YOUNG & RUBICAM INC, 424B4, 1998-05-12

YOUNG & RUBICAM INC
424B4, 1998-05-12
ADVERTISING AGENCIES

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<PAGE> 1
Filed pursuant to Rule 424(b)(4)
Registration Nos. 333-46929 and 333-52395

PROSPECTUS

May 11, 1998
16,600,000 SHARES

[YOUNG & RUBICAM INC. LOGO]
COMMON STOCK

Of the 16,600,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), of Young & Rubicam Inc. ("Y&R" or the "Company") offered
hereby, 13,280,000 shares are initially being offered in the United States and
Canada (the "U.S. Offering") by the underwriters of the U.S. Offering named
herein (the "U.S. Underwriters") and 3,320,000 shares are initially being
offered in a concurrent international offering outside the United States and
Canada (the "International Offering," and together with the U.S. Offering, the
"Offerings") by the managers of the International Offering named herein (the
"International Managers"). The initial public offering price and the per share
underwriting discounts and commissions will be identical for each of the
Offerings. Of the 16,600,000 shares of Common Stock offered hereby, 6,912,730
shares are being sold by the Company and 9,687,270 shares are being sold by
certain selling stockholders (the "Selling Stockholders"). The Company will not
receive any of the proceeds from the sale of shares of Common Stock by the
Selling Stockholders. See "Principal and Selling Stockholders."

Prior to the Offerings, there has been no public market for the Common
Stock. For information relating to the factors considered in determining the
initial public offering price, see "Underwriting."

The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "YNR."

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES
OFFERED HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO THE DISCOUNTS AND TO THE THE SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share.................... $25.00 $1.375 $23.625 $23.625
Total(3)..................... $415,000,000 $22,825,000 $163,313,246 $228,861,754
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The Company and the Selling Stockholders have agreed to indemnify the U.S.
Underwriters and the International Managers (collectively, the
"Underwriters") against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses estimated at $2,250,000 which will be paid by the
Company.

(3) Certain non-management Selling Stockholders have granted to the U.S.
Underwriters an option, exercisable within 30 days of the date hereof, to
purchase up to an aggregate of 2,490,000 additional shares of Common Stock
at the Price to the Public less Underwriting Discounts and Commissions,
solely to cover over-allotments, if any. If the option is exercised in full,
the total Price to the Public, Underwriting Discounts and Commissions,
Proceeds to the Company and Proceeds to the Selling Stockholders will be
$477,250,000, $26,248,750, $163,313,246 and $287,688,004, respectively. See
"Underwriting."

The shares of Common Stock offered hereby are being offered by the several
U.S. Underwriters when, as and if delivered to and accepted by the U.S.
Underwriters against payment therefor and subject to various prior conditions,
including their right to reject orders in whole or in part. It is expected that
delivery of share certificates representing the Common Stock will be made in New
York, New York on or about May 15, 1998.

JOINT GLOBAL COORDINATORS AND JOINT BOOK-RUNNING MANAGERS
DONALDSON, LUFKIN & JENRETTE BEAR, STEARNS & CO. INC.
SECURITIES
CORPORATION
------------------------------
FURMAN SELZ
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
<PAGE> 2

[INTERNATIONAL COVER PAGE]
PROSPECTUS

May 11, 1998
16,600,000 SHARES

[YOUNG & RUBICAM INC. LOGO]
COMMON STOCK

Of the 16,600,000 shares of Common Stock, par value $.01 per share (the
"Common Stock"), of Young & Rubicam Inc. ("Y&R" or the "Company") offered
hereby, 3,320,000 shares are initially being offered outside the United States
and Canada (the "International Offering") by the managers of the International
Offering named herein (the "International Managers") and 13,280,000 shares are
initially being offered in a concurrent offering in the United States and Canada
(the "U.S. Offering," and together with the International Offering, the
"Offerings") by the underwriters of the U.S. Offering named herein (the "U.S.
Underwriters"). The initial public offering price and the per share underwriting
discounts and commissions will be identical for each of the Offerings. Of the
16,600,000 shares of Common Stock offered hereby, 6,912,730 shares are being
sold by the Company and 9,687,270 shares are being sold by certain selling
stockholders (the "Selling Stockholders"). The Company will not receive any of
the proceeds from the sale of shares of Common Stock by the Selling
Stockholders. See "Principal and Selling Stockholders."

Prior to the Offerings, there has been no public market for the Common
Stock. For information relating to the factors considered in determining the
initial public offering price, see "Underwriting."

The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "YNR."

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN RISKS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES
OFFERED HEREBY.

(2) Before deducting expenses estimated at $2,250,000 which will be paid by the
Company.

The shares of Common Stock offered hereby are being offered by the several
International Managers when, as and if delivered to and accepted by the
International Managers against payment therefor and subject to various prior
conditions, including their right to reject orders in whole or in part. It is
expected that delivery of share certificates representing the Common Stock will
be made in New York, New York on or about May 15, 1998.

JOINT GLOBAL COORDINATORS AND JOINT BOOK-RUNNING MANAGERS
DONALDSON, LUFKIN & JENRETTE BEAR, STEARNS INTERNATIONAL LIMITED
INTERNATIONAL
------------------------------
FURMAN SELZ
GOLDMAN SACHS INTERNATIONAL
SALOMON SMITH BARNEY INTERNATIONAL
<PAGE> 3

[Photograph of a magazine open to a page containing a print advertisement for
Young & Rubicam Inc.]

[fold-out page]

[Photograph of keys of computer keyboard very close-up predominantly in green. A
question mark, semicolon, colon and comma are identifiable.]

[fold-out page]

[Photograph of printing press roller of typewritten numbers and symbols very
close-up predominantly in purple. The numbers 3, 4, 5, 6, 7, 8 and 9 and a plus
sign are repeated in rows on the page.]

CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERINGS,
AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 4

This Prospectus, information included in future filings by the Company with
the United States Securities and Exchange Commission (the "Commission"), and
information contained in written material, press releases and oral statements
issued by or on behalf of the Company contain, or may contain, statements that
constitute forward-looking statements. These statements appear in a number of
places in this Prospectus and include statements regarding the intent, belief or
current expectations of the Company or its officers (including statements
preceded by, followed by or that include forward-looking terminology such as
"may," "will," "should," "believes," "expects," "anticipates," "estimates,"
"continues" or similar expressions or comparable terminology, including the
negative thereof) with respect to various matters. These forward-looking
statements include statements in the "Business -- Industry Overview,"
" -- Industry Trends" and " -- Strategy" sections of this Prospectus relating to
trends in the advertising and marketing and communications industries, including
with respect to anticipated advertising expenditures (and the growth thereof) in
the world's advertising markets, as well as statements relating to the Company's
performance in the "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Business" sections of this Prospectus. It is
important to note that the Company's actual results could differ materially from
those anticipated in these forward-looking statements depending on, among other
important factors, (i) revenues received from clients, including pursuant to
incentive compensation arrangements entered into by the Company with certain
clients, (ii) gains or losses of clients and client business and projects, as
well as changes in the marketing and communications budgets of clients, (iii)
the overall level of economic activity in the principal markets in which the
Company conducts business and other trends affecting the Company's financial
condition or results of operations, (iv) the impact of competition in the
marketing and communications industry and (v) the Company's liquidity and
financing plans. All forward-looking statements in this Prospectus are based on
information available to the Company on the date hereof. In addition, the
matters set forth under the caption "Risk Factors" in the Prospectus constitute
cautionary statements identifying important factors with respect to such
forward-looking statements, including certain risks and uncertainties, that
could cause actual results to differ materially from those in such
forward-looking statements.

Information regarding worldwide advertising expenditures, historical and
projected growth in advertising expenditures and comparative rankings of the
size of Young & Rubicam Inc., its affiliates, subsidiaries and operating units
has been obtained from industry sources, principally Advertising Age,
McCann-Erickson Report, O'Dwyer's PR Services Report, Med Ad News and Design
Week. All information regarding comparative size rankings is based on 1996
billings or revenues.

References in this Prospectus to the years 1993, 1994, 1995, 1996 and 1997
are, unless the context otherwise requires, to the Company's fiscal years ended
December 31.

Young & Rubicam, Y&R, Young & Rubicam Advertising, Y&R Advertising,
Wunderman Cato Johnson, WCJ, The Chapman Agency, The Bravo Group,
Burson-Marsteller, Marsteller Advertising, Cohn & Wolfe, Landor Associates,
Sudler & Hennessey, BrandAsset Valuator, Brand Dialogue, The Media Edge and The
Mead Point Group are trademarks of the Company. Other trademarks referenced
herein are trademarks of their respective legal owners.

3
<PAGE> 5

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the Company's consolidated financial
statements and notes thereto (the "Consolidated Financial Statements"),
appearing elsewhere in this Prospectus. Except as otherwise indicated herein,
the information in this Prospectus (i) reflects a stock dividend of 14 shares of
Common Stock payable for each share of Common Stock outstanding as of the date
of effectiveness of the Registration Statement of which this Prospectus is a
part, payable on such date (the "Stock Split"), (ii) reflects the effectiveness,
upon the closing of the Offerings, of an Amended and Restated Certificate of
Incorporation and Amended and Restated By-Laws of Young & Rubicam Inc. and (iii)
assumes that the U.S. Underwriters' over-allotment option is not exercised.
Unless otherwise indicated, all references to the "Company" and "Y&R" refer to
Young & Rubicam Inc., its predecessors and its consolidated subsidiaries,
including Young & Rubicam L.P.

THE COMPANY

Young & Rubicam Inc. is the fifth largest consolidated marketing and
communications organization in the world. Since its founding 75 years ago, Y&R
has evolved from a single New York-based advertising agency to a diversified
global marketing and communications company operating in 128 cities in 76
countries worldwide as of December 31, 1997. The Company operates through such
internationally recognized market leaders as Young & Rubicam Advertising
(full-service advertising), Wunderman Cato Johnson (direct marketing and sales
promotion), Burson-Marsteller (perception management and public relations),
Landor Associates (branding consultation and design services) and Sudler &
Hennessey (healthcare communications). Y&R's revenues in 1997 were approximately
$1.4 billion, having grown at a compound annual rate of 12.9% from 1995 to 1997.

Through multi-disciplinary, client-focused teams, Y&R provides clients with
global access to fully integrated marketing and communications solutions. Among
Y&R's approximately 5,500 client accounts are a number of large multinational
organizations, including AT&T, Citibank, Colgate-Palmolive, Ford and Philip
Morris. Y&R has maintained long-standing relationships with many of its clients,
with the average length of relationship for the top 20 clients exceeding 20
years.

Y&R's mission is to be its clients' most valued business partner in
building, leveraging, protecting and managing clients' brands for both
short-term results and long-term growth. Consistent with its mission, Y&R has
developed an organizational and management structure designed to meet the
diverse needs of its large global clients as well as the more specialized needs
of its other clients. The Company's strategy combines this organizational and
management structure with the aggressive pursuit of new business opportunities
and continued investment in Y&R's business, personnel and superior consumer
knowledge.

In late 1992, Y&R created the Key Corporate Account ("KCA") program to
enhance the coordination of services sought by clients from both a global
coverage as well as an integrated solutions perspective. KCAs are large global
client accounts that, as a group, contribute the greatest share of Y&R's
revenues and profits, and are served on a multinational basis by two or more of
Y&R's businesses. Y&R currently designates 42 of its client accounts as KCAs.
Revenues from the KCAs, as a group, increased by 14.6% in 1997, and accounted
for approximately 45.5% and 46.1% of consolidated revenues in 1996 and 1997,
respectively. In order to further strengthen client relationships and reward Y&R
for meeting or exceeding certain performance targets, Y&R is working with KCAs
to adopt incentive compensation arrangements that align Y&R's compensation with
its performance and its clients' business performance.

As part of Y&R's client focus, Peter A. Georgescu, Chairman and Chief
Executive Officer of Y&R, John P. McGarry, Jr., President of Y&R, Edward H.
Vick, Chief Operating Officer of Y&R and the Chairman and Chief Executive
Officer of Young & Rubicam Advertising, and Thomas D. Bell, Jr., Executive Vice
President of Y&R and President and Chief Executive Officer of Burson-Marsteller,
all retain ongoing responsibilities for individual KCAs in addition to their
managerial roles.

4
<PAGE> 6

INDUSTRY TRENDS

The marketing and communications industry encompasses a wide range of
services used to develop and deliver messages to both broad and targeted
audiences through multiple communications channels. Several significant trends
are changing the dynamics of the marketing and communications industry,
including the following:

Growth in United States Marketing and Communications Markets. Advertising
expenditures in the United States have continued to grow, increasing from
approximately $140 billion in 1993 to approximately $175 billion in 1996.

Growth in International Marketing and Communications Markets. Since 1986,
non-U.S. advertising expenditures have grown more rapidly than U.S.
expenditures, and according to industry sources, have increased from
approximately 44% of worldwide expenditures in 1986 to approximately 55% in
1996.

Investment in Brand Development. Over the last several years, advertisers
have focused on the image or brand identity of their organizations, products and
services in an effort to differentiate themselves from competitors and increase
brand loyalty.

Demand for Integrated Service Offerings. Demand has increased for globally
integrated marketing and communications solutions as companies seek consistent
and effective delivery of their messages through multiple communications
channels and across a variety of geographic markets.

Increased Emphasis on Targeted Marketing. The desire of companies to reach
their target audiences and quantify the effectiveness of their communications
has resulted in greater demand for customized direct marketing methods, such as
database marketing, infomercials, in-store promotions and interactive programs.

STRATEGY

Y&R's strategy consists of the following key components:

Increase Penetration of Key Corporate Accounts. Y&R believes that
significant opportunities exist to increase its share of KCA marketing and
communications expenditures by leveraging its global network to provide
integrated services to KCAs. In recent years, Y&R has successfully increased its
share of the marketing and communications expenditures of certain KCAs. KCAs
also have increased their use of multiple services offered by Y&R over the same
period. During 1997, Y&R's 20 largest clients used the capabilities of an
average of five of the Company's marketing and communications services.

Develop New Client Relationships. The Company believes that there are
significant opportunities for future revenue and profit growth by providing
services to new clients in targeted industry sectors and to those clients
seeking to build and maintain global, regional and local brands. Y&R has
successfully used its integrated and global approach as an effective tool in
winning new business.

Leverage Existing Global Network. With a worldwide presence in 76
countries, the Company believes that it is well positioned to continue to
benefit from the trend towards the globalization of client marketing and
communications needs and the consolidation of such needs with a single
international service provider.

Capitalize on Existing Capabilities. Y&R intends to continue the
development of its existing capabilities into more visible and accessible client
services. For example, Y&R recently launched a new unit, Brand Dialogue, by
combining the existing interactive capabilities of Young & Rubicam Advertising
and Wunderman Cato Johnson in the United States, Latin America, Europe and
Asia/Pacific.

