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SERVICE AGREEMENT

Consulting Services Agreement

SERVICE AGREEMENT | Document Parties: WPP GROUP PLC | SIR MARTIN STUART SORRELL You are currently viewing:
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WPP GROUP PLC | SIR MARTIN STUART SORRELL

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Title: SERVICE AGREEMENT
Governing Law: Delaware     Date: 6/30/2005
Industry: Advertising     Sector: Services

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Exhibit 4.36

 

 

 

 

 

 

 

 

 

 

 

DATED 16 th August 2004

    

 

 

 

 

 

 

WPP GROUP USA, INC.

    

(1)

 

 

 

 

 

and

    

 

 

 

 

 

 

SIR MARTIN STUART SORRELL

    

(2)

 

 

 

 

 


SERVICE AGREEMENT

in the USA effective from the date hereof


 

    

 


DATE OF SERVICE AGREEMENT 16 th August 2004

 

PARTIES

 

(1)

WPP GROUP USA, INC, a Delaware Corporation of 125 Park Avenue, New York, New York 10017-5529 (the “Company”)

 

(2)

SIR MARTIN STUART SORRELL with a business address at 125 Park Avenue, New York, New York 10017-5529 (the “Executive”)

 

INTRODUCTION

 

A

The Company employs the Executive in the United States of America in order to assist the Company, its Affiliates and Subsidiaries in the management, control, organisation and development of their respective businesses and trades within the United States of America pursuant to an agreement embodying the terms of such employment dated 14 May 2001 (the “2001 Agreement”).

 

B

The Company and the Executive desire to continue such employment, subject to the terms and provisions of the 2001 Agreement but with the modifications herein contained (the “Agreement” ).

 

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for other good and valuable consideration, the receipt of which is mutually acknowledged, the Company and the Executive (individually a “Party” and together the “Parties”) agree as follows:

 

IT IS AGREED THAT:

 

1

DEFINITIONS

 

“Affiliate” of a person or other entity shall mean a person or other entity that directly or indirectly controls, is controlled by, or is under common control with the person or other entity specified.

 

“Base Salary” shall mean the salary provided for in clause 7.1 below or any increased salary granted to the Executive pursuant to clause 7.1.

 

“Board” shall mean the Board of Directors of the Company.

 

“Compensation Committee” shall mean the Compensation Committee of the Board of Directors of the Parent.

 

“Group” shall mean the Company and the Parent together with their Subsidiaries and Affiliates and “Group Company” shall be anyone of them.

 

“Parent” shall mean WPP Group plc.

 

“Schedule” shall mean Schedule 1 attached hereto.

 

“Subsidiary” shall mean any corporation of which the Company owns, directly or indirectly, more than 50% of the Voting Stock.

 

“Term of Employment” shall mean the period specified in clause 3 below.

 

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“UK Employment Contract” shall mean an agreement between the Parent and the Executive which is effective from April 1, 2005.

 

“UK Services Agreement” shall mean an agreement of even date between the Parent and J.M.S. Financial Services Limited.

 

“Voting Power” shall mean the number of votes available to be cast (determined by reference to the maximum number of votes entitled to be cast by the holders of such Voting Stock upon any matter submitted to stockholders where the holders of all Voting Stock vote together as a single class) by the holders of Voting Stock.

 

“Voting Stock” shall mean capital stock of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the Executives of a corporation.

 

2

APPOINTMENT

 

2.1

During the Term of Employment, the Company shall employ the Executive to provide services in the United States of America and the Executive:

 

 

(a)

shall use his best endeavours to promote the interests of the Company, its Affiliates and Subsidiaries and also Group Companies in the United States of America in the management, control, organisation and development of their respective businesses and trades and in addition the Executive shall comply with all reasonable directions which the Board may give to him and the Executive shall furnish to the Board all such explanations, information and assistance as it may reasonably require;

 

 

(b)

will not, without first obtaining the prior written approval of the Company, on his own behalf enter into any contract or other arrangement with any other firm, person or company whose business is in competition with the businesses of the Company or any Group Company.

