controversy under or in connection with this Agreement shall be
settled exclusively by arbitration in New York City by one arbitrator with prior
formal judicial experience in accordance with the rules of JAMS-Endispute, Inc.
then in effect. Judgment may be entered upon the arbitrator's award in any court
having jurisdiction.
FIFTEENTH: The Company shall have the right to withhold from the
Executive's Salary and other compensation hereunder all amounts required to be
withheld by
19
law, including such amounts in respect of any compensation deemed to be paid to
the Executive under federal, state and local tax laws, as well as those amounts
authorized by the Executive.
SIXTEENTH: This Agreement constitutes the entire understanding among the
parties hereto as to the subject matter covered herein, and all prior
understandings and agreements are merged herein and succeeded hereby.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and year first above set forth.
BATES ADVERTISING USA, INC.
By: /s/ [illegible]
--------------------------------
/s/ David Hearn
------------------------------------
David Hearn
20
EXHIBIT A
ACKNOWLEDGMENT OF RECEIPT
I hereby acknowledge that I have received a copy of the Separation Agreement and
Release of Claims which is attached hereto on the date noted beneath my
signature on this Acknowledgement.
I further acknowledge that I have been informed that I will have a period of
exactly twenty-one (21) days [or 45 days in the case of a "program" from today
to sign and return the Separation Agreement and Release of Claims to the
Company. I understand that if I do not sign and return the Separation Agreement
and Release of Claims to the Company before the expiration of that twenty-one
(21) day [or 45 days in the case of a "program" period, I will not be entitled
to receive the Severance Pay, even if I thereafter sign and return the
Separation Agreement and Release of Claims to the Company. I also understand
that I have the right to consult with an attorney before signing the Separation
Agreement and Release of Claims.
By: /s/ David Hearn
-------------------
David Hearn
Date: March 11, 2002
B A T E S U S A
March 11,2003
David Hearn
157 E. 82nd Street
New York, New York 10028
Re: Your Employment Agreement dated as of March 18, 2002 (the "Employment
Agreement")
Dear David:
We have agreed to modify your Employment Agreement as follows:
1. Paragraph FIRST of the Employment Agreement is hereby modified so as to
reflect your becoming the Chief Executive Officer of Cordiant Communications
Group plc, effective as of January 1,2003, and to modify your reporting, so that
it is henceforth directly to the Board of Directors of Cordiant Communications
Group plc. To effect these changes, paragraph FIRST of the Employment Agreement
is hereby modified to read in its entirety as follows:
"FIRST: The Company shall employ the Executive at its New York City offices
(subject to its normal travel requirements), and the Executive shall serve the
Company during the Term of Employment (as defined below) in the capacity of
Chairman and member of the board of directors of the Company's affiliate, Bates
Worldwide, Inc. ("Worldwide") and as set forth in the following sentence. The
Company shall procure the appointment of the Executive to the Board of Directors
of the Company's ultimate parent, Cordiant Communications Group plc ("CCG")
within ten (10) business days after the Start Date (as defined in Paragraph
SECOND below) and shall cause the Executive to be appointed as the Chief
Executive Officer of CCG, effective as of January 1, 2003, subject always to the
Executive not then being disqualified from acting as a director of an English
public company pursuant to applicable law. The Executive agrees to accept such
appointments and to observe and comply with, and with the policies, procedures
and requirements from time to time reasonably imposed by CCG and its
subsidiaries for the purpose of ensuring compliance with, the Companies Act 1985
and Financial Services and Markets Act of the United Kingdom, as amended, United
States federal and state securities laws and other applicable laws and
regulations, including (without limitation) the Listing Rules of The Financial
Services Authority (the "Listing Rules"), the City Code on Take-overs and
Mergers and the rules and regulations of the United States Securities and
Exchange Commission and of the New York Stock Exchange. In particular, the
Executive shall from time to time supply to the Company Secretary or Chairman of
the Board of CCG such information concerning his interests and dealings in
securities of CCG and those of his immediate family, family trusts and other
connected persons, as is reasonably required to comply with applicable
disclosure requirements and shall comply with the Model Code on directors'
dealings in securities set out in the appendix to Chapter 16 of the Listing
Rules, as implemented by CCG. The Executive shall comply with the CCG Group
Policies Manual as in effect from time to time. As the Chief Executive Officer
of CCG, the Executive shall report directly to the Board of Directors of CCG."