Utilize Superior Consumer Knowledge and Brand Insights. To assist its
clients in building, leveraging, protecting and managing their brands, Y&R has
developed and is maintaining extensive knowledge of consumer brand perceptions.
For example, Y&R has developed BrandAsset Valuator ("BAV"), a proprietary
database that reflects the perceptions of over 95,000 consumers in 32 countries
on five continents. The Company believes that BAV is the first global consumer
study that provides an empirically derived model for how brands gain and lose
their strength over time.

5
<PAGE> 7

Cultivate Creative Excellence. Y&R intends to continue emphasizing the
importance of creative marketing and communications. Y&R has created numerous
memorable marketing and communications programs for clients, including "The
Softer Side of Sears," "Everybody Needs a Little KFC," "It's All Within Your
Reach" for AT&T, "The Document Company" for Xerox and "Be All That You Can Be"
for the United States Army, as well as identity and design assignments,
including the creation of corporate identities, for Lucent Technologies,
Netscape and the 2002 Salt Lake City Olympics.

Improve Operating Efficiencies. The Company believes that opportunities
exist to improve operating efficiencies in order to expand margins and increase
future profitability. For example, Y&R has implemented initiatives which have
both improved productivity and reduced compensation expense as a percentage of
consolidated revenues.

Expand Capabilities Through Acquisitions. In order to add new
capabilities, enhance its existing capabilities and expand the geographic scope
of its operations, Y&R regularly evaluates and intends to pursue appropriate
acquisition opportunities.

THE RECAPITALIZATION

From the time of its founding until 1996, Y&R was wholly owned by its
employees. In December 1996, Y&R consummated a recapitalization (the
"Recapitalization"). The purpose of the Recapitalization was to realign the
ownership of the Company with those senior employees who would most actively
lead Y&R's future growth, to establish an equity-based incentive program to
motivate current and future employees and to enhance Y&R's ability to make
strategic investments in people, services and products. In connection with the
Recapitalization, predecessor companies of Y&R acquired, canceled or exchanged
all outstanding equity units, issued new shares of Common Stock and granted
certain restricted stock awards and options to acquire shares of Common Stock to
approximately 325 employees. In addition, at the time of the consummation of the
Recapitalization, Hellman & Friedman Capital Partners III, L.P., H&F Orchard
Partners III, L.P. and H&F International Partners III, L.P. (collectively, the
"H&F Investors"), and six other investors not affiliated with the Company
(together with the H&F Investors, the "Recapitalization Investors") and certain
employees and former employees of Y&R contributed an aggregate of $242 million
to the Company in exchange for shares of Common Stock and options to acquire
additional shares of Common Stock.

The Company's principal executive office is located at 285 Madison Avenue,
New York, New York 10017, and its telephone number is (212) 210-3000.

RECENT UNAUDITED FINANCIAL RESULTS

The following table sets forth certain unaudited consolidated results of
operations data for the Company for the three months ended March 31, 1997 and
1998. The unaudited quarterly data should be read in conjunction with the
additional annual financial information included in "Selected Consolidated
Financial Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements appearing
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1998
(DOLLARS IN MILLIONS)
<S> <C> <C>
Revenues.................................................... $298.2 $348.2
Income from operations...................................... 14.1 25.3
Net income.................................................. 4.1 12.2
</TABLE>

6
<PAGE> 8

THE OFFERINGS
<TABLE>
<CAPTION>
<S> <C>
Common Stock offered by:
The Company............................................ 6,912,730
shares
The Selling Stockholders............................... 9,687,270
shares
------
Total............................................. 16,600,000
shares

Common Stock offered:
U.S. Offering.......................................... 13,280,000
shares
International Offering................................. 3,320,000
shares
------
Total............................................. 16,600,000
shares

Common Stock to be outstanding after the Offerings.......... 66,594,730
shares(1)
</TABLE>

Dividend Policy................ The Company expects to commence the
declaration and payment of a regular
quarterly cash dividend in the last quarter
of 1998. See "Dividend Policy."

Use of Proceeds................ The net proceeds to be received by the
Company from the Offerings are estimated to
be approximately $161,063,246 after deducting
underwriting discounts and commissions and
estimated offering expenses payable by the
Company. The Company intends to use such net
proceeds to repay a portion of the borrowings
outstanding under the term loan portion of
its existing credit facilities. See
"Management's Discussion and Analysis of
Financial Condition and Results of
Operations -- Liquidity and Capital
Resources." The Company will not receive any
of the proceeds from the sale of shares of
Common Stock by the Selling Stockholders. See
"Use of Proceeds."

New York Stock Exchange
Symbol......................... "YNR"
- ---------------------------
(1) As of the date hereof, the number of shares of Common Stock outstanding
excludes (i) an aggregate of 28,883,715 shares reserved for issuance upon
the exercise of outstanding options under the Young & Rubicam Holdings Inc.
Management Stock Option Plan (under which no additional awards will be made)
and the Young & Rubicam Inc. 1997 Incentive Compensation Plan (collectively,
the "Stock Option Plans") at a weighted average exercise price of $6.98 per
share and (ii) an aggregate of 2,598,105 shares reserved for issuance upon
the exercise of outstanding options issued to certain of the
Recapitalization Investors at a weighted average exercise price of $7.67 per
share. The number of shares of Common Stock outstanding includes an
aggregate of 9,231,105 shares of Restricted Stock (as defined herein)
allocated to employees as of the date of consummation of the Offerings. See
"Management -- Executive Compensation" and "Capitalization." All of such
shares are subject to 180-day lock-up agreements following the Offerings.
See "Shares Eligible for Future Sale."

RISK FACTORS

Prior to making an investment in the Common Stock offered hereby,
prospective purchasers of the Common Stock should take into account the specific
risks set forth under "Risk Factors" as well as the other information set forth
in this Prospectus.

7
<PAGE> 9

SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1995 1996 1997
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:

Revenues............................................ $1,085,494 $1,222,139 $ 1,382,740
Compensation expense, including employee
benefits(1)...................................... 672,026 730,261 836,150
General and administrative expenses(1).............. 356,523 391,617 463,936
Recapitalization-related charges(2)................. -- 315,397 --
Other operating charges(2).......................... 31,465 17,166 11,925
---------- ---------- -----------
Operating expenses............................... 1,060,014 1,454,441 1,312,011
---------- ---------- -----------
Income (loss) from operations....................... 25,480 (232,302) 70,729
Net income (loss)................................... 820 (238,311) (23,938)
Basic and diluted loss per common share(3).......... $ (.51)
Weighted average shares outstanding(3).............. 46,949,355
Supplemental loss per common share(4)............... $ (.35)
OTHER OPERATING DATA:
EBITDA(1)(5)........................................ $ 72,972 $ 147,221 $ 139,375
Net cash provided by operating activities........... 79,809 178,064 224,511
Net cash used in investing activities............... 45,821 76,094 67,142
Net cash used in financing activities............... 50,025 12,614 98,667
Capital expenditures................................ 42,096 51,792 51,899
International revenues as a % of total
revenues(6)...................................... 54.7% 53.3% 52.2%
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(10) AS ADJUSTED(11)
<S> <C> <C> <C>
BALANCE SHEET DATA:

Total assets(7)..................................... $1,528,019 $1,528,019 $1,622,638
Total debt(8)....................................... 351,051 351,051 189,988
Mandatorily redeemable equity securities(9)......... 508,471 -- --
Total (deficit) equity.............................. (661,714) (153,243) 102,439
</TABLE>

- ------------------------------

(1) For a discussion of charges included in compensation expense, including
employee benefits, and general and administrative expenses, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

(2) For a discussion of Recapitalization-related and other operating charges,
see Notes 4 and 6 to the Consolidated Financial Statements.

(3) Basic net loss per common share for 1997 was computed by dividing the net
loss by the weighted average number of common shares outstanding during the
period. The weighted average number of common shares outstanding excludes
11,086,950 shares of Common Stock held by the Restricted Stock Trust (as
defined herein), as such shares vest upon the consummation of an initial
public offering, or the six-month anniversary thereof, a condition which
was not satisfied at December 31, 1997. Diluted net loss per common share
for 1997 was computed in the same manner as basic net loss per common share
since the inclusion of potential common shares would be antidilutive.

At December 31, 1997, the Company had outstanding options to purchase
31,013,205 shares of Common Stock, with a weighted average exercise price
of $6.84, that could potentially dilute basic earnings per share in the
future. These options were excluded from the computation of diluted net
loss per common share because the effect for 1997 would be antidilutive. In
addition, at December 31, 1997, a maximum of 11,086,950 shares of Common
Stock held by the Restricted Stock Trust would vest and be dilutive as a
result of the consummation of the Offerings. See "Management -- Executive
Compensation -- The Restricted Stock Plan and Trust Agreement" and Notes 3,
15 and 21 to the Consolidated Financial Statements.

Earnings per share for 1995 and 1996 cannot be computed because the
Company's capital structure prior to the Recapitalization consisted of both
common shares and limited partnership units in predecessor entities. See
Note 4 to the Consolidated Financial Statements.

(4) The supplemental loss per common share was computed by dividing the
supplemental loss of $18,696 by the supplemental common shares of
53,862,085. The supplemental loss of $18,696 has been computed by adjusting
the historical net loss for 1997 to reflect the following: (i) additional
interest cost, net of the related tax benefit, of $1,410 (computed
utilizing an interest rate and statutory tax rate of 7.0% and 41.0%,
respectively) associated with the $161,700 of Recapitalization-related
borrowings under the Company's existing credit facilities, which occurred
on March 18, 1997, as if such borrowings had occurred as of January 1, 1997
and (ii) the reduction in interest cost, net of tax, of $6,652 (computed
utilizing an interest rate and statutory tax rate of 7.0% and 41.0%,
respectively), associated with $161,063 of the net proceeds of the
Offerings to the Company, which is expected to be utilized to

8
<PAGE> 10

repay a portion of the outstanding borrowings under the term loan portion of the
Company's existing credit facilities, as if the debt repayment had occurred as
of January 1, 1997.

The supplemental shares of 53,862,085 were computed by adding the 6,912,730
shares of Common Stock offered by the Company to the 46,949,355 weighted average
shares outstanding as of December 31, 1997. See "Capitalization."

Based upon the initial public offering price of $25.00 per share, the
consummation of the Offerings will give rise to a non-recurring, non-cash,
pre-tax charge of $230,778 ($136,159 net of the related tax benefit
assuming a statutory tax rate of 41.0%) arising from the vesting of the
aggregate of 9,231,105 shares of Restricted Stock (as defined below)
allocated to employees as of the date of the consummation of the Offerings.
The determination of supplemental loss for 1997 does not give effect to
this charge due to its non-recurring nature. See "Management -- Executive
Compensation -- The Restricted Stock Plan and Trust Agreement" and Note 15
to the Consolidated Financial Statements.

(5) EBITDA is defined as income (loss) from operations before depreciation and
amortization, other non-cash charges and Recapitalization-related charges.
EBITDA is presented because it is a widely accepted financial indicator and
is generally consistent with the definition used for covenant purposes
contained in the Company's existing credit facilities; however, EBITDA may
not be comparable to other registrants' calculation of EBITDA or similarly
titled items. EBITDA should not be considered as an alternative to net
income (loss) as a measure of operating results in accordance with
generally accepted accounting principles or as an alternative to cash flows
as a measure of liquidity. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Results of Operations."
EBITDA for 1996 and 1997 is before $11,096 and $11,925, respectively, of
non-cash charges primarily related to impairment write-downs which are
included in other operating charges. See Notes 4 and 6 to the Consolidated
Financial Statements.

(6) International revenues include all revenues earned outside the United
States.

(7) Total assets as of December 31, 1997 (actual, pro forma and pro forma as
adjusted) include net deferred tax assets of $157,024, $75,135 of which
relate to net operating loss ("NOL") carryforwards of approximately
$140,409 for U.S. tax purposes and approximately $69,231 for foreign tax
purposes. See Note 9 to the Consolidated Financial Statements.

(8) Total debt includes current and non-current loans and installment notes.
See Notes 13 and 14 to the Consolidated Financial Statements.

(9) From the date of consummation of the Recapitalization and through the date
of consummation of the Offerings, all outstanding shares of Common Stock,
exclusive of shares of Common Stock held in the Restricted Stock Trust, are
redeemable, subject to certain restrictions, at the option of the
stockholder. Accordingly, all such shares of Common Stock have been
recorded at their redemption values and classified as Mandatorily
Redeemable Equity Securities in the Company's historical balance sheets at
December 31, 1996 and 1997, respectively. See Notes 2, 15 and 16 to the
Consolidated Financial Statements.

(10) The pro forma December 31, 1997 balance sheet reflects the termination of
the redemption feature and subsequent reclassification of Mandatorily
Redeemable Equity Securities, as discussed in Note (9) above, to
stockholders' deficit. See "Capitalization" and Notes 2, 15 and 16 to the
Consolidated Financial Statements.

(11) The pro forma as adjusted balance sheet reflects the following: (i) an
increase in total assets of $94,619, resulting from the tax benefits
arising from the compensation charge associated with the vesting of the
Restricted Stock as further described in Note (4) above; (ii) a decrease in
total debt resulting from the sale by the Company of 6,912,730 shares of
Common Stock in the Offerings and the application of $161,063 of net
proceeds to the Company to repay a portion of the outstanding borrowings
under the term loan portion of the Company's existing credit facilities;
and (iii) a $255,682 increase in total equity resulting from the $161,063
net proceeds to the Company from the Offerings and $94,619 resulting from
the vesting of Restricted Stock upon consummation of the Offerings as
discussed in (i) above. See "Capitalization."

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RISK FACTORS

A prospective investor should consider carefully all of the information
contained in this Prospectus before deciding whether to purchase the Common
Stock offered hereby and, in particular, the following factors.

RECENT HISTORY OF NET LOSSES

The Company reported a net loss for 1996 and 1997 of $238.3 million and
$23.9 million, respectively. In addition, the Company expects to report a net
loss for 1998 resulting from charges relating to the Offerings. The Company
expects to recognize a non-cash compensation charge of $230.8 million in
connection with the vesting of the Restricted Stock upon consummation of the
Offerings. The Company also expects to enter into a new revolving credit
facility to become effective upon completion of the Offerings, and as a result
expects to write off approximately $7.4 million, which represents the
unamortized portion of capitalized charges relating to the Company's existing
$700 million senior secured credit facilities as of March 31, 1998 (the "Credit
Facilities"), which will be repaid and replaced with net proceeds to the Company
from the Offerings and borrowings under the new revolving credit facility.