 

2.2

During the Term of Employment under this Agreement the Executive shall be a member of the Board and of the Board of Executives of such Group Company as the Parties from time to time shall agree and the Executive shall continue in his current positions as Chairman, President and Chief Executive Officer of the Company in which capacity he shall, subject to clause 2.1(a), be responsible for the overall management control, organisation and development of the affairs of the Company, its Affiliates and Subsidiaries and also the Group Companies in the United States of America and he shall be responsible to the Board for all aspects of the conduct of such businesses.

 

3

TERM OF EMPLOYMENT

 

3.1

The Company hereby agrees to continue to employ the Executive, and the Executive hereby accepts such continued employment and, subject to clause 15, such employment shall last until 31 August 2005 and continue thereafter, provided that after August 31, 2005 the Company and the Executive can terminate the Term of Employment by written notice taking effect immediately on the date of its service on the other party, in which event the Executive’s employment with the Company shall terminate as of the date of such notice. Any notice to terminate the Term of Employment given by either the Executive or the Company after 31 August 2005 (other than a notice by the Company pursuant to clause 15.1 hereof) shall be deemed to be a notice given by such party on the grounds of the Executive’s retirement and upon giving such notice, the Executive shall be deemed to have retired and qualified for retirement treatment for purposes of all

 

3


plans, policies, programs, arrangements of, or other agreements with, the Company or any Group Company. In the event of any termination of the Term of Employment after August 31, 2005, save as provided in clause 3.2 and clause 22 below, the Executive will have no entitlement to any further payments from the Company hereunder and he hereby irrevocably waives any entitlement to notice or pay and/or benefits in lieu of any period of notice. Nothing in this clause 3.1 shall prejudice the Company’s right to terminate the Term of Employment hereunder pursuant to clause 15.1 hereof.

 

3.2

Following termination of the Term of Employment the Executive shall continue to be entitled to receive amounts due hereunder which are accrued up to and including the date on which the employment terminates but not yet paid, subject to any adjustment under clause 7.2 and/or clause 12.3, if applicable.

 

4

DIRECTOR’S FEES

 

Unless otherwise agreed in writing between the Company and the Executive the Executive shall not be entitled to any director’s fees from the Company or from any Group Company in addition to the remuneration payable by the Company to the Executive hereunder; provided that if the Executive is at any time removed from the office of director whether of the Company or the Parent the Term of Employment shall automatically terminate and such termination shall be deemed to be by the Company for a reason other than provided for in clauses 15.1 or 15.2 of this Agreement.

 

5

ACCOMMODATION

 

5.1

The Company undertakes to the Executive to provide suitable offices and suitable office and secretarial facilities for his use as are compatible with the Executive’s role as President and Chief Executive Officer of the Company and the Executive shall carry out his duties there and in such other places as the Executive judges appropriate.

 

5.2

The Company shall make available for the use of the Executive (at the expense of the Company) an apartment in New York City while the Executive is in New York City and engaged in or conducting business on behalf of the Company or its Subsidiaries and Affiliates, including, but not limited to, any company referred to in clause 2.2.

 

6

HOURS OF WORK

 

The Executive shall work at such times and for such periods as the efficient and conscientious discharge of his duties hereunder shall reasonably require. There are no normal working hours for the Executive. The Company acknowledges that the Executive has obligations under the UK Services Agreement and thereafter the UK Employment Contract for the provision of his services which will affect the time during which and the times at which he can discharge his duties under this Agreement.

 

7

SALARY

 

7.1

The Company shall pay to the Executive a Base Salary for each calendar year calculated and determined in accordance with the Schedule. The Base Salary shall accrue from day to day.