2. Paragraph THIRD of the Employment Agreement is hereby modified so as to
reflect your becoming the Chief Executive Officer of Cordiant Communications
Group plc, effective as of January 1, 2003, and to modify your reporting, so
that it is henceforth directly to the Board of Directors of Cordiant
Communications Group plc. To effect these changes, paragraph THIRD of the
Employment Agreement is hereby modified to read in its entirety as follows:
"THIRD: At all times during which the Executive is in the employ of the
Company, the Executive shall devote substantially all of his time and attention
during business hours to the business and affairs of the Company, Worldwide, CCG
and their affiliates, and shall perform such senior executive and managerial
duties and responsibilities customary to, and consistent with, the positions set
forth in Paragraph FIRST as may be assigned to him by the Board of Directors of
CCG from time to time. The provisions of the foregoing sentence notwithstanding,
the Executive shall, subject to the prior approval of the Remuneration and
Nominations Committee of the Board of Directors of CCG (the "Committee"), be
permitted to devote immaterial amounts of his business time to charity work and
to holding non-executive directorships of companies which do not compete with
CCG."
3. Paragraph FOURTH A of the Employment Agreement is hereby modified to increase
your Salary from $750,000 per annum to $900,000 per annum and shall henceforth
read in its entirety as follows:
"A. The Company shall pay the Executive, and the Executive shall accept,
for his services to the Company while in its active employ hereunder and in
consideration of his agreement not to compete as set forth hereinafter at
Paragraph FIFTH, salary at the rate of at least $900,000 per annum (the
"Salary"), payable in accordance with the Company's standard payroll practices
in effect at such time as the Salary is paid. The Executive shall be entitled to
such annual increases in Salary as may be determined from time to time by the
Company's, Worldwide's arid CCG's Boards of Directors in a manner no less
favorable than that used for other senior executives of the Company and
Worldwide."
4. Paragraph FOURTH B of the Employment Agreement is hereby modified to restate
the Target Bonus as a percent of Salary, rather than as a fixed number and to
clarify that the performance targets to be set shall be based upon the
performance of CCG rather than Worldwide. Therefore, paragraph FOURTH B of the
Employment Agreement shall, for all years subsequent to 2002, read in its
entirety as follows:
"B. In addition to the Salary, the Company shall pay to the Executive an
annual bonus calculated at 70% of Salary, subject to Executive's and CCG's
satisfaction of performance targets set by the Committee (as defined in
Paragraph THIRD above) (the "Target Bonus"). In the event that such performance
targets are exceeded in any year during the Term of Employment, Executive shall
be entitled to receive an additional amount of bonus compensation for such year
as is set forth in a bonus grid for such year approved by the Committee in its
sole discretion (the `Grid"), provided, however, that such additional bonus
compensation, when added to the Target Bonus shall in no event exceed 100% of
the Salary for such year. Similarly, in the event that the performance targets
for such year are not met, the Executive shall be entitled to receive such
portion of the Target Bonus as may be set forth in the Grid for such year.
Except as otherwise expressly set forth herein, bonus compensation (the "Bonus")
shall be payable as and when bonuses are paid by the Company to its employees
generally."
5. Paragraph FOURTH L of the Employment Agreement, which provides for the
Company to pay to you an Expatriate Benefit in the amount of$150,000 per annum,
is hereby deleted and a new Paragraph FOURTH L is hereby inserted, to read in
its entirety as follows:
"L. On or before December 31, 2002, the Company shall pay to the Executive
a special supplementary moving allowance in the amount of $50,000."