COMPETITION

The marketing and communications industry is highly competitive. Y&R's
principal competitors are large multinational marketing and communications
companies, as well as numerous smaller agencies that operate in one or more
countries or local markets. Y&R must compete with such other companies and
agencies to maintain existing client relationships and to obtain new clients and
assignments. Some clients, such as U.S. governmental agencies, require agencies
to compete for business at mandatory intervals. Principal competitive factors
include an agency's creative reputation, knowledge of media, financial controls,
geographical coverage and diversity, relationships with clients and quality and
breadth of services. Recently, traditional advertising agencies have also been
competing with major consulting firms which have developed practices in
marketing and communications, and with smaller companies such as systems
integrators, database marketing and modeling companies and telemarketers, which
are offering technological solutions to marketing and communications issues
faced by clients.

Representation of a client does not necessarily mean that all advertising
or public relations for that client is handled by one agency. Many large
multinational companies are served by a number of agencies within the marketing
and communications industry. In many cases, clients' conflicts policies or
desires to be served by multiple agencies result in one or more global agency
networks representing a client only for a portion of its marketing and
communications needs or only in particular geographic areas. In addition, the
ability of agencies within marketing and communications organizations to acquire
new clients or additional assignments from existing clients may be limited by
the conflicts policy followed by many clients not to permit agencies to perform
similar services for competing products or companies. Y&R's principal
international competitors are holding companies for more than one global
advertising agency network, which, in some situations, may permit separate
agency networks within such holding companies to perform services for competing
products or for products of competing companies. The Company has one global
advertising agency network, and accordingly Y&R's ability to compete for new
advertising assignments and, to a lesser extent, other marketing and
communications assignments, may be limited by these conflicts policies. Industry
practices in other areas of the marketing and communications business reflect
similar concerns with respect to client relationships. See
"Business -- Competition."

TREND TOWARDS CONSOLIDATION OF GLOBAL ACCOUNTS WITH GLOBAL AGENCIES

The Company believes that large multinational companies will seek to
consolidate their accounts with one organization that can fulfill their
marketing and communications needs worldwide. There can be no assurance that the
Company will continue to benefit from this trend towards consolidation of global
accounts. In addition, this trend towards consolidation of global accounts
requires companies seeking to compete effectively in the international marketing
and communications industry to make significant investments in additional
offices and personnel around the world and in new and improved technology for
linking such offices

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and people. Y&R's international network of employees and offices are linked by
computer networks which require significant capital expenditures for
maintenance, expansion and upgrades. To the extent that Y&R's competitors may
have broader geographic scope or greater financial resources to invest in
additional offices, personnel or technology, such competitors may be better able
than Y&R to take advantage of an opportunity for the consolidation of a global
account. In such event, Y&R's prospects, business, financial condition and
results of operations could be adversely affected.

CONCENTRATION OF REVENUES FROM A LIMITED NUMBER OF LARGE CLIENTS

A relatively small number of clients contributes a significant percentage
of Y&R's consolidated revenues. In 1997, Y&R's 20 largest clients contributed
approximately 40.5% of consolidated revenues, its three largest clients
contributed approximately 18.6% of consolidated revenues and its largest client,
Ford Motor Company, contributed approximately 10.0% of consolidated revenues.
Based upon Y&R's strategy of increasing its penetration of existing large
clients, it is possible that Y&R's dependence on revenues from such clients will
increase in the future. Most of Y&R's agreements with U.S.-based clients are
cancelable on 90 days' notice, and its agreements with non-U.S. clients
typically are cancelable on 90 to 180 days' notice. In addition, clients
generally are able to reduce marketing and communications spending or cancel
projects at any time for any reason. There can be no assurance that any of Y&R's
clients will continue to utilize Y&R and its services to the same extent, or at
all, in the future. A significant reduction in the marketing and communications
spending by, or the loss of one or more of, Y&R's largest clients, if not
replaced by new client accounts or an increase in business from existing
clients, would have a material adverse effect on Y&R's prospects, business,
financial condition and results of operations. See "Business."

CLIENT TURNOVER; DEVELOPMENT OF NEW CLIENTS

The success of a marketing and communications organization depends on its
continuing ability to attract and retain clients. Y&R has approximately 5,500
client accounts worldwide. Although historically Y&R has had long-term
relationships with many of its largest clients, clients may move their
advertising and other communications assignments from agency to agency, or may
divide their assignments among two or more agencies, with relative ease. In
addition, the perception management and public relations business, as well as
the branding consultation and design business, are principally project-based and
require new assignments in order to maintain and increase revenues. As is
typical in the marketing and communications industry, Y&R has lost or resigned
client accounts and assignments for a variety of reasons, including conflicts
with newly acquired clients. Although typically Y&R has been able to replace
such client and revenue losses with new clients and assignments, there can be no
assurance that Y&R will continue to be successful in replacing clients or in
replacing revenues when a client significantly reduces the amount of work given
to Y&R. The failure to maintain existing clients or attract new clients could
have a material adverse effect on Y&R's prospects, business, financial condition
and results of operations. See "Business."

CYCLICAL INDUSTRY

The marketing and communications industry is cyclical because it is subject
to downturns in general economic conditions and changes in client business and
marketing budgets. There can be no assurance that the Company's prospects,
business, financial condition and results of operations would not be materially
adversely affected by a downturn in general economic conditions in one or more
markets or changes in client business and marketing budgets. See "Business."

CURRENCY RISK

The Company's Consolidated Financial Statements are denominated in U.S.
dollars. Y&R derived approximately 52.2% of its revenues from operations outside
of the United States in 1997. Currency fluctuations may give rise to translation
gains or losses when financial statements of foreign operating units are
translated into U.S. dollars. Significant strengthening of the U.S. dollar
against other major foreign currencies could have a material adverse effect on
Y&R's results of operations. With limited exceptions, Y&R does not

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actively hedge its foreign currency exposure. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

CONTROL OF Y&R

Substantially all of Y&R's Common Stock is owned by employee equityholders
(the "Management Investors") and the Recapitalization Investors. See
"Management." All Common Stock held at any time by Management Investors is
deposited in a voting trust (the "Management Voting Trust") which is controlled
by eight members of Y&R's senior management, in their capacities as voting
trustees (the "Voting Trustees"). Upon consummation of the Offerings, the
Management Voting Trust will hold voting power over approximately 51.7% of the
outstanding shares of Common Stock (assuming the exercise of all currently
vested options held by Management Investors). As a result, the Management Voting
Trust will be able to exercise substantial control over any matters requiring
the vote of stockholders, including the election of Directors, which could delay
or prevent a change in control of the Company. Furthermore, the vote of Peter A.
Georgescu (or any other person duly elected Chief Executive Officer of Y&R with
the prior approval of the Management Voting Trust) will bind the Management
Voting Trust unless he (or his successor) is outvoted by the vote of six of the
other Voting Trustees. As a result of the foregoing, Peter A. Georgescu (or any
such successor) will be able to exercise a significant degree of control over
business decisions affecting Y&R. The Management Voting Trust will remain in
existence following consummation of the Offerings but will terminate no later
than 24 months after the consummation of the Offerings. See "Description of
Capital Stock -- The Management Voting Trust Agreement." In the event that,
following the termination of the Management Voting Trust, management of the
Company continues to own collectively a significant percentage of the
outstanding shares of Common Stock, management acting together would be able to
exercise a significant degree of control over business decisions affecting Y&R.

Upon consummation of the Offerings, the H&F Investors are expected to
beneficially own an aggregate of approximately 34.8% of the outstanding shares
of Common Stock (assuming the exercise of all currently vested options held by
the H&F Investors). As a result of their stock ownership, the H&F Investors
currently are, and upon consummation of the Offerings will be, able to influence
matters requiring the vote of stockholders, including the election of Directors.
In addition, pursuant to the Amended Stockholders' Agreement (as defined
herein), the H&F Investors will have the right to nominate and have elected two
members of the Company's Board of Directors (the "Board" or the "Company Board")
for so long as they continue to hold, in the aggregate, at least 10% of the
Outstanding Shares (as defined in the Amended Stockholders' Agreement), and one
member of the Board for so long as they continue to hold, in the aggregate, at
least 5% of the Outstanding Shares. Should the Management Voting Trust and the
H&F Investors act together, they would be able to elect the members of the Board
and exercise a controlling influence over the business and affairs of the
Company. In addition, the Management Voting Trust and the H&F Investors could,
acting together, delay or prevent a change in control of the Company. See
"-- Certain Anti-Takeover Effects" and "Description of Capital Stock -- The
Stockholders' Agreement."

DEPENDENCE ON KEY PERSONNEL

The Company's ability to maintain its competitive position is dependent on
the services of its senior management. The loss of the services of one or more
members of senior management could have a material adverse effect on the
Company. In addition, the success of Y&R has been, and will continue to be,
highly dependent upon the skills of its creative, research, media and account
personnel and practice group specialists, and their relationships with clients.
Employees generally are not subject to contracts of employment and are,
therefore, typically able to move within the industry with relative ease.
Although the Management Voting Trust Agreement (as defined herein) and certain
stock option and restricted stock agreements contain non-competition and
non-solicitation covenants, there can be no assurance that such provisions will
be effective in helping Y&R retain qualified personnel or that Y&R would not be
adversely affected by the failure to retain such personnel.

If Y&R were unable to continue to attract and retain additional key
personnel, or if it were unable to retain and motivate its existing key
personnel, its prospects, business, financial condition and results of
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<PAGE> 14

operations would be materially adversely affected. See "Management" and
"Description of Capital Stock -- The Management Voting Trust Agreement."

RISKS OF MULTINATIONAL OPERATIONS

The Company conducts business in various developing countries in Asia,
Latin America, Eastern Europe and Africa, where the systems and bodies of
commercial law and trade practices arising thereunder are evolving. Commercial
laws in such countries are often vague, arbitrary, contradictory, inconsistently
administered and retroactively applied. Under such circumstances, it is
difficult for the Company to determine with certainty at all times the exact
requirements of such local laws. If the Company consistently were unable to
remain in compliance with local laws in such developing countries, it could have
a material adverse impact on Y&R's prospects, business, results of operations
and financial condition. In addition, the global nature of the Company's
operations poses various challenges to the Company's management and its
financial, accounting and other systems which, if not satisfactorily met, could
have a material adverse impact on the Company's prospects, business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Results of Operations."

TERMS OF CERTAIN INDEBTEDNESS

The Company's Credit Facilities contain certain financial and operating
covenants and require the Company to achieve or maintain certain financial
ratios and net worth requirements, and restrict the Company's ability to incur
additional indebtedness, sell assets, redeem equity, pay cash dividends, make
acquisitions and take other specified actions. The Company's obligations under
the Credit Facilities are secured by a security interest in certain domestic
assets, including its headquarters building in New York, all of the capital
stock of the direct and indirect domestic subsidiaries of the Company and 66.7%
of the capital stock of the Company's first-tier non-U.S. subsidiaries. The net
proceeds to the Company from the Offerings are expected to be used to repay a
portion of the borrowings outstanding under the term loan portion of the Credit
Facilities. The Company has entered into an agreement with respect to a $400
million unsecured revolving credit facility (the "New Facility") which will
become effective upon the consummation of the Offerings. The New Facility will
contain certain financial and operating restrictions and covenant requirements.
Consummation of the New Facility remains subject to a number of closing
conditions, and there can be no assurance that the Company will be successful in
consummating such Facility.

Outstanding borrowings under the Credit Facilities, which aggregated $330.6
million at December 31, 1997, bear interest at rates that fluctuate with changes
in certain prevailing market interest rates. Any increase in interest rates
would adversely affect Y&R's net income and the cash flow available after debt
service to fund operations and expansion. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."

ACQUISITION STRATEGY RISKS

Y&R's business strategy includes increasing its share of clients' marketing
expenditures by adding to or enhancing its existing marketing and communications
capabilities, and expanding its geographic reach. Y&R intends to implement this
strategy in part by making acquisitions. There can be no assurance that the
Company will be successful in identifying appropriate acquisition candidates or
consummating acquisitions on terms satisfactory to Y&R, or that any newly
acquired companies will be successfully integrated into Y&R's existing global
network. The Company may use Common Stock (which could result in dilution to
purchasers of Common Stock offered hereby) or may incur indebtedness (which may
be long-term), expend cash or use a combination thereof for all or part of the
consideration to be paid in future acquisitions. While the Company regularly
evaluates potential acquisition opportunities, it has no present commitments,
agreements or understandings with respect to any material acquisition. See
"Business."

THIRD PARTY LIABILITY

Y&R from time to time may be, or may be joined as, a defendant in
litigation brought against its clients by third parties, including, without
limitation, claims brought by such clients' competitors, regulatory bodies or

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consumers, alleging that advertising claims made with respect to such client's
products or services are false, deceptive or misleading, that such clients'
products are defective or injurious or that marketing and communications
materials created for such clients infringe on the proprietary rights of third
parties. If, in such circumstances, Y&R is not insured under the terms of the
insurance policies with its insurers or is not indemnified under the terms of
its agreements with such clients (or such indemnification is unavailable) with
respect to such claims, then the damages, costs, expenses or attorneys' fees
arising from any such claims could have an adverse effect on Y&R's prospects,
business, results of operations and financial condition. In addition, Y&R's
contracts with clients sometimes require it to indemnify clients for claims
brought by competitors or others claiming that advertisements or other
communications infringe on intellectual property rights. Although Y&R maintains
an insurance program, including insurance for advertising agency liability,
there can be no assurance that such insurance will be available, or will be
sufficient to cover any claim if available, in the event a significant adverse
claim is made. In the opinion of management, none of the existing claims and
legal actions to which the Company currently is a party is expected to have a
material adverse effect on the Company.

YEAR 2000 RISK

The Company is conducting a comprehensive review of its computer systems to
identify all software applications that could be affected by the inability of
many existing computer systems to process time-sensitive data accurately beyond
the year 1999 (referred to as the "Year 2000" issue). The Company intends to
modify or replace all affected systems for compliance with the Year 2000 issue
and is also monitoring the adequacy of the processes and progress of third-party
vendors of systems that may be affected by the Year 2000 issue. Y&R is dependent
on third-party computer systems and applications, particularly with respect to
such critical tasks as accounting, billing and buying, planning and paying for
media, as well as on its own computer systems. While Y&R believes its process is
designed to be successful, because of the complexity of the Year 2000 issue and
the interdependence of organizations using computer systems, there can be no
assurance that Y&R's efforts, or those of third parties with whom Y&R interacts,
will be satisfactorily completed in a timely fashion. Failure to satisfactorily
address the Year 2000 issue could have a material adverse effect on Y&R's
prospects, business, financial condition and results of operations. The costs of
the Company's Year 2000 project have not been determined but are not expected to
have a material adverse effect on the Company. However, there can be no
assurance that Y&R will not experience cost overruns or delays in connection
with its plan for replacing or modifying systems, which could have a material
adverse effect on Y&R's prospects, business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Year 2000 Compliance."