 

7.2

The Company will pay on 1 st January and 1 st July (or such other dates as may be agreed from time to time between the Company and Services) in each year during the Term of Employment hereunder instalments of an amount on account of the Base Salary payable under clause 7.1 above for that year (which for 2004 shall include services provided by the Executive under the 2001 Agreement), provided that as of July 1, 2005, the Company

 

4


will pay such Base Salary due for the particular year in 12 equal monthly instalments in arrears. Prior to July 1, 2005, each of the instalments will be equal to one-half of 40% of the Aggregate Basic Income (as defined in the Schedule) for such year and on and after July 1, 2005, such instalments will be equal to one-twelfth of 40% of such Aggregate Basic Income. Except as otherwise set forth herein, any instalment due hereunder shall be payable in accordance with the regular payroll practices of . the Company. At appropriate times during the year adjustments shall be made to reflect the US Time (as defined in the Schedule) and such adjustments may be made by adjusting the amount of Base Salary paid for future services hereunder or by adjusting the portion of the bonus earned for the year in which such Base Salary is being adjusted that is attributable to US Time (as defined in the Schedule).

 

8

ANNUAL INCENTIVE AWARDS

 

8.1

The Executive shall, subject to satisfaction of the criteria set out below and subject to any adjustment as set forth in clause 7.2 above, also be entitled to receive, within 30 days following the finalisation of the final audited results of the Parent in respect of each financial year of the Parent that occurs during the Term of Employment hereunder, a bonus determined by reference to the financial performance of the Parent for the period to which it relates payable, if in cash, in a lump sum. The bonus shall be deemed to accrue from day to day during the period to which it relates and determined and based on three separate components, each comprising one-third of the amount of the bonus, as follows:

 

 

(a)

One component is based on financial performance of the Parent measured against budgeted operating profit and cash flow to be agreed between the Executive and the Company in consultation with the Compensation Committee (but which shall be measured in the same way as the Parent’s financial performance for the purpose of calculating bonus payments for the Group’s other senior executives).

 

 

(b)

One component is based on the Parent’s performance relative to a peer group of major public advertising companies. The peer group will be reviewed by the Company and the Parent from time to time as necessary and any changes to the peer group will be notified to the Executive, provided .always that the Company and the Parent will act reasonably and will consult with the Executive prior to making any changes to the companies in the peer group.

 

The performance levels and the criteria for achieving them will be agreed between the Executive and the Company in respect of each year and will take into account the following criteria inter alia:

 

 

 

Total shareholder return (i.e. share price appreciation plus reinvestment of dividends in shares);

 

 

 

Increase in operating profit;

 

 

 

Increase in earnings per share and/or operating margins.

 

Adjustments shall be made in relation to the Parent and the peer group of companies referred to above as necessary to enable an accurate comparison of performance to be made, provided always that the Company and the Parent will act reasonably and will consult with the Executive prior to making any such adjustments.

 

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(c)

One component shall be based on the achievement of key strategic initiatives which shall be agreed by the Executive and the Company as early as practicable during the relevant year.

 

    

The total bonus comprising each of the three components shall be targeted so as to equal 100 per cent of the Base Salary under clause 7.1 as at 31 December of the relevant year (calculated in accordance with the Schedule) and the maximum bonus shall be 200 per cent of that Base Salary.

 

    

The Executive and the Company may agree from time to time an alternative structure for determining the bonus payable under this dause, including the target and maximum amounts of that bonus.

 

8.2

If after 31 August 2005, either the Executive or the Company terminates the Term of Employment for whatever reason (and in the Company’s case other than pursuant to clause 15.1 hereof), after the end of the performance period to which the bonus period refers but prior to the payment date of any such bonus, the Executive will continue to be treated on the same basis as if he were employed on the relevant payment date. For the avoidance of doubt, if the Executive or Company terminate the Term of Employment at any time before the end of the performance period referred to thenthe Executive loses all and any rights under this clause and the Executive has no rights against the Company and/or Parent in respect of the same except as otherwise provided pursuant to the applicable annual incentive plan.