6. For the avoidance of doubt, in: (i) Paragraph FOURTH C the words "and one
year's Expatriate Benefit (as defined in Subparagraph L of Paragraph FOURTH)"
are hereby deleted, and (ii) Paragraph NINTH A (1) (b) the "L" is hereby deleted
and the word "and" immediately preceding such "U" is hereby moved so as to
precede "K (2)" in said Paragraph NINTH A (1) (b,).
7. Paragraph TWELFTH A of the Employment Agreement is hereby changed so as to
delete the reference to the Executive's prior address and set forth the current
address of the Executive for purposes of sending notices, as follows:
"If to Executive: David Hearn
157 E. 82nd Street
New York, New York 10028"
If this letter completely and correctly expresses the terms of our agreement
regarding the modification of your Employment Agreement, please so indicate by
signing and returning a copy hereof to me.
Very truly yours,
BATES ADVERTISING USA, INC.
By: /s/ [illegible]
------------------------
Accepted and agreed to:
/s/ David Hearn
- ---------------------
David Hearn
SEPARATION AGREEMENT AND RELEASE OF CLAIMS
This Separation Agreement including a General and Special Release of Claims
(the "Agreement") is entered into by David Hearn ("Executive") and Bates
Advertising USA, Inc. (the "Company"). It is entered into to resolve amicably
all matters between Executive and the Company concerning Executive's employment
and the termination of that employment
1. Termination of Employment. Executive's employment with the Company
terminated effective [DATE] (the "Termination Date").
2. Final Wages and Vacation Pay. The Company will pay (or already has paid)
to Executive all wages earned and all unused vacation accrued through and
including the Termination Date. None of the payments set forth above shall
constitute consideration for the releases and covenants set forth in paragraphs
7 (subparagraphs a-c), 8 and 9 hereof and will be paid to Executive regardless
of whether or not Executive signs and does not revoke this Agreement.
3. Severance Pay. Provided that Executive signs, returns and does not
revoke this Agreement within the time period described in paragraph 12, the
Company will pay Executive severance pay in the amount of [as set forth in The
Employment Agreement, dated as of March [ ], 2002] (the "Severance Pay"). Such
Severance Pay will be paid in a lump sum on the first regular payroll date of
the Company following the expiration of the Revocation Period (as defined in
paragraph 12). Executive acknowledges and agrees that the Severance Pay is
greater than any severance pay to which he would otherwise have been entitled,
and that Executive shall not be entitled to receive any severance pay pursuant
to any other agreements, plans or policies in addition to the Severance Pay.
4. Medical and Dental Continuation Coverage and Other Benefits. After the
Termination Date Executive shall no longer receive any insurance benefits from
the Company and Executive shall be entitled to exercise Executive's rights to
benefits under COBRA, if eligible.
5. Sole Entitlement. Executive acknowledges and agrees that, except as set
forth in this Agreement, he has no right or entitlement to any severance pay or
other severance benefits. Executive acknowledges and agrees that no other wages,
monies or benefits are owing to Executive except as set forth above or with
respect to Executive's vested rights under, and in accordance with the written
terms of: (a) the Company's ERISA and insurance plans, (b) the Cordiant
Communications Group plc Options grants and the Scheme (as those terms are
defined in the Employment Agreement), and (c) in the event that the provisions
of Paragraph NINTH of the Employment Agreement are not applicable, Executive's
pro-rated Bonus pursuant to Paragraph FOURTH C of the Employment Agreement and
his benefits pursuant to Paragraph FOURTH K (2) of the Employment Agreement.