DIVIDEND POLICY

Although the Company intends to commence the declaration and payment of a
regular quarterly cash dividend in the last quarter of 1998, the Company's
ability to pay dividends will depend upon, among other factors, the Company's
results of operations, financial condition and capital requirements. In
addition, the covenants under the Credit Facilities currently prohibit Y&R from
the declaration and payment of cash dividends. The terms of the New Facility,
which New Facility will become effective upon consummation of the Offerings,
permit the payment of cash dividends except in the event of a continuing default
under the credit agreement. Any cash dividend is therefore contingent upon the
consummation of the New Facility, which remains subject to a number of other
closing conditions, and there can be no assurance that the Company will be
successful in consummating such Facility. See "Dividend Policy."

BENEFIT TO EXISTING STOCKHOLDERS

The initial public offering price of the shares of Common Stock to be sold
in the Offerings is substantially in excess of the net tangible book value per
share, which results in a benefit to existing stockholders of the Company. See
"-- Immediate and Substantial Dilution" and "Dilution." Consummation of the
Offerings will result in the vesting of the Company's Restricted Stock (as
defined below), which will provide a substantial benefit to management
stockholders who have been allocated shares of Restricted Stock. In addition,

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<PAGE> 16

consummation of the Offerings will result in the elimination of the Company's
right to repurchase shares of Common Stock held by Management Investors upon
their termination of employment. See "The Company -- The Recapitalization" and
"Description of Capital Stock -- The Stockholders' Agreement."

IMMEDIATE AND SUBSTANTIAL DILUTION

The initial public offering price of the Common Stock is substantially in
excess of the net tangible book value per share. As a result, purchasers of
Common Stock in the Offerings will experience immediate and substantial dilution
of $25.21 per share. See "Dilution."

ABSENCE OF PRIOR MARKET FOR COMMON STOCK

Prior to the Offerings, there has been no public market for the Common
Stock, and there can be no assurance that an active trading market for the
Common Stock will develop or will continue if it develops. The initial public
offering price of the Common Stock has been determined by negotiations between
the Company and representatives of the Underwriters and may not be indicative of
the market price of the Common Stock following the Offerings. See
"Underwriting." The market price of the Common Stock could be subject to
significant fluctuations in response to various factors and events, including
the liquidity of the market for the Common Stock, differences between the
Company's actual financial or operating results and those expected by investors
and analysts, changes in analysts' recommendations or projections, marketing and
communications budgets of clients, new statutes or regulations or changes in
interpretations of existing statutes and regulations affecting the Company's
business, changes in general economic or market conditions and broad market
fluctuations.

POSSIBLE ADVERSE IMPACT ON SHARE PRICE OF SHARES ELIGIBLE FOR FUTURE SALE

Following the Offerings, the Company will have 66,594,730 shares of Common
Stock outstanding. Of these, 20,219,305 shares will be freely transferable by
persons other than "affiliates" of the Company without restriction or further
registration under the Securities Act. The remaining 46,375,425 outstanding
shares of Common Stock will be "restricted securities" within the meaning of
Rule 144 under the Securities Act or securities issued and sold pursuant to
Regulation S under the Securities Act and subject to transfer restrictions.
Following the Offerings and subject to certain 180-day lock-up agreements
described herein, certain of the Recapitalization Investors will have demand and
piggyback registration rights with respect to an aggregate of 21,979,409 shares
of Common Stock. In addition, beginning 90 days after the date of this
Prospectus, such shares will be eligible for sale in the public market without
registration under the Securities Act, subject to compliance with the resale
volume limitations and other restrictions of Rule 144 under the Securities Act.
Subject to certain 180-day lock-up agreements described herein, and beginning 90
days after the date of this Prospectus, shares of Common Stock held by
Management Investors will be eligible for sale in the public market without
registration under the Securities Act, subject to compliance with the resale
volume limitations and other restrictions of Rule 144 under the Securities Act.
Future sales of the Common Stock, or the perception that such sales could occur,
could adversely affect prevailing market prices for the Common Stock. See
"Shares Eligible for Future Sale" and "Underwriting."

CERTAIN ANTI-TAKEOVER EFFECTS

Certain provisions of the Company's Amended and Restated Certificate of
Incorporation (the "Company's Charter") and the Company's Amended and Restated
By-Laws (the "Company's By-Laws"), which will become effective upon consummation
of the Offerings, and of the Delaware General Corporation Law (the "DGCL") may
have the effect of delaying, deterring or preventing a change in control of the
Company not approved by the Company Board. These provisions include (i) a
classified Board, (ii) a requirement that no action required or permitted to be
taken at any annual or special meeting of stockholders may be taken without a
meeting, (iii) a requirement that special meetings of stockholders be called
only by the Chairman of the Board or the Company Board, (iv) advance notice
requirements for stockholder proposals and nominations, (v) limitations on the
ability of stockholders to amend, alter or repeal certain provisions of the
Company's Charter and the Company's By-Laws, (vi) authorization for the Company
Board to issue without
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<PAGE> 17

stockholder approval preferred stock with such terms as the Board may determine
and (vii) authorization for the Company Board to consider the interests of
clients and other customers, creditors, employees and other constituencies of
the Company and its subsidiaries and the effect upon communities in which the
Company and its subsidiaries do business, in evaluating proposed corporate
transactions. With certain exceptions, Section 203 of the DGCL ("Section 203")
imposes certain restrictions on mergers and other business combinations between
the Company and any holder of 15% or more of the Company's Common Stock (other
than the H&F Investors and their permitted transferees, who have been exempted
from these restrictions by the Company Board). In addition, the Company has
adopted a stockholder rights plan that will become effective prior to
consummation of the Offerings (the "Rights Plan") pursuant to which each
shareholder will also receive rights (the "Rights") and, if any person acquires
beneficial ownership of 15% or more of the outstanding shares of Common Stock
(with certain exceptions, including the Management Voting Trust) such person
will become an "Acquiring Person" and, as a result, holders of Rights other than
the Acquiring Person (and certain transferees and related persons) shall be
entitled to purchase shares of Common Stock at one-half the market price
thereof. However, the H&F Investors will not become an "Acquiring Person" (and,
thus, holders of Rights shall not be so entitled to purchase shares of Common
Stock) unless, after the Offerings, the H&F Investors acquire beneficial
ownership of additional shares of Common Stock under certain circumstances.
Also, any Permitted H&F Transferee (as defined herein) who acquires beneficial
ownership of shares of Common Stock from the H&F Investors and, as a result,
becomes the beneficial owner of 15% or more of the outstanding shares of Common
Stock will not become an Acquiring Person (and, thus, holders of Rights shall
not be so entitled to purchase shares of Common Stock) unless such person (or
certain related persons) thereafter acquires beneficial ownership of additional
shares of Common Stock. The Rights Plan is designed to protect stockholders in
the event of an unsolicited offer and other takeover tactics which, in the
opinion of the Company Board, could impair the Company's ability to represent
stockholder interests. The provisions of the Rights Plan may render an
unsolicited takeover of the Company more difficult or less likely to occur or
might prevent such a takeover. For a more detailed description of the Rights
Plan, see "Description of Capital Stock -- Rights Plan."

These provisions of the Company's Charter and the Company's By-Laws, the
DGCL and the Rights Plan, together with the control of 51.7% of the outstanding
shares of Common Stock by the Management Voting Trust upon consummation of the
Offerings (assuming the exercise of all currently vested options held by
Management Investors) could discourage potential acquisition proposals and could
delay or prevent a change in control of the Company, although such proposals, if
made, might be considered desirable by a majority of the Company's stockholders.
Such provisions could also make it more difficult for third parties to remove
and replace the members of the Company Board. Moreover, these provisions could
diminish the opportunities for a stockholder to participate in certain tender
offers, including tender offers at prices above the then-current market price of
the Company's Common Stock, and may also inhibit increases in the market price
of the Company's Common Stock that could result from takeover attempts or
speculation. In addition, certain options issued to employees of the Company
contain change in control provisions that could have the effect of delaying,
deterring or preventing a change in control of the Company. See "Management --
Executive Compensation -- 1997 ICP -- Acceleration of Vesting" and "Description
of Capital Stock -- Anti-Takeover Effects of Certain Provisions of the Charter,
the By-Laws, the Rights Plan and Delaware Law."

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THE COMPANY

GENERAL

Since its founding 75 years ago by John Orr Young, an account executive,
and Raymond Rubicam, a copywriter, Y&R has evolved from a single New York-based
advertising agency to a diversified global marketing and communications
organization. In its early years, the Company grew its core advertising business
by either opening additional offices in the United States and abroad, or by
acquiring established local agencies and fully integrating them into the Company
under the Y&R name. By the early 1970s, the Company had established a network of
approximately 40 Young & Rubicam Advertising agency offices in the United States
and 22 other countries.

In 1973, Y&R began to expand its capabilities beyond traditional general
advertising by acquiring well-established leaders in other marketing and
communications disciplines. Y&R began this diversification with its acquisitions
of Wunderman Ricotta & Kline (the predecessor to Wunderman Worldwide), a direct
marketing firm, and Sudler & Hennessey, a healthcare communications specialist.
In 1976, the Company added the sales promotion firm, Cato Johnson Associates,
which was merged with Wunderman Worldwide in 1992 to form Wunderman Cato
Johnson. Y&R continued implementing its diversification strategy with its
acquisitions of Burson-Marsteller, a public relations company, in 1979 and
Landor Associates, a branding consultation and strategic design firm, in 1989.
Y&R has been successful in integrating the diverse capabilities of these
companies, which the Company believes enables it to better serve clients'
marketing and communications needs on a global basis.

The Company's principal executive office is located at 285 Madison Avenue,
New York, New York 10017, and its telephone number is (212) 210-3000.

THE RECAPITALIZATION

From the time of its founding until 1996, Y&R was wholly owned by its
employees. In December 1996, Y&R consummated the Recapitalization. The purpose
of the Recapitalization was to realign the ownership of the Company with those
senior employees who would most actively lead Y&R's future growth, to establish
an equity-based incentive program to motivate current and future employees and
to enhance its ability to make strategic investments in people, services and
products. In connection with the Recapitalization, predecessor companies of Y&R
acquired for cash, canceled or exchanged all then outstanding equity and
equity-based compensation units, including shares of common stock, limited
partnership interests, options to acquire shares of common stock and limited
partnership interests, and growth participation units (collectively, the
"Predecessor Units"). In place of the Predecessor Units, the Company issued new
shares of Common Stock and granted certain restricted stock awards and options
to acquire shares of Common Stock to approximately 325 employees. In addition,
at the time of consummation of the Recapitalization, an aggregate of $242
million was contributed to the Company in exchange for an aggregate of
31,566,345 shares of Common Stock and options to acquire an additional aggregate
of 2,598,105 shares of Common Stock. The Recapitalization Investors contributed
an aggregate of $231.7 million in exchange for 30,228,195 shares of Common Stock
and options to purchase an additional 2,598,105 shares of Common Stock and are
selling an aggregate of 7,831,473 shares of Common Stock in the Offerings, and
55 Management Investors contributed an aggregate of $10.3 million in exchange
for 1,338,150 shares of Common Stock and no options, of which 223,065 shares of
Common Stock were received by four Management Investors who are selling an
aggregate of 415,854 shares of Common Stock in the Offerings. See "Principal and
Selling Stockholders."

Upon consummation of the Recapitalization, the H&F Investors were granted
registration rights as well as the right to nominate and have elected three
members of the Company Board and to designate jointly with the Management Voting
Trust two additional members of the Company Board. See "Risk Factors -- Control
of Y&R," "Management -- Executive Compensation" and "-- Officers and Directors,"
"Shares Eligible for Future Sale" and "Description of Capital Stock -- The
Management Voting Trust Agreement."

In connection with the Recapitalization, the Company entered into the $700
million Credit Facilities, a portion of the proceeds of which were used to
prepay the Company's indebtedness under its previous credit facilities.
Recapitalization-related borrowings under the Credit Facilities totalled $361.7
million, $200.0

17
<PAGE> 19

million of which was borrowed on December 12, 1996 and $161.7 million of which
was borrowed on March 18, 1997.

At the time of the Recapitalization, Y&R adopted certain incentive
compensation plans, including the Young & Rubicam Holdings Inc. Management Stock
Option Plan (the "Management Stock Option Plan") and the Young & Rubicam
Holdings Inc. Restricted Stock Plan (the "Restricted Stock Plan"), designed to
attract, retain and motivate key employees. The Management Stock Option Plan
provides for the grant of options to purchase Common Stock. At the time of the
Recapitalization, non-qualified options to purchase 16,823,565 shares of Common
Stock of Y&R were granted to certain members of Y&R management in consideration
of their surrender for cancellation of all or a portion of their outstanding
options to purchase equity units of predecessor companies of Y&R (the "Rollover
Options"). The Rollover Options were immediately vested and exercisable upon
grant. Each Rollover Option has an exercise price of $1.92 per share. In
addition to the Rollover Options, immediately following the closing of the
Recapitalization, non-qualified options with exercise prices of $7.67 per share
with respect to 5,200,590 shares of Common Stock were granted to certain key
employees of Y&R (the "Closing Options"). Each Closing Option became exercisable
immediately upon grant with respect to 40% of the shares subject thereto and
will become exercisable (i) on the third anniversary of its grant date with
respect to 30% of such shares and (ii) on the fifth anniversary of its grant
date with respect to the remaining 30% of such shares. See
"Management -- Executive Compensation -- Management Stock Option Plan."

Pursuant to the Restricted Stock Plan, Y&R issued a total of 11,086,950
shares of Common Stock to a trust (the "Restricted Stock Trust") established by
Y&R for allocation to key employees of Y&R. Of such amount, as of the date of
consummation of the Offerings, 9,231,105 shares of Common Stock will have been
allocated to employees pursuant to the Restricted Stock Plan ("Restricted
Stock"). The Restricted Stock Plan provides that such shares will vest upon the
six-month anniversary of the consummation of the Offerings, subject to the power
of the Board of Directors to accelerate the vesting and distribution date to the
consummation of the Offerings. The Board of Directors has so accelerated the
vesting and distribution date, subject to the ability of the holders to sell
such number of shares of Restricted Stock in the Offerings as is necessary to
fund the personal tax liabilities associated with the vesting and distribution
thereof. In addition, in the event the Restricted Stock does not vest upon
consummation of the Offerings, the Restricted Stock will vest upon the earliest
to occur of the six-month anniversary of the consummation of the Offerings,
certain change of control events and certain other events described in the
Restricted Stock Plan, provided that in all cases each such employee is then
still employed by Y&R. Certain of such shares of Restricted Stock will be placed
in a deferral trust upon vesting thereof and the holders will have such shares
distributed to them from such deferral trust at specified times in the future.
See "Management -- Executive Compensation."

All shares of Common Stock (including all shares of Common Stock issued
upon the exercise of options) held by current or former members of Y&R
management and all shares of Common Stock held in the Restricted Stock Trust are
required to be deposited in the Management Voting Trust, the Voting Trustees of
which have the power to vote all shares of Common Stock held by it. The voting
rights of the Management Voting Trust are exercised by eight members of Y&R
senior management in their capacities as Voting Trustees. The Management Voting
Trust will remain in existence following consummation of the Offerings but will
terminate no later than 24 months after the consummation of the Offerings. See
"Shares Eligible for Future Sale" and "Description of Capital Stock -- The
Management Voting Trust Agreement."