 

9

OTHER INCENTIVE AWARDS

 

The Executive shall have no entitlement to participate in any incentive arrangements for executives, except as expressly provided herein, or as agreed in writing in advance by the Company or the Parent. The Executive shall be entitled at the discretion of the Compensation Committee of the Company to participate in the WPP Group plc Leadership Equity Acquisition Plan, the WPP Performance Share Plan and such other plans and arrangements which at the discretion of such Compensation Committee shall be made available for the most senior executives of the Company and the Group Companies, subject always to the rules of the applicable plan or scheme.

 

10

EXPENSES

 

The Executive is authorised to incur reasonable expenses in carrying out his duties and responsibilities under this Agreement and the Company shall promptly reimburse him for all business expenses incurred in connection with carrying out the business of the Company, subject to documentation in accordance with the Company’s policy.

 

11

CAR AND CLUB

 

The Company shall make available to the Executive as required a car and driver appropriate for his sole use. The Company shall maintain, service, and comprehensively insure the car as appropriate and shall arrange for the supply to the Executive of fuel for his use in such car. The Company shall also pay the cost and shall reimburse the Executive for his reasonable properly vouchered club expenses incurred in connection with the Company’s business in accordance with Company policy as from time to time in effect.

 

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12

INSURANCES AND PENSION

 

12.1

The Company shall or will procure that the Parent shall provide for the benefit of the Executive and his dependants life and accident assurance and health insurance and any other benefits as may be agreed between the Company and the Executive.

 

12.2

The Company shall pay 50% of the reasonable cost of providing for the benefit of the Executive and his dependants insurance cover on such basis and for such amounts, as shall from time to time be agreed between the Company and the Executive provided that such cover is available, which provides a payment in the event that the Term of Employment is terminated because of the Executive’s death, ill-health or disability.

 

12.3

Unless otherwise agreed between the parties, the Executive shall be entitled to a supplemental pension to be funded by or on behalf of the Company by an annual payment of a sum (the “Pensions Contribution”) calculated in accordance with the Schedule, provided that as of January 1, 2006 and thereafter, the Company shall establish an appropriate funding mechanism for the payment of such Pensions Contribution or payment or provision in lieu thereof. An amount on account of the Pensions Contribution will be paid or funded, as the case may be, on the first day of January of each year during the Term of Employment under this Agreement in respect of the year for which it is paid equal to 40% of the Aggregate Pensions Provision (as defined in the Schedule) at that time, provided that as of January 1, 2006, the annual amount due hereunder shall be paid or funded in equal instalments in arrears on 31 March, 30 June, 30 September and 31 December in respect of the year for which it is paid. All necessary adjustments to reflect US Time (as defined in the Schedule) in the manner described in clause 7.2 above for adjusting the Base Salary shall be made after the Pensions Contribution for that year has been calculated after the end of that year for the purposes of 2004 and 2005 and for the purposes of 2006 and thereafter at regular times during the year in accordance with the understanding between the Parties.

 

13

VACATION

 

13.1

In addition to bank and other public holidays in the United Kingdom the Executive shall be entitled to six weeks paid vacation per year.

 

13.2

The vacation shall be taken at such time or times as the Executive shall decide but in any event it shall be taken at the same time as the Executive’s holiday entitlement from the Parent.

 

14

SICKNESS ABSENCE

 

14.1

Subject to clause 3.1, the Company shall continue to pay to the Executive afl sums due to him (without deduction) during any period of absence from work due to his illness or disability.

 

15

TERMINATION OF EMPLOYMENT

 

15.1

In any of the following cases, but without prejudice to clause 3.1, the Company may terminate the Term of Employment by written notice taking effect on the date of its service on the Executive in which case the Executive shall not be entitled to any further payment from the Company hereunder (other than pursuant to clause 22 hereof, if applicable) except such sums as shall then have accrued or become due.