6. Return of Property and Documents. Executive agrees to return to the
Company all property of the Company, its affiliates and their clients which is
in Executive's possession. Executive further agrees that all memoranda, notes,
records or other documents compiled by Executive or made available to Executive
during the term of Executive's employment concerning the business of the
Company, its affiliates and/or their clients is the property of the Company,
whether or not confidential, and has been or will be returned by Executive to
the Company prior to or upon Executive's execution of this Separation Agreement
and Release of Claims. Executive further agrees to cooperate with the Company in
providing information about the status of current projects.
7. Confidentiality and Non-Solicitation.
(a) Executive hereby agrees that Executive will not, at any time, disclose
to anyone any confidential information or trade secret of the Company, its
affiliates or any of their clients, or utilize such confidential information or
trade secret for Executive's own benefit, or for the benefit of third parties,
and that the transfer of any such data, information or materials to any client
shall not render such data, information or materials other than confidential.
(b) Executive further agrees that for a period of twelve months from the
Termination Date Executive shall not attempt in any manner to (i) persuade any
client of the Company or an affiliate of the Company, which was a client of the
Company or such affiliate during Executive's employment with the Company, to
cease to do business or to reduce the amount of business which any such client
has customarily done or contemplates doing with the Company or such affiliate,
whether or not the relationship between the Company or such affiliate and such
client was originally established in whole or in part through Executive's
efforts, (ii) perform any advertising, marketing or merchandising services for
any such client other than on behalf of the Company or such affiliate and (iii)
employ or cause his/her subsequent employer to employ anyone who was an employee
of the Company or any of its affiliates on Executive's Termination Date.
(c) Executive's obligations under paragraphs 7(a) and 7(b) are in addition
to, and not in lieu of, any confidentiality, non-disclosure, non-solicitation
and/or non-compete obligations Executive may have under the terms of any other
written agreement with the Company.
8. General and Specific Release of Claims. Executive (for him/herself,
his/her agents, heirs, successors, assigns, executors and/or administrators)
does hereby and forever release and discharge the Company, as well as its
parents, subsidiaries, affiliates, successors, partners, heirs, predecessors,
and assigns, and the officers, agents, employees, attorneys and representatives
of each of them, past or present (collectively referred to as the "Released
Parties"), from any and all causes of action, actions, judgments, liens, debts,
contracts, indebtedness, damages, losses, claims, liabilities, rights, interests
and demands of whatsoever kind or character, known or unknown, suspected to
exist or not suspected to exist, anticipated or not anticipated, whether or not
heretofore brought before any state or federal court or before any state or
federal agency or other governmental entity, which Executive has or may have
against any of the Released Parties, by reason of any and all acts, omissions,
events or facts occurring or existing prior to the date hereof, including,
without limitation, all claims attributable to the employment of Executive, all
claims attributable to the termination of that employment, and all claims
arising under any federal, state or other governmental statute, regulation or
ordinance or common law, such as, for example and without limitation, the Fair
Labor Standards Act, the Family and Medical Leave Act, the Americans with
Disabilities Act, Title VII of the Civil Rights Act of 1964 and the Civil Rights
Act of 1866. Executive specifically understands and agrees that this Release of
Claims includes any claims he/she might have under the Age Discrimination in
Employment Act, which prohibits discrimination on the basis of age 40 or over.
9. Promise Not To Sue On Claims Released. Executive hereby warrants and
represents that, as of the execution of this Agreement, neither he nor anyone
acting on his behalf has made or filed any charge, complaint or suit against any
of the Released Parties with any federal, state, or local court agency or
authority, or any other regulatory authority. Executive
further acknowledges that, except as such promise may be prohibited by or
unenforceable under law, the Severance Pay is being given to Executive in return
for his promise not to initiate any court or judicial-type proceeding against
the Released Parties that involves any claim that Executive has released in
paragraph 8 of this Agreement, and Executive further covenants not to initiate
any such proceeding. However, nothing in this paragraph shall be construed to
prevent Executive from filing a charge of discrimination with, or participating
in an investigation or proceeding conducted by, the Equal Employment Opportunity
Commission. Further, if any provision of this paragraph 9 shall be held by any
court or agency of competent jurisdiction to be illegal, void or unenforceable,
such provision shall be of no force and effect. The illegality or
unenforceability of any provision in this paragraph 9 shall have no effect upon
the remaining provisions of this Agreement.