18
<PAGE> 20

USE OF PROCEEDS

The net proceeds to the Company from the Offerings (after deducting
applicable underwriting discounts and commissions and estimated offering
expenses payable by the Company) are estimated to be approximately $161.1
million. The Company intends to use such net proceeds to repay a portion of the
borrowings outstanding under the term loan portion of the Credit Facilities. The
Company will not receive any of the proceeds from the sale of shares of Common
Stock by the Selling Stockholders. As of December 31, 1997, there was an
aggregate of $330.6 million outstanding under the term loan, which bore interest
at a rate of 6.875% per annum. The term loan portion of the Credit Facilities is
repayable in quarterly installments which commenced on September 30, 1997 with
final maturity on March 31, 2003. The proceeds of the term loan portion of the
Credit Facilities were received by the Company in December 1996 and March 1997
and were used by the Company primarily to prepay indebtedness, to repurchase
equity units from certain employees and to repay certain expenses in connection
with the Recapitalization.

DIVIDEND POLICY

Since the consummation of the Recapitalization, the Company has not
declared or paid any cash or other dividends on its Common Stock (other than the
Stock Split). The Company expects to commence the declaration and payment of a
regular quarterly cash dividend in the last quarter of 1998. However, any
determination to pay dividends will be at the discretion of the Company Board
and will depend upon, among other factors, the Company's results of operations,
financial condition, capital requirements and contractual restrictions pursuant
to the Company's Credit Facilities. The covenants under the Company's existing
Credit Facilities currently prohibit Y&R from declaring and paying cash
dividends; any cash dividend is therefore contingent upon a renegotiation or
refinancing of the existing Credit Facilities in order to remove such
restriction. The Company has entered into an agreement with respect to the New
Facility, which will become effective upon the consummation of the Offerings.
The New Facility, which would replace the Credit Facilities, will contain
certain financial and operating restrictions and covenant requirements and will
permit the payment of cash dividends except in the event of a continuing default
under the credit agreement. The net proceeds to the Company from the Offerings,
together with borrowings under the New Facility, are expected to be used to
repay all outstanding borrowings under the Credit Facilities upon consummation
of the Offerings. The New Facility remains subject to a number of closing
conditions, and there can be no assurance that the Company will be successful in
consummating such Facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

19
<PAGE> 21

CAPITALIZATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following table sets forth the Company's consolidated cash and cash
equivalents, current portion of installment notes and loans payable and
capitalization as of December 31, 1997 on (i) an actual basis; (ii) a pro forma
basis giving effect to the termination of the redemption feature and subsequent
reclassification of the Mandatorily Redeemable Equity Securities to
stockholders' deficit upon consummation of the Offerings; and (iii) a pro forma
as adjusted basis giving further effect to the sale of 6,912,730 shares of
Common Stock offered by the Company hereby and the application of the estimated
net proceeds therefrom as described in "Use of Proceeds" and the non-recurring,
non-cash, after-tax compensation charge resulting from the vesting of Restricted
Stock.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1997
-----------------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 160,263 $ 160,263 $ 160,263
========= ========= =========
Current portion of installment notes and loans payable...... 13,996 13,996 13,996
========= ========= =========
Long-term debt:
Installment notes payable................................. 6,503 6,503 6,503
Loans payable:
Term loan facility(1).................................. 299,000 299,000 137,937
Revolving credit facility.............................. 31,552 31,552 31,552
--------- --------- ---------
Total long-term debt.............................. 337,055 337,055 175,992
--------- --------- ---------
Mandatorily Redeemable Equity Securities:
Common Stock, $.01 par value, 250,000,000 shares
authorized; 50,658,180 shares issued and outstanding
(actual) and no shares issued and outstanding (pro
forma and pro forma as adjusted)(2).................... 508,471 -- --
--------- --------- ---------
Stockholders' deficit:
Cumulative Preferred Stock:
Money Market Preferred Stock -- variable dividend;
liquidating value of $115.00 per share; one-tenth of
one vote per share; 50,000 shares authorized; 87
shares issued and outstanding (actual, pro forma and
pro forma as adjusted)............................... -- -- --
Cumulative Participating Junior Preferred
Stock -- $ dividend; liquidating value of
$1.00 per share; 100 votes per share; 2,500,000
shares authorized (pro forma as adjusted); no shares
issued and outstanding (pro forma as adjusted)(3).... -- -- --
Common Stock, $.01 par value, 250,000,000 shares
authorized (actual and pro forma); 250,000,000 shares
authorized (pro forma as adjusted); 11,086,950 shares
issued and outstanding (actual); 61,745,130 shares
issued and outstanding (pro forma) and 66,802,015
shares issued and outstanding (pro forma as
adjusted)(2)(4)(5)..................................... 111 617 667
Capital surplus(2)(5)..................................... 23,613 531,578 786,630
Accumulated deficit(6).................................... (522,866) (522,866) (659,025)
Cumulative translation adjustment......................... (16,577) (16,577) (16,577)
Pension liability adjustment.............................. (706) (706) (706)
--------- --------- ---------
Subtotal.................................................. (516,425) (7,954) 110,989
Common stock in treasury.................................... (8,550) (8,550) (8,550)
Unearned compensation-Restricted Stock(5)................... (136,739) (136,739) --
--------- --------- ---------
Total stockholders' (deficit) equity.............. (661,714) (153,243) 102,439
--------- --------- ---------
Total capitalization.............................. $ 183,812 $ 183,812 $ 278,431
========= ========= =========
</TABLE>

20
<PAGE> 22

- ------------------------------

(1) The pro forma as adjusted column reflects the application of $161,063 of
estimated net proceeds to the Company from the Offerings to repay a portion
of the borrowings outstanding under the term loan portion of the Credit
Facilities.

(2) From the date of consummation of the Recapitalization and through the date
of consummation of the Offerings, all outstanding shares of Common Stock,
exclusive of shares of Common Stock held in the Restricted Stock Trust, are
redeemable, subject to certain restrictions, at the option of the
stockholder. Accordingly, all such shares of Common Stock have been recorded
at their redemption values and classified as Mandatorily Redeemable Equity
Securities in the Company's historical balance sheets at December 31, 1996
and 1997, respectively. The pro forma December 31, 1997 balance sheet
reflects the reclassification of the $508,471 carrying value of Mandatorily
Redeemable Equity Securities to stockholders' deficit in connection with the
termination of the redemption feature upon consummation of the Offerings, of
which $506 is attributable to the par value of the 50,658,180 common shares
and the remaining $507,965 is attributable to capital surplus. See Notes 2,
15 and 16 to the Consolidated Financial Statements.

(3) Reflects the authorization of 2,500,000 shares of Cumulative Participating
Junior Preferred Stock which is effective upon the closing of the Offerings.
See "Description of Capital Stock -- Rights Plan."

(4) Excludes 31,013,205 shares of Common Stock issuable upon exercise of options
outstanding at a weighted average exercise price of $6.84 at December 31,
1997. See "Management -- Executive Compensation."

(5) Pro forma as adjusted common stock and capital surplus reflect an increase
of $50 and $255,052, respectively, for the following: (i) a $161,063
increase resulting from the issuance of 6,912,730 newly issued shares of
Common Stock in the Offerings (of the $161,063 net increase in stockholders'
equity, $69 is attributable to Common Stock for the par value of the
6,912,730 shares issued with the remaining $160,994 increasing capital
surplus); (ii) a $230,778 increase resulting from the vesting of the
9,231,105 shares of Restricted Stock (based upon the initial public offering
price of $25.00 per share) allocated to employees as of the date of
consummation of the Offerings (of the $230,778 aggregate increase to Common
Stock and capital surplus, $92 is attributable to Common Stock for the par
value of the 9,231,105 shares vested and $230,686 is attributable to capital
surplus); and (iii) the elimination of the unearned compensation included as
a component of stockholders' equity resulting from recognition of the
Restricted Stock compensation charge (discussed in Note (6) below) in
connection with the vesting of such awards upon consummation of the
Offerings (this charge results in a $111 decrease in Common Stock (par value
of the 11,086,950 shares of Common Stock held by the Restricted Stock Trust
outstanding at December 31, 1997) and a decrease in capital surplus of
$136,628).

(6) Reflects the vesting of the aggregate 9,231,105 shares of Restricted Stock
allocated to employees as of the consummation of the Offerings and the
resulting non-recurring, non-cash, after-tax compensation charge estimated
at $136,159 (at the initial public offering price of $25.00 per share) as an
increase in the accumulated deficit herein. The charge to compensation
expense will occur upon consummation of the Offerings. See
"Management -- Executive Compensation -- The Restricted Stock Plan and Trust
Agreement" and Note 15 to the Consolidated Financial Statements.

21
<PAGE> 23

DILUTION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

As of December 31, 1997, after giving effect to the termination of the
redemption feature of the Mandatorily Redeemable Equity Securities upon the
consummation of the Offerings, the Company had a pro forma deficit in net
tangible book value of $269,880, or $4.37 per share of Common Stock based upon
61,745,130 pro forma shares of Common Stock outstanding. The deficit in pro
forma net tangible book value per share is determined by dividing the pro forma
deficit in net tangible book value of the Company (total tangible assets less
total liabilities) on such date by the number of pro forma shares of Common
Stock outstanding as of such date. After giving effect to the sale by the
Company of the 6,912,730 shares of Common Stock offered hereby and after
deducting underwriting discounts and commissions and estimated offering expenses
payable by the Company, the Company's pro forma as adjusted deficit in net
tangible book value as of December 31, 1997 would have been $14,198 or $.21 per
share of Common Stock. This represents an immediate decrease in the deficit in
the pro forma net tangible book value of $4.16 per share to existing
stockholders and immediate dilution of $25.21 per share to new investors
purchasing shares of Common Stock in the Offerings. The following table
illustrates dilution to new investors on a per share basis:

<TABLE>
<S> <C> <C>
Initial public offering price per share..................... $25.00
Pro forma deficit in net tangible book value per share
before the Offerings................................... $4.37
Decrease in deficit in pro forma net tangible book value
per share attributable to new investors................ $4.16
-----
Pro forma as adjusted deficit in net tangible book value per
share after the Offerings................................. $ .21
------
Dilution per share to new investors......................... $25.21
======
</TABLE>

The following table sets forth, as of the date of this Prospectus, a
comparison of the number of shares of Common Stock owned by the existing
stockholders and the new investors, the total consideration paid and the average
price per share paid by the Company's existing stockholders and new investors
purchasing shares of Common Stock from the Company in the Offerings.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)............... 59,682,000 90% $273,763 61% $ 4.59
New investors(1)....................... 6,912,730 10 172,818 39 25.00
----------- --- -------- ---
Total........................ 66,594,730 100% $446,581 100%
=========== === ======== ===
</TABLE>

- ------------------------------

(1) Sales of Common Stock by the Selling Stockholders in the Offerings will
reduce the number of shares of Common Stock held by existing stockholders to
49,994,730, or approximately 75% of the total shares of Common Stock
outstanding after the Offerings and will increase the number of shares held
by new investors to 16,600,000, or approximately 25% of the total shares of
Common Stock outstanding after the Offerings. See "Principal and Selling
Stockholders."

The foregoing tables exclude (i) an aggregate of 28,883,715 shares of
Common Stock reserved for issuance upon exercise of outstanding options under
the Stock Option Plans and (ii) an aggregate of 2,598,105 shares reserved for
issuance upon the exercise of outstanding options issued to certain of the
Recapitalization Investors. See "Management -- Executive
Compensation -- Management Stock Option Plan" and "-- 1997 ICP."

22
<PAGE> 24

SELECTED CONSOLIDATED FINANCIAL DATA

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following selected consolidated balance sheet data and consolidated
statement of operations data as of and for the years 1993 through 1997 have been
derived from the Company's audited annual consolidated financial statements,
including the consolidated balance sheets at December 31, 1996 and 1997 and the
related consolidated statements of operations and of cash flows for the three
years ended December 31, 1997 and the notes thereto appearing elsewhere in this
Prospectus. The selected consolidated financial data set forth below should be
read in conjunction with, and are qualified in their entirety by reference to,
the Consolidated Financial Statements and related notes thereto appearing
elsewhere in this Prospectus. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------
1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:

Revenues........................................ $905,770 $959,275 $1,085,494 $1,222,139 $1,382,740
Compensation expense, including employee
benefits(1)................................... 583,723 594,322 672,026 730,261 836,150
General and administrative expenses(1).......... 312,083 323,087 356,523 391,617 463,936
Recapitalization-related charges(2)............. -- -- -- 315,397 --
Other operating (income) charges(2)............. (11,714) 4,507 31,465 17,166 11,925
-------- -------- ---------- ---------- ----------
Operating expenses............................ 884,092 921,916 1,060,014 1,454,441 1,312,011
-------- -------- ---------- ---------- ----------
Income (loss) from operations................... 21,678 37,359 25,480 (232,302) 70,729
Interest income................................. 10,646 12,100 9,866 10,269 8,454
Interest expense................................ (17,958) (23,027) (27,441) (28,584) (42,879)
-------- -------- ---------- ---------- ----------
Income (loss) before income taxes............... 14,366 26,432 7,905 (250,617) 36,304
Income tax provision (benefit).................. 8,583 12,998 9,130 (20,611) 58,290
-------- -------- ---------- ---------- ----------
5,783 13,434 (1,225) (230,006) (21,986)
Equity in net income (loss) of unconsolidated
companies..................................... 102 4,740 5,197 (9,837) 342
Minority interest in net (income) loss of
consolidated subsidiaries..................... (1,271) (2,742) (3,152) 1,532 (2,294)
-------- -------- ---------- ---------- ----------
Income after taxes and before accounting
changes....................................... 4,614 15,432 820 (238,311) (23,938)
Cumulative effect of accounting changes (net of
tax benefit of $3,400)........................ (5,100) -- -- -- --
-------- -------- ---------- ---------- ----------
Net (loss) income............................... $ (486) $ 15,432 $ 820 $ (238,311) $ (23,938)
======== ======== ========== ========== ==========
Basic and diluted loss per common share(3)...... $ (.51)
Weighted average shares outstanding(3).......... 46,949,355
Supplemental loss per common share(4)........... $ (.35)
OTHER OPERATING DATA:
EBITDA(1)(5).................................... $ 59,282 $ 77,662 $ 72,972 $ 147,221 $ 139,375
Net cash provided by operating activities....... 15,426 43,314 79,809 178,064 224,511
Net cash used in investing activities........... 34,226 49,941 45,821 76,094 67,142
Net cash (provided by) used in financing
activities.................................... (41,644) 30,705 50,025 12,614 98,667
Capital expenditures............................ 25,241 33,196 42,096 51,792 51,899
International revenues as a % of total
revenues(6)................................... 51.7% 53.6% 54.7% 53.3% 52.2%
</TABLE>

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------------------------------------
1997 1997
1993 1994 1995 1996 ACTUAL PRO FORMA(11)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)(7).... $100,519 $ 72,651 $ 27,827 $ (196,509) $ (106,169) $ (106,169)
Total assets(8)................. 998,808 1,118,846 1,226,581 1,598,812 1,528,019 1,528,019
Total debt(9)................... 197,929 256,032 230,831 267,238 351,051 351,051
Mandatorily Redeemable Equity
Securities(10)................ -- -- -- 363,264 508,471 --
Total equity (deficit).......... 123,661 69,982 (55,485) (480,033) (661,714) (153,243)
</TABLE>

23
<PAGE> 25

- ------------------------------
(1) For a discussion of charges included in compensation expense, including
employee benefits, and general and administrative expenses, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

(2) For a discussion of Recapitalization-related and other operating charges,
see Notes 4 and 6 to the Consolidated Financial Statements.