 

 

(a)

If the Executive is convicted in the United States of a felony involving moral turpitude, fraud or dishonesty and sentenced to a term of imprisonment.

 

7


 

(b)

If the Executive engages in conduct that constitutes wilful gross neglect or wilful gross misconduct in carrying out his duties under this Agreement, resulting, in either case, in material economic harm to the Company.

 

 

(c)

If the Executive be adjudicated bankrupt under the laws of the United Kingdom.

 

 

(d)

If the Executive resigns as a director of the Parent prior to 31 August 2005 without having obtained the Parent’s prior written agreement, save for just cause by the Executive or at the Company’s written request, provided that “just cause” shall not include resignation as a result of the Executive’s own act or omission as a director.

 

 

(e)

If the Parent terminates the Term of Appointment under the UK Services Agreement pursuant to clause 16.1 thereof or thereafter terminates the Term of Employment under the UK Employment Contract pursuant to clause 14.1 thereof.

 

15.2

The Company may terminate the Term of Employment by reason of the Executive’s illness or disability by giving written notice to the Executive in any of the following cases:

 

 

(a)

the Executive is substantially unable properly to perform the duties required under this Agreement by reason of illness or physical or mental incapacity or disability (irrespective of the cause or causes) for a period of 180 consecutive working days or for a period or periods aggregating at least 261 working days in any period of 18 months.

 

 

(b)

the Executive is permanently prevented as a result of any deterioration of his health from providing the services to the Company which he is required to provide under this Agreement and in particular to act as President and Chief Executive Officer of the Company. Whether or not the Executive is permanently incapacitated shall be determined by a medical doctor selected by the Parties, and in default of agreement by such medical doctor appointed by the President of the British Medical Association.

 

15.3

Without prejudice to the Executive’s right to accept other repudiatory breaches of this Agreement by the Company as terminating the Term of Employment hereunder, in any of the following cases the Executive may terminate the Term of Employment by written notice taking effect on the date of its service on the Company:

 

 

(a)

if the Company reduces the then current Base Salary, the bonus or incentive provisions contained in clause 8 or 9 and the Schedule to this Agreement, the payment in respect of pension benefits contained in clause 12.3 and the Schedule to this Agreement or any other material benefits provided under this Agreement without the Executive’s prior written consent;

 

 

(b)

if without first obtaining the written consent of the Executive, the Company:

 

 

(i)

appoints any executive to whom the Executive reports or to work jointly with the Executive in his capacity as Chairman, President or Chief Executive Officer;

 

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(ii)

permits or procures the Executive’s functions or duties to be materially diminished in any way; or

 

 

(iii)

permits or procures an assignment of duties to the Executive which are materially inconsistent with his duties as Chairman, President or Chief Executive Officer of the Company;

 

 

(c)

if there is a failure to elect or re-elect the Executive to any of the positions described in clause 15.3(b)(i) above or removal of him from any such position without obtaining his written consent; or

 

 

(d)

if (i) any person (as such term is used in Sections 3(a)(9) and 13(d) of the Securities Exchange Act of 1934) becomes the beneficial owner (as such term is used in Rule 13d-3 promulgated under the said Act) of a greater percentage of the Voting Stock of the Company than the percentage of such Voting Stock then held directly or indirectly by the Parent, (ii) the Company adopts any plan of liquidation providing for the distribution of all or substantially all of its assets; (iii) all or substantially all of the assets or business of the Company is disposed of pursuant to a merger, consolidation or other transaction (unless the Parent owns all of the Voting Stock of the surviving corporation); or (iv) the Company combines with another company and is the surviving corporation but, immediately after the combination, the Parent holds directly or indirectly, 50% or less of the Voting Stock of the combined company (each of the foregoing occurrences referred to as a “US Divestment”), and the Parent does not offer or procure that another Group Company offers the Executive or J.M.S. Financial Services Limited (as the case may be), and with effect from the commencement of the UK Employment Contract the Executive only, employment or an agreement, which employment or agreement shall be on the same terms as this Agreement, including, but not limited to, the same Term of Employment as this Agreement, within 28 days of the date of a US Divestment becoming effective.