10. No Admissions. Nothing contained herein shall be construed as an
admission of wrongdoing or liability by either the Executive or the Company.
11. Entire Agreement. Except as otherwise specifically set forth in
paragraph 7(c), this Agreement constitutes a single integrated contract
expressing the entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior and contemporaneous oral and written
agreements and discussions with respect to the subject matter hereof. There are
no other agreements, written or oral, express or implied, between the parfles
hereto, concerning the subject matter hereof, except as specifically set forth
in paragraph 7(c). This Agreement may be amended or modified only by an
agreement in writing which is signed by both parties to this Agreement and which
specifically states that it is intended to amend or modify this Agreement.
12. Waiting Period and Right of Revocation. EXECUTIVE ACKNOWLEDGES THAT
EXECUTIVE IS AWARE THAT AND IS HEREBY ADVISED THAT EXECUTIVE HAS THE RIGHT TO
CONSIDER THIS AGREEMENT FOR TWENTY-ONE [or 45] DAYS BEFORE SIGNING IT AND THAT
IF EXECUTIVE SIGNS THIS AGREEMENT PRIOR TO THE EXPIRATION OF TWENTY-ONE [or 45]
DAYS, EXECUTIVE IS WAIVING THIS RIGHT FREELY AND VOLUNTARILY. EXECUTIVE ALSO
ACKNOWLEDGES THAT EXECUTIVE IS AWARE OF AND IS HEREBY ADVISED OF EXECUTIVE'S
RIGHT TO REVOKE THIS AGREEMENT FOR A PERIOD OF SEVEN DAYS FOLLOWING THE
EXECUTIVE'S SIGNING OF THIS AGREEMENT (THE "REVOCATION PERIOD") AND THAT IT
SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS
EXPIRED. TO REVOKE THIS AGREEMENT, EXECUTIVE MUST NOTIFY THE COMPANY WITHIN
SEVEN DAYS OF SIGNING IT. ANY SUCH NOTIFICIATION SHOULD BE IN WRITING AND SENT
TO THE FOLLOWING ADDRESS:
Anne Melanson
Executive Vice President, Director of Human Resources
Bates Advertising USA, Inc.
498 Seventh Avenue
New York, New York 10018
13. Attorney Advice. EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE IS AWARE OF
EXECUTIVE'S RIGHT TO CONSULT AN ATTORNEY, THAT EXECUTIVE HAS BEEN ADVISED TO
CONSULT WITH AN ATTORNEY, AND THAT EXECUTIVE HAS HAD THE OPPORTUNITY TO
CONSULT WITH AN ATTORNEY, IF DESIRED, PRIOR TO SIGNING THIS AGREEMENT.
14. Understanding of Agreement. Executive states that Executive has
carefully read this Agreement, that Executive has had sufficient time and
opportunity to consider its terms and to obtain legal advice, if desired, that
Executive fully understands its final and binding effect, that the only promises
made to Executive to sign this Agreement are those stated above, and that
Executive is signing this Agreement voluntarily.
Dated: Bates Advertising USA, Inc.
By __________________________________
Anne Melanson
Executive Vice President, Director of
Human Resources
AGREED TO AND ACCEPTED:
______________________________
David Hearn
DATE: ________________________
STATE OF
COUNTY OF
On the ________________ day of [MONTH and YEAR] before me personally came
David Hearn, to me known, and known to me to be the individual described in, and
who executed, the foregoing Separation Agreement And Release Of Claims, and duly
acknowledged to me that he executed the same.
______________________________
NOTARY PUBLIC