(3) Basic net loss per common share for 1997 was computed by dividing the net
loss by the weighted average number of common shares outstanding during the
period. The weighted average number of common shares outstanding excludes
11,086,950 shares of Common Stock held by the Restricted Stock Trust, as
such shares vest upon the consummation of an initial public offering, or
the six-month anniversary thereof, a condition which was not satisfied at
December 31, 1997. Diluted net loss per common share for 1997 was computed
in the same manner as basic net loss per common share since the inclusion
of potential common shares would be antidilutive.

At December 31, 1997, the Company had outstanding options to purchase
31,013,205 shares of Common Stock with a weighted average exercise price of
$6.84 that could potentially dilute basic earnings per share in the future.
These options were excluded from the computation of diluted net loss per
common share because the effect for 1997 would be antidilutive. In
addition, at December 31, 1997, a maximum of 11,086,950 shares of Common
Stock held by the Restricted Stock Trust would vest and be dilutive as a
result of the consummation of the Offerings. See "Management -- Executive
Compensation -- The Restricted Stock Plan and Trust Agreement" and Notes 3,
15 and 21 to the Consolidated Financial Statements.

(4) The supplemental loss per common share was computed by dividing the
supplemental loss of $18,696 by the supplemental shares of 53,862,085. The
supplemental loss of $18,696 has been computed by adjusting the historical
net loss for 1997 to reflect the following: (i) additional interest cost,
net of the related tax benefit of $1,410 (computed utilizing an interest
rate and statutory tax rate of 7.0% and 41.0% respectively), associated
with the $161,700 of Recapitalization-related borrowings under the
Company's Credit Facilities, which occurred on March 18, 1997, as if such
borrowings had occurred as of January 1, 1997 and (ii) the reduction in
interest cost, net of tax, of $6,652 (computed utilizing an interest rate
and statutory tax rate of 7.0% and 41.0% respectively) associated with
$161,063 of the net proceeds of the Offerings to the Company, which is
expected to be utilized to repay a portion of the outstanding borrowings
under the term loan portion of the Company's Credit Facilities, as if the
debt repayment had occurred as of January 1, 1997.

The supplemental shares of 53,862,085 were computed by adding the 6,912,730
shares of Common Stock offered by the Company to the 46,949,355 weighted
average shares outstanding as of December 31, 1997. See "Capitalization."

Based upon the initial public offering price of $25.00 per share, the
consummation of the Offerings will give rise to a non-recurring, non-cash,
pre-tax charge of $230,778 ($136,159 net of the related tax benefit
assuming a statutory tax rate of 41.0%) arising from the vesting of the
aggregate of 9,231,105 shares of Restricted Stock allocated to employees as
of the date of the consummation of the Offerings. The determination of
supplemental loss for 1997 does not give effect to this charge due to its
non-recurring nature. See "Management -- Executive Compensation -- The
Restricted Stock Plan and Trust Agreement" and Note 15 to the Consolidated
Financial Statements.

(5) EBITDA is defined as income (loss) from operations, before depreciation and
amortization, other non-cash charges and Recapitalization-related charges.
EBITDA is presented because it is a widely accepted financial indicator and
is generally consistent with the definition used for covenant purposes
contained in the Company's existing credit facilities; however, EBITDA may
not be comparable to other registrants' calculation of EBITDA or similarly
titled items. EBITDA should not be considered as an alternative to net
income (loss) as a measure of operating results in accordance with
generally accepted accounting principles or as an alternative to cash flows
as a measure of liquidity. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Results of Operations."
EBITDA for 1996 and 1997 are before $11,096 and $11,925, respectively, of
non-cash charges primarily related to impairment write-downs which are
included in other operating charges. See Notes 4 and 6 to the Consolidated
Financial Statements.

(6) International revenues include all revenues earned outside the United
States.

(7) Working capital deficit as of December 31, 1996 includes approximately
$161,700 of accruals related to the Recapitalization which were paid in
1997 through long-term borrowings. Working capital deficit as of December
31, 1997 is the result of improved collection of accounts receivable and
use of cash to repay short-term borrowings under the Company's Credit
Facilities during 1997. See the Consolidated Statements of Cash Flows and
Note 4 to the Consolidated Financial Statements.

(8) Total assets as of December 31, 1997 (actual and pro forma) include net
deferred tax assets of $157,024, $75,135 of which relate to NOL
carryforwards of approximately $140,409 for U.S. tax purposes and
approximately $69,231 for foreign tax purposes. See Note 9 to the
Consolidated Financial Statements.

(9) Total debt includes current and non-current loans and installment notes.
See Notes 13 and 14 to the Consolidated Financial Statements.

(10) From the date of consummation of the Recapitalization and through the date
of consummation of the Offerings, all outstanding shares of Common Stock,
exclusive of shares of Common Stock held in the Restricted Stock Trust, are
redeemable, subject to certain restrictions, at the option of the
stockholder. Accordingly, all such shares of Common Stock have been
recorded at their redemption values and classified as Mandatorily
Redeemable Equity Securities in the Company's historical balance sheets at
December 31, 1996 and 1997, respectively. See Notes 2, 15 and 16 to the
Consolidated Financial Statements.

(11) The pro forma December 31, 1997 balance sheet reflects the termination of
the redemption feature and subsequent reclassification of Mandatorily
Redeemable Equity Securities, as discussed in Note (10) above, to
stockholders' equity. See "Capitalization" and Notes 2, 15 and 16 to the
Consolidated Financial Statements.

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<PAGE> 26

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the
Consolidated Financial Statements.

OVERVIEW

Y&R is the fifth largest marketing and communications organization in the
world, with integrated services in advertising, direct marketing and sales
promotion, perception management and public relations, branding consultation and
design services, and healthcare communications. Y&R's revenues were
approximately $1.4 billion in 1997, having grown at a compound annual rate of
12.9% from 1995 to 1997.

Y&R's revenues consist principally of commissions and fees received by the
Company from its clients. Commissions are derived using a negotiated percentage
of an advertiser's media and production spending through Y&R. Fees are based on
hours spent and costs incurred by agency staff plus a negotiated mark-up.
Commission revenue is recognized primarily when media placements appear on
television, on radio or in print, and when labor and production costs are
billed. Fee revenue is recognized when services are rendered.

Y&R has also implemented certain incentive-oriented compensation
arrangements with several clients to further strengthen client relationships and
reward Y&R for superior performance. These incentive arrangements create a range
of compensation which could result in either higher or lower revenues and
operating margins than a more traditional commission or fee arrangement.
Incentive levels are determined with reference to agreed upon operating,
performance and other benchmarks, with respect to both clients' businesses as
well as Y&R's performance. Although incentive arrangements did not materially
impact Y&R's revenues in 1997, management believes that additional clients may
request that Y&R institute incentive compensation arrangements in the future.

Y&R's revenues are diversified across geographic regions, various sectors
of the economy and among many clients. In 1997, approximately 47.8% of Y&R's
revenues were derived from its U.S. operations, with approximately 34.2% coming
from its European operations and the rest divided among its operations in Latin
America, Australia/New Zealand, Asia, Canada and Africa. For the years 1995,
1996 and 1997, the Company's revenue from any one country, other than the United
States, has not exceeded 10% of the Company's consolidated revenues. The United
Kingdom, Germany, Brazil, France, Australia, the Netherlands, Italy, Canada and
Switzerland represent the Company's largest sources of revenues by country
(other than the United States). See Note 10 to the Consolidated Financial
Statements. Y&R represents clients in various industries, including automotive,
consumer packaged goods, financial services, food and beverage, government
services and telecommunications. Y&R's revenues are diversified across its
approximately 5,500 client accounts, with the largest client, Ford Motor
Company, and the top 20 clients accounting for approximately 10.0% and 40.5%,
respectively, of revenues in 1997.

Y&R has two principal categories of operating expenses: compensation
expense and general and administrative expenses. Y&R's largest expense is
compensation, which includes the salaries, bonuses and benefits of all
employees, as well as fees paid to freelance contractors. General and
administrative expenses principally consist of facilities' costs, depreciation,
amortization, new business costs, travel expenses and professional fees.

From the time of its founding until 1996, Y&R was wholly owned by its
employees. As further described in Note 4 to the Consolidated Financial
Statements, in December 1996, Y&R consummated the Recapitalization, which
resulted in the recording of a pre-tax charge of $315.4 million in 1996. In
connection with the Recapitalization, the Company issued Restricted Stock. Based
upon the initial offering price of $25.00 per share, the consummation of the
Offerings will give rise to a non-recurring, non-cash, pre-tax charge of $230.8
million ($136.2 million net of the related tax benefit assuming a statutory tax
rate of 41.0%) from the vesting of an aggregate of 9,231,105 shares of
Restricted Stock allocated to employees as of the date of consummation of the
Offerings.

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<PAGE> 27

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items
derived from the Company's consolidated statements of operations and the
percentages of revenue represented by such items. Totals may not add due to
rounding.

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------
% OF % OF % OF
1995 REVENUES 1996 REVENUES 1997 REVENUES
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Revenues................................ $1,085.5 100.0% $1,222.1 100.0% $1,382.7 100.0%
Compensation expense, including employee
benefits.............................. 672.0 61.9% 730.3 59.8% 836.2 60.5%
General and administrative expenses..... 356.5 32.8% 391.6 32.0% 463.9 33.6%
Recapitalization-related charges........ -- 0.0% 315.4 25.8% -- 0.0%
Other operating charges................. 31.5 2.9% 17.2 1.4% 11.9 0.9%
------- --------- ------- --------- ------- ---------
Income (loss) from operations........... 25.5 2.3% (232.3) (19.0%) 70.7 5.1%
Net income (loss)....................... $ 0.8 0.1% ($238.3) (19.5%) ($ 23.9) (1.7%)
======= ========= ======= ========= ======= =========
EBITDA.................................. $ 73.0 6.7% $ 147.2 12.0% $ 139.4 10.1%
</TABLE>

1997 COMPARED TO 1996

Consolidated worldwide revenues for 1997 increased by 13.1% to $1,382.7
million from $1,222.1 million in 1996. Consolidated U.S. revenues for 1997
increased by 15.8% to $661.3 million from $571.1 million in 1996. Consolidated
international revenues for 1997 increased by 10.8% to $721.4 million from $651.0
million in 1996. Of the worldwide revenue increase, 13.6% was due to organic
growth (including net new business gains and higher net revenues from existing
clients) and 3.0% was due to the acquisition of majority interests in
investments previously accounted for under the equity method. Such increases
were partially offset by a 3.5% decline related to a strengthening (on average)
of the U.S. dollar against foreign currencies. New business was generated from
new client accounts such as Campbell's Soup, Citibank, Merck and United
Airlines.

Compensation expense for 1997 increased by 14.5% to $836.2 million from
$730.3 million in 1996. Compensation expense for 1997 increased as a percentage
of revenues to 60.5% from 59.8% in 1996. The growth in compensation expense was
generally in line with revenue growth and also included a $12.3 million charge
primarily for deferred compensation awards granted to senior executives in 1997.

General and administrative expenses for 1997 increased by 18.5% to $463.9
million from $391.6 million in 1996. General and administrative expenses
increased as a percentage of revenues to 33.6% in 1997 from 32.0% in 1996. The
higher rate of growth in general and administrative expenses compared to
revenues was primarily attributable to a $25.5 million write-off of accounts
receivable, costs billable to clients and other capitalized costs recorded in
1997 with respect to the operations of Burson-Marsteller in Europe and Asia. The
write-offs in Europe were primarily related to Burson-Marsteller's
implementation of a new management information system in 1997 which resulted in
delayed and inaccurate billing of certain clients and necessitated the creation
of additional reserves against accounts receivable and costs billable to
clients. The write-offs in Asia were attributable to the Company's evaluation of
Burson-Marsteller's recent operating performance in Asia and the determination
that Burson-Marsteller was unlikely to collect certain accounts receivable and
costs billable to clients. As a result of its analysis of the circumstances
which led to these write-offs, the Company has made management changes at
Burson-Marsteller in Europe and Asia and implemented additional financial
control and reporting requirements for these operations, including strengthening
controls and procedures regarding regional billing and collection practices.

In 1997, the Company had income from operations of $70.7 million compared
to a loss from operations of $232.3 million in 1996, primarily due to the
Recapitalization-related charges of $315.4 million. Income from operations in
1997 included $47.6 million of depreciation expense, $9.1 million of goodwill
amortization and $11.9 million of other operating charges for asset impairment
write-downs principally related to certain

26
<PAGE> 28

operations in the United States, Africa, Latin America and Europe. As a result,
EBITDA for 1997 was $139.4 million.

Net interest expense (interest expense net of interest income) increased by
$16.1 million in 1997 compared to 1996. The increase was primarily due to higher
average borrowing levels in 1997 as a result of the Recapitalization in December
1996. The net proceeds to the Company from the Offerings are expected to be used
to repay a portion of the borrowings under the term loan portion of the Credit
Facilities. Therefore, the Company expects to have lower average borrowing
levels in 1998.

The effective income tax rate for 1997 was 160.6%. The primary difference
between the U.S. statutory tax rate and Y&R's effective tax rate in 1997
resulted from incremental foreign taxes arising from losses outside the United
States which provided little or no tax benefit. The effective income tax rate
for 1996 was a benefit of 8.2%. This reflects the tax benefit from the
Recapitalization-related charges partially offset by foreign income taxed at
rates greater than the U.S. statutory rate. See Note 9 to the Consolidated
Financial Statements.

Net income of unconsolidated companies was $0.3 million in 1997 compared to
a loss of $9.8 million in 1996. A $9.3 million charge to write down an
Australian equity investment was recorded in 1996.

Minority interest in net loss of consolidated subsidiaries increased $3.8
million in 1997 compared to 1996, primarily reflecting the minority interest
share of charges for asset impairment write-downs relating to an Italian
operation in 1996.