 

And any such termination shall be deemed to be a termination of the Term of Employment by the Company without cause for the purposes of clause 20 below.

 

15.4

If the Term of Appointment under the UK Services Agreement or the Term of Employment under the UK Employment Contract terminates for any reason whatsoever the Company or the Executive (as the case may be) may terminate the Term of Employment hereunder, provided that any such termination shall be deemed to be on the same basis as the Term of Appointment under the UK Services Agreement or the Term of Employment under the UK Employment Contract, as the case may be, was terminated.

 

15.5

 

 

 

(a)

Subject always to the provisions of clause 15.6, in the event it shall be determined that any payment, benefit, entitlement or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the United States Internal Revenue Code) to or for the benefit of the Executive by the Company or any Group Company, whether paid or payable pursuant to this Agreement or otherwise (the “Payment”), would be subject to any excise tax imposed by Section 4999 of the Internal Revenue Code or any similar tax that may hereafter be imposed (“Excise Tax”), then the Executive shall be entitled to receive an additional payment (the “Gross-Up Payment”) in an amount such that and subject to the adjustments pursuant to the provision of Clause 15.6, after payment by the Executive of all taxes, whether imposed under United States or United Kingdom tax laws, including, without limitation, any income, employment, excise or other taxes (which shall include social security, Medicare and similar imposts), the

 

9


Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. All determinations required to be made pursuant to this clause, including whether and when a Gross-Up Payment is required, the amount of such Gross-Up Payment and the assumptions to be utilised in arriving at such determination, shall be made by an independent auditor (the “Auditor”) jointly selected by the Company and the Executive and paid by the Company. The Auditor shall be a nationally recognised United States public accounting firm which has not, during the two years preceding the date of its selection, acted in any way on behalf of the Company or any Group Company. If the Executive and the Company cannot agree on the firm to serve as the Auditor, then the Executive and the Company shall each select one accounting firm and those two firms shall jointly select the accounting firm to serve as the Auditor. The Auditor shall be requested to provide detailed supporting calculations both to the Company and the Executive within 30 business days of a request for a determination by the Company. The Executive may request such determination by providing written notice thereof to the Company, which will promptly thereafter make such a request of the Auditor. The Auditor shall also make any determination as to whether any Payment shall be required to be reduced pursuant to Rule 11.1 of LEAP. In the event the Auditor determines that the Executive will be better off with a reduction (after taking into account all arrangements between the Company and the Executive including the arrangement for the Gross-Up Payment pursuant to this Clause 15.5(a)) such reduction shall be made even if not required by the terms of Rule 11.1 of LEAP.

 

 

(b)

Any Gross-Up Payment shall be paid by the Company to the Executive within 10 days of the receipt of the Auditor’s determination. Any determination by the Auditor shall be binding upon the Company and the Executive; provided, however, the Executive will be obligated hereunder to follow the determination of the Auditor only if the Auditor has confirmed in writing that there is “substantial authority” for such position within the meaning of Treas. Reg. Section 1.6662-4(d). If the Auditor has determined that a Gross-Up Payment is not required but has not confirmed that there is substantial authority for its position, the Auditor shall compute the amount of the Gross-Up Payment that would be due to the Executive if the Auditor had determined that such payment was required. if the Auditor’s determination of the amount of the Excise Tax payable by the Executive (including a determination that no Excise Tax is owing), is found to be erroneous (other than by reason of the Executive not providing the Auditor with accurate and complete information regarding his circumstances in a timely manner) and, as a result of such erroneous determination the Executive fails to report the full amount of the Excise Tax determined to be due on his applicable income tax return, then the Company shall indemnify the Executive, subject to the procedures provided in Clause 15.5(c), on a f


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