Net loss for 1997 was $23.9 million compared to a net loss of $238.3
million in 1996, primarily as a result of charges recorded in connection with
the Recapitalization.

1996 COMPARED TO 1995

Consolidated worldwide revenues for 1996 increased by 12.6% to $1,222.1
million from $1,085.5 million in 1995. Consolidated U.S. revenues for 1996
increased by 16.0% to $571.1 million from $492.3 million in 1995. Consolidated
international revenues for 1996 increased by 9.7% to $651.0 million from $593.2
million in 1995. Of the worldwide revenue increase, 12.9% was attributable to
organic growth (including net new business gains and higher net revenues from
existing clients) and 0.7% was due to businesses acquired. Such increases were
partially offset by a 1.0% decline related to a strengthening (on average) of
the U.S. dollar against foreign currencies. New business was generated from new
client accounts such as Blockbuster Video, Equal, Ericsson, H&R Block and
Novell.

Compensation expense for 1996 increased by 8.7% to $730.3 million from
$672.0 million in 1995. Compensation expense decreased as a percentage of
revenues to 59.8% in 1996 from 61.9% in 1995. Such decrease primarily reflects
productivity improvements resulting from selected staff reductions in connection
with a productivity improvement plan implemented by the Company at the end of
1995.

General and administrative expenses for 1996 increased by 9.8% to $391.6
million from $356.5 million in 1995. General and administrative expenses
decreased as a percentage of revenues to 32.0% in 1996 from 32.8% in 1995,
primarily due to improved cost controls.

Recapitalization-related expenses of $315.4 million were incurred in 1996,
primarily related to the cancellation of the Company's former equity-based
compensation and stock option plans. See Note 4 to the Consolidated Financial
Statements.

In 1996, the Company recorded a $17.2 million charge for asset impairment
write-downs for certain European and Latin American operations. In 1995, the
Company recorded a restructuring charge of $24.4 million in connection with a
productivity improvement plan and charges of $7.1 million, primarily to dispose
of certain non-strategic European agencies.

In 1996, the Company had a loss from operations of $232.3 million compared
to income from operations of $25.5 million in 1995. The loss from operations of
$232.3 million in 1996 included $42.0 million of depreciation expense, $11.0
million of goodwill amortization, $315.4 million of Recapitalization-related

27
<PAGE> 29

charges and $11.1 million of non-cash, non-recurring operating charges
principally for asset impairment write-downs for certain operations in Europe
and Latin America. As a result, EBITDA for 1996 was $147.2 million.

Net interest expense (interest expense net of interest income) increased by
$0.7 million in 1996 compared to 1995. The increase was primarily due to $2.9
million in prepayment penalties relating to the repayment, in connection with
the Recapitalization, of $100 million of 7.01% senior notes and $40 million of
8.75% senior notes. Excluding these prepayment penalties, net interest expense
in 1996 decreased by $2.2 million versus 1995, resulting from lower average
interest rates combined with lower average borrowing levels in 1996. See Note 4
to the Consolidated Financial Statements.

The effective income tax rate for 1996 was a benefit of 8.2%. This reflects
the tax benefit for the Recapitalization-related charges partially offset by
foreign income taxed at rates greater than the U.S. statutory rate. The
effective income tax rate for 1995 was 115.5%. The primary difference between
the statutory tax rate and Y&R's effective tax rate in 1995 resulted from
foreign income taxed at rates greater than the U.S. statutory rate. See Note 9
to the Consolidated Financial Statements.

Net loss of unconsolidated companies was $9.8 million in 1996 compared to
income of $5.2 million in 1995. A $9.3 million charge to write down an
Australian equity investment as well as lower earnings reported by the Company's
joint ventures with Dentsu, Inc. contributed to the net loss in 1996.

Minority interest in net loss of consolidated subsidiaries decreased $4.7
million in 1996 compared to 1995, reflecting the minority interest share of
charges for asset impairment write-downs relating to an Italian operation in
1996.

Net loss for 1996 was $238.3 million compared to net income of $0.8 million
in 1995, primarily as a result of charges recorded in connection with the
Recapitalization.

LIQUIDITY AND CAPITAL RESOURCES

The Company historically has financed its working capital, capital
expenditures, acquisitions and equity repurchases from cash generated from
operations and third party borrowings.

Cash and cash equivalents at December 31, 1997 increased by 45.5% to $160.3
million from $110.2 million at December 31, 1996. For 1997, the Company
generated operating cash flows of $224.5 million which represented a 26.1%
increase in operating cash flows versus 1996. The Company achieved an
improvement in net cash flow from operating activities due, in part, to
increased focus on cash flow management, including improvements in the timing of
billings and the relationship between the collection of accounts receivable and
the payment of obligations to media and other suppliers. Operating cash flows
and third-party borrowings were used for capital expenditures, acquisition
requirements and equity repurchases.

Investing activities in 1997 included $51.9 million for capital
expenditures and $11.3 million for acquisitions. The majority of capital
expenditures were for technology-related purchases, while the remaining
expenditures were for leasehold improvements, furniture and equipment. The $11.3
million for acquisitions primarily consisted of increases in investments in
equity affiliates in the United States, Europe, Latin America and Australia/New
Zealand. Capital expenditures are estimated to be approximately $72.5 million
for 1998 primarily for real estate and information technology, with the increase
over 1997 primarily related to leasehold improvements in London and New York.

In December 1996, Y&R consummated the Recapitalization. Pursuant to the
Recapitalization, all of the Company's outstanding equity and equity-related
units and options to purchase such units were either acquired for cash
consideration or cancelled and exchanged for new equity interests or options to
purchase new equity interests. The Recapitalization was financed by $242 million
contributed by the Recapitalization Investors and by borrowings under the Credit
Facilities. The Credit Facilities consist of a six and one-half year $400
million term loan and a six and one-half year $300 million revolving credit
facility. The Company's obligations under the Credit Facilities are secured by a
security interest in certain domestic assets, including its headquarters
building in New York, all of the capital stock of the direct and indirect
domestic subsidiaries of the Company and 66.7% of the capital stock of the
Company's first-tier non-U.S. subsidiaries. As a result of

28
<PAGE> 30

the timing of Recapitalization-related payments, net cash used in financing
activities increased from $12.6 million in 1996 to $98.7 million in 1997.

At December 31, 1997, the Company had $330.6 million in outstanding
indebtedness under the Credit Facilities. The Company expects to fund its
payments of principal and interest under the Credit Facilities with internally
generated funds and from various external sources including the net proceeds
from the sale of Common Stock by the Company in the Offerings and borrowings
under the New Facility.

At December 31, 1997, the Company recorded a net deferred tax asset of
$157.0 million, $75.1 million of which related to net operating loss ("NOL")
carryforwards of approximately $140.4 million for U.S. tax purposes which expire
in the year 2012 and approximately $69.2 million of NOL carryforwards for
foreign tax purposes with carryforward periods ranging from one year to an
indefinite time. The available net deferred tax assets principally resulted from
compensation payments made in connection with the Recapitalization. Based upon
the initial public offering price of $25.00 per share, the consummation of the
Offerings will give rise to a non-recurring, non-cash, pre-tax charge of $230.8
million, which will generate additional tax benefits to the Company estimated at
$94.6 million.

As required by the Credit Facilities, the Company has entered into interest
rate exchange agreements with off-balance sheet risk in order to reduce its
exposure to changes in interest rates on its variable rate long-term debt. As of
December 31, 1997, the Company had obtained interest rate protection agreements
with respect to $275.0 million of indebtedness, which effectively changed the
Company's interest rate under the Credit Facilities to fixed rate borrowings.
The interest rate protection agreements mature at various times through 2001.

The Company's Consolidated Financial Statements are denominated in U.S.
dollars. In 1997, Y&R derived approximately 52.2% of its revenues from
operations outside of the United States. Currency fluctuations may give rise to
translation gains or losses when financial statements of foreign operating units
are translated into U.S. dollars. Significant strengthening of the U.S. dollar
against other major foreign currencies could have a material adverse effect on
Y&R's results of operations. Most of the Company's revenues are billed in the
same currency as the costs incurred to support the revenues, thereby reducing
exposure to currency fluctuations. The Company typically does not hedge foreign
currency profits into U.S. dollars, believing that over time the costs of a
hedging program would outweigh any benefit of greater predictability in the
Company's U.S. dollar-denominated profits. However, the Company selectively
hedges some positions where management believes it is economically beneficial to
do so, and bases its foreign subsidiary capitalization, debt and dividend
policies on minimizing currency risk. The Company also seeks, through pricing
and other means, to anticipate and avoid economic currency losses.

Management believes cash flows from operations coupled with availability
under the New Facility are adequate to support its short-term cash requirements
for capital expenditures, repayment of debt and maintenance of working capital.
The Company anticipates that future cash flows from operations plus funds from
various external sources including the New Facility and additional financings
will be adequate to support the long-term cash requirements as presently
contemplated.

The Company expects to prepay certain non-negotiable subordinated payment
obligations of approximately $15.2 million on June 30, 1998 using available cash
or borrowings under the New Facility. The non-negotiable subordinated payment
obligations were incurred by the Company in connection with the termination of
employment of certain former employee stockholders. Such payment obligations are
repayable at the Company's election in four annual installments and bear
interest at a rate equal to the applicable United States federal rate in effect
under Section 1274(d) of the Internal Revenue Code of 1986, as amended.

The Company expects to commence the declaration and payment of a regular
quarterly cash dividend in the last quarter of 1998. However, any determination
to pay dividends will be at the discretion of the Company Board and will depend
upon, among other factors, the Company's results of operations, financial
condition, capital requirements and contractual restrictions pursuant to the
Company's Credit Facilities. The covenants under the Company's existing Credit
Facilities currently prohibit Y&R from declaring and paying cash dividends; any
cash dividend is therefore contingent upon a renegotiation or refinancing of the
existing Credit

29
<PAGE> 31

Facilities in order to remove such restriction. The Company has entered into an
agreement in respect of the New Facility, which will become effective upon the
consummation of the Offerings. The New Facility, which would replace the Credit
Facilities, will contain certain financial and operating restrictions and
covenant requirements, and will permit the payment of cash dividends except in
the event of a continuing default under the credit agreement. The net proceeds
to the Company from the Offerings, together with borrowings under the New
Facility, are expected to be used to repay all outstanding borrowings under the
Credit Facilities upon consummation of the Offerings. The New Facility remains
subject to a number of closing conditions, and there can be no assurance that
the Company will be successful in consummating the New Facility.

SEASONALITY

The Company's revenues generally reflect the media buying patterns of
advertisers and are concentrated in the second and fourth quarters of the year.

YEAR 2000 COMPLIANCE

The Company is conducting a comprehensive review of its computer systems to
identify all software applications that could be affected by the inability of
many existing computer systems to process time-sensitive data accurately beyond
the year 1999 (referred to as the "Year 2000" issue). The Company intends to
modify or replace all affected systems for compliance with the Year 2000 issue.
The Company is also monitoring the adequacy of the processes and progress of
third-party vendors of systems that may be affected by the Year 2000 issue. Y&R
is dependent on third-party computer systems and applications, particularly with
respect to such critical tasks as accounting, billing and buying, planning and
paying for media, as well as on its own computer systems. While Y&R believes its
process is designed to be successful, because of the complexity of the Year 2000
issue and the interdependence of organizations using computer systems, it is
possible that Y&R's efforts, or those of third parties with whom Y&R interacts,
will not be satisfactorily completed in a timely fashion. Failure to
satisfactorily address the Year 2000 issue could have a material adverse effect
on Y&R's prospects, business, financial condition and results of operations.

The costs of Y&R's Year 2000 project have not been determined but are not
expected to have a material adverse effect on the Company. However, there can be
no assurance that Y&R will not experience cost overruns or delays in connection
with its plan for replacing or modifying systems, which could have a material
adverse effect on Y&R's prospects, business, financial condition and results of
operations.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" ("SFAS 130") and Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"), were issued. In February 1998, Statement of
Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions
and Other Postretirement Benefits" -- ("SFAS 132"), was issued. The Company
anticipates that the adoption of SFAS 130, SFAS 131 and SFAS 132 will not have a
significant effect on its 1998 financial statements. See Note 2 to the
Consolidated Financial Statements.

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<PAGE> 32

RECENT UNAUDITED FINANCIAL RESULTS

The following table sets forth certain unaudited consolidated results of
operations data for the Company for the three months ended March 31, 1997 and
1998. The unaudited quarterly data should be read in conjunction with the
additional annual financial information included in "Selected Consolidated
Financial Data" and the Consolidated Financial Statements appearing elsewhere in
this Prospectus.

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<PAGE> 33

BUSINESS

GENERAL

Young & Rubicam Inc. is the fifth largest consolidated marketing and
communications organization in the world. Since its founding 75 years ago, Y&R
has evolved from a single New York-based advertising agency to a diversified
global marketing and communications company operating in 128 cities in 76
countries worldwide as of December 31, 1997. The Company operates through such
internationally recognized market leaders as Young & Rubicam Advertising
(full-service advertising), Wunderman Cato Johnson (direct marketing and sales
promotion), Burson-Marsteller (perception management and public relations),
Landor Associates (branding consultation and design services) and Sudler &
Hennessey (healthcare communications), along with smaller complementary business
units, including The Bravo Group (multi-cultural marketing and communications),
Brand Dialogue (digital interactive branding and digital commerce), The Chapman
Agency (direct marketing) and The Media Edge (media planning, buying and
placement services). Y&R's revenues in 1997 were approximately $1.4 billion,
having grown at a compound annual rate of 12.9% from 1995 to 1997.

As part of Y&R's client focus, Peter A. Georgescu, Chairman and Chief
Executive Officer of Y&R, John P. McGarry, Jr., President of Y&R, Edward H.
Vick, Chief Operating Officer of Y&R and Chairman and Chief Executive Officer of
Young & Rubicam Advertising, and Thomas D. Bell, Jr., Executive Vice President
of Y&R and President and Chief Executive Officer of Burson-Marsteller, all
retain ongoing responsibilities for individual KCAs in addition to their
managerial roles.

INDUSTRY OVERVIEW

The marketing and communications industry encompasses a wide range of
services used to develop and deliver messages to both broad and targeted
audiences through multiple communication channels. The industry includes
traditional advertising services as well as other marketing and communications
services such as direct marketing and sales promotion, public relations,
branding consultation and design services, new media marketing and other
specialized services.

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<PAGE> 34

Traditional advertising services include the development and planning of
marketing and branding campaigns; the creative design and production of
advertisements; the planning and buying of time and/or space in a variety of
media, including broadcast and cable television, radio, newspapers, general
interest/ specialty magazines, billboards and the internet; and the provision of
consumer, product and other market research to clients on an ongoing basis.
According to industry sources, growth in advertising expenditures has
accelerated in recent years following the economic recession in the early 1990s,
and worldwide advertising expenditures totaled approximately $387 billion in
1996. Industry sources have predicted that worldwide advertising spending will
grow approximately 6% in 1998.

Direct marketing and sales promotion incorporate a broad range of services,
including direct mail and direct response television advertising (using
toll-free 800 numbers), inbound and outbound telemarketing and database
marketing. Sales promotion includes the planning, design and implementation of
merchandising and sales promotions as well as design and implementation of
targeted interactive campaigns. Industry sources have estimated a growth rate in
1998 of approximately 10% for both direct marketing and sales promotion.

Perception management and public relations address clients' external
corporate or brand positioning, public image and relations with key external
constituencies. Functions provided by public relations firms include corporate
communications, public affairs, lobbying, crisis management, issue advertising
and internal, consumer grassroots communications.

Branding consultation and design services encompass a range of services to
create, build and revitalize clients' brands. Among these services are corporate
identity, package design, retail design and branded environments, verbal
branding and nomenclature systems, corporate literature and interactive
branding.

New media marketing services include interactive marketing campaigns and
strategic consulting services, the design of internet websites, banners and home
pages, the development of corporate intranets and digital commerce applications.

INDUSTRY TRENDS

Several significant trends are changing the dynamics of the marketing and
communications industries, including the following:

GROWTH IN UNITED STATES MARKETING AND COMMUNICATIONS MARKETS. According to
industry sources, advertising expenditures in the United States have continued
to grow, increasing from approximately $140 billion in 1993 to approximately
$175 billion in 1996. In industries such as telecommunications, where regulatory
developments have encouraged increased competition among industry participants,
a growing number of companies have sought to establish and enhance their brand
images through comprehensive marketing and communications programs. In the
healthcare industry, recent regulatory changes that eased restrictions on
direct-to-consumer communications by pharmaceutical companies have also resulted
in significant additional marketing and communications expenditures.

GROWTH OF INTERNATIONAL MARKETING AND COMMUNICATIONS MARKETS. The
globalization of markets and the deregulation of certain sectors of
international markets have led to growth in demand for marketing and
communications services by large corporate clients. An increasing number of
companies are expanding globally and, where appropriate, are seeking consistent
brand images and market positions for their products throughout the world. At
the same time, however, companies continue to rely on their marketing and
communications advisors to tailor their regional and local marketing approach to
the demands, tastes and desires of the local marketplace. As international
markets have expanded, particularly the markets in the Asia/Pacific and Latin
American regions, non-U.S. advertising expenditures have grown more rapidly than
U.S. expenditures. According to industry sources, non-U.S. advertising
expenditures have increased from approximately 44% of worldwide expenditures in
1986 to approximately 55% in 1996.

INVESTMENT IN BRAND DEVELOPMENT. In the 1980s, many advertisers focused
their marketing campaigns on promotional advertising that emphasized price
competition, often reducing brand loyalty. Over the last several years, however,
advertisers have focused on the image or brand identity of their organizations,
products and services in an effort to differentiate themselves from competitors
and increase brand loyalty. This
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<PAGE> 35

emphasis on brand development has increased the demand for delivery of
consistent messages and, as a result, companies are seeking marketing and
communications organizations which are able to coordinate resources across
multiple disciplines, geographies and media.

DEMAND FOR INTEGRATED SERVICE OFFERINGS. Increasingly, certain clients are
turning to large marketing and communications organizations to provide
integrated services across multiple disciplines. Such clients are seeking
integrated services to ensure a consistent brand presence and maximize the
effectiveness of their messages around the world, better coordinate their
marketing activities and simplify and strengthen their relationships with their
marketing partners. The demand for globally-integrated services has led to the
creation of a small number of global marketing and communications companies,
including Y&R, which strive to provide their clients with a full range of
services in each of the local markets in which their clients operate. In
addition, a substantial number of clients continue to require access to
specialized service providers. Y&R has over 20 years of experience in organizing
its companies to address this client need.

INCREASED EMPHASIS ON TARGETED MARKETING. The desire of companies to reach
their target audiences and quantify the effectiveness of their communications
has resulted in greater demand for customized direct marketing methods, such as
database marketing, infomercials, in-store promotions and interactive programs.
These techniques enable companies to quantify the success of their campaigns and
monitor the return on investment of their marketing expenditures through such
mechanisms as response rate tracking. The desire to create more targeted
marketing has been enhanced by the emergence of new media which permits more
interactive methods of customizing and delivering messages. In certain
developing economies, the technology infrastructure is improving, indicating
increased potential for database marketing and communications.

STRATEGY

Y&R's strategy consists of the following key components:

INCREASE PENETRATION OF KEY CORPORATE ACCOUNTS. Y&R believes that
significant opportunities exist to increase its share of KCA marketing and
communications expenditures by leveraging its global network to provide
integrated services to KCAs. Y&R has successfully increased its share of the
marketing and communications expenditures of certain KCAs over the past few
years. For example, Y&R has significantly expanded its relationship with Ford,
winning new assignments in Brazil, Germany, Canada and the United States for
Young & Rubicam Advertising, Wunderman Cato Johnson, Landor Associates and Brand
Dialogue. KCAs also have increased their use of multiple services offered by Y&R
over the same period. During 1997, Y&R's 20 largest clients used the
capabilities of an average of five of the Company's marketing and communications
services.

Y&R has implemented a team concept for certain KCAs which utilize
advertising, direct marketing and other marketing and communications services
offered by Y&R. Each client team aligns Y&R employees from separate disciplines
within the Company around KCAs and offers incentives to these employees to
provide the highest quality service to the client without regard to Y&R's own
internal corporate structure. In addition, Y&R seeks to improve KCA satisfaction
by retaining independent consultants to conduct third-party audits with clients
which measure Y&R's performance on a variety of criteria. Y&R intends to use
this objective information to identify strengths, weaknesses and opportunities
within KCA relationships.

DEVELOP NEW CLIENT RELATIONSHIPS. The Company believes that there are
significant opportunities for future revenue and profit growth by providing
services to new clients in targeted industry sectors and to those clients
seeking to build and maintain global, regional and local brands. Y&R has
successfully used its integrated and global approach as an effective tool in
winning new business. Y&R's win of the global Citibank account in August 1997
exemplifies the success of this strategy. Management believes that the
acquisition of this new business was due, in part, to Y&R's ability to
coordinate advertising and direct marketing activities for Citibank around the
world. The Company believes that Citibank consolidated its advertising and
direct marketing accounts with Y&R in order to establish a consistent brand
identity around the world. In addition to Citibank, during the last 18 months,
Y&R has won new business from clients including United Airlines and Campbell's
Soup, both of whom were designated as KCAs.

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<PAGE> 36

LEVERAGE EXISTING GLOBAL NETWORK. With a worldwide presence in 76
countries (including 14 countries where Y&R is represented by non-equity
affiliations with local partners), the Company believes that it is well
positioned to continue to benefit from the trend towards the globalization of
client marketing and communications needs and the consolidation of such needs
with a single international service provider. For example, in late 1995,
Colgate-Palmolive consolidated its global advertising with Y&R, enabling
Colgate-Palmolive to replace multiple campaigns created by various local
agencies with a single campaign coordinated by Y&R's global network, while
providing substantial cost savings to Colgate-Palmolive.

CAPITALIZE ON EXISTING CAPABILITIES. Y&R intends to continue the
development of its existing capabilities into more visible and accessible client
services. For example, in 1997, Y&R launched a new unit, Brand Dialogue, to
serve its clients in the areas of digital interactive branding and digital
commerce and in the development and implementation of various interactive
strategies, including website design, creation and production. To create this
integrated unit, Y&R combined the existing interactive capabilities of Young &
Rubicam Advertising and Wunderman Cato Johnson in the United States, Latin
America, Europe and Asia/ Pacific. Management believes that Brand Dialogue
represents a growth opportunity for Y&R, and the Company intends to make
significant investments in new and emerging technologies to capitalize on these
opportunities.

In addition, in July 1997, the Company consolidated the United States media
planning, buying and placement capabilities of Young & Rubicam Advertising,
Wunderman Cato Johnson and The Media Edge (a media company acquired by Y&R in
1996) under The Media Edge name. With this consolidation, Y&R created a major
United States media agency, thereby enhancing its ability to negotiate
effectively and secure discounts for media purchases on behalf of its clients.
The Company believes that The Media Edge will provide a variety of media
alternatives in various markets to existing and future clients. Y&R plans to
continue to identify and leverage strengths and capabilities that can provide
further differentiation for the Company and that can evolve into businesses that
generate incremental revenues and profits.

UTILIZE SUPERIOR CONSUMER KNOWLEDGE AND BRAND INSIGHTS. To assist its
clients in building, leveraging, protecting and managing their brands, Y&R has
developed and is maintaining extensive knowledge of consumer brand perceptions.
In 1994, Y&R launched BrandAsset Valuator ("BAV"), a proprietary database of
consumer perceptions for building and managing brands. In its first two phases,
in 1994 and the second half of 1997, the BAV project involved the gathering of
information on approximately 10,000 brands, including over 9,000 local and
regional brands and 550 global brands. BAV provides an understanding of how
consumers evaluate brands, how brands evolve over time and how brands are
managed successfully. The Company believes that BAV, in which the Company has
made significant investments over the past five years, is the first global
consumer study that provides an empirically derived model for how brands gain
and lose their strength. The Company further believes that BAV, which reflects
the perceptions of over 95,000 consumers in 32 countries in the Americas,
Europe, Asia, Australia and Africa, is the most extensive database of
information concerning consumer perceptions of brands. Management believes that
Y&R's comprehensive research capabilities, including BAV, have become a
significant factor in attracting new clients and winning new assignments from
existing clients. The Company plans to continue to invest in BAV, and believes
that knowledge of consumers' changing perceptions of brands will continue to
provide Y&R with a significant competitive advantage.

CULTIVATE CREATIVE EXCELLENCE. Y&R intends to continue emphasizing the
importance of creative marketing and communications. The creative leadership of
Y&R has been recognized over the years through the receipt of various industry
awards, including Cannes Lions and Clio Awards for excellence in television and
print advertising, EFFIES (awards for effective advertising) and a number of
other awards for direct marketing and design services. Y&R also has created
numerous memorable marketing and communications programs for clients, including
"The Softer Side of Sears," "Everybody Needs a Little KFC," "It's All Within
Your Reach" for AT&T, "The Document Company" for Xerox, and "Be All That You Can
Be" for the United States Army, as well as identity and design assignments,
including the creation of corporate identities, for Lucent Technologies,
Netscape and the 2002 Salt Lake City Olympics.

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<PAGE> 37

IMPROVE OPERATING EFFICIENCIES. The Company believes that opportunities
exist to further improve operating efficiencies in order to expand margins and
increase future profitability. For example, Y&R has implemented initiatives
which have both improved productivity and reduced compensation expense as a
percentage of consolidated revenues.

EXPAND CAPABILITIES THROUGH ACQUISITIONS. In order to add new
capabilities, enhance its existing capabilities and expand the geographic scope
of its operations, Y&R regularly evaluates and intends to pursue appropriate
acquisition opportunities. Management believes that significant opportunities
exist to expand its businesses. Historically, in order to expand capabilities
beyond traditional advertising, Y&R has acquired well-established leaders in
other marketing and communications disciplines. More recently, the Company has
acquired smaller niche agencies or companies to enhance existing capabilities or
expand geographic coverage.

OPERATIONS

The Company's operations are aligned under two senior executives. Young &
Rubicam Advertising and Wunderman Cato Johnson, along with the smaller
complementary business units, Brand Dialogue, The Bravo Group, The Chapman
Agency and The Media Edge, report to Edward H. Vick, Chief Operating Officer of
the Company, as well as Chairman and Chief Executive Officer of Young & Rubicam
Advertising. As appropriate, Young & Rubicam Advertising and Wunderman Cato
Johnson work in partnership to service those clients who demand integrated
advertising and direct marketing capabilities. Burson-Marsteller, Landor
Associates, Sudler & Hennessey and Cohn & Wolfe report to Thomas D. Bell, Jr.,
Executive Vice President of the Company, as well as President and Chief
Executive Officer of Burson-Marsteller.

YOUNG & RUBICAM ADVERTISING. Young & Rubicam Advertising is one of the
world's leading full-service consumer advertising agencies, offering expertise
in creative development, consumer research and marketing, and media buying and
planning. In 1996, Young & Rubicam Advertising was ranked by industry sources as
the ninth largest advertising agency based in the United States.

Young & Rubicam Advertising has had a number of recent new business wins.
In August 1997, Citibank consolidated its worldwide advertising and direct
marketing business with Y&R. In addition, since 1995, Young & Rubicam
Advertising has won substantial new business from Colgate-Palmolive, United
Airlines and Campbell's Soup. In June 1997, Young & Rubicam Advertising extended
its long-term relationship with the United States Army, an account which is
subject to a government-mandated review every five years. In October 1997, Young
& Rubicam Advertising won the assignment to develop a campaign for Census 2000,
the first unified, paid advertising campaign undertaken by the United States
Bureau of the Census. Young & Rubicam Advertising also continues to expand
relationships with existing clients, including creating AT&T's corporate
branding campaign, and together with Wunderman Cato Johnson, developing the
campaign for the launches of Sears' Home Services Division, the Navigator
sport-utility vehicle for Ford's Lincoln-Mercury division in the United States
and the Puma, Ka and Galaxy automobiles for Ford in selected international
markets.

Young & Rubicam Advertising has long been involved in various public
interest and public service efforts. Young & Rubicam Advertising handles public
service accounts for The National Urban League, The United Negro College Fund
and, through its work with the Ad Council, is launching a series of programs to
benefit children throughout the United States and, separately, to assist
battered women.

Young & Rubicam Advertising operates in 91 cities in 61 countries
worldwide, in the Americas, Europe and Africa. Young & Rubicam Advertising
services clients through the Dentsu, Young & Rubicam Partnerships across
Asia/Pacific.

DENTSU, YOUNG & RUBICAM PARTNERSHIPS. The Dentsu, Young & Rubicam
Partnerships ("DY&R") are a network of full-service advertising agencies that
provide Young & Rubicam Advertising with access to major markets across the
Asia/Pacific region. DY&R was created as a joint venture between Y&R and Dentsu,
Inc. ("Dentsu") in 1991. In 1996, Dentsu ranked as the fourth largest marketing
and communications organization in the world and the largest marketing and
communications organization based in Asia/Pacific. DY&R is a series of local
ventures in which Y&R typically has a 50% interest, and is jointly managed and
operated by

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<PAGE> 38

Y&R and Dentsu. To maximize local brand equity and minimize conflicts, DY&R
operates under different brand names and management in each of its three
regions -- Asia, Australia/New Zealand and the United States. DY&R primarily
services major clients of Dentsu and Y&R in Asia, including Y&R's KCAs, but also
has its own local clients in each region. In Asia/Pacific, DY&R has recently won
regional business from Fuji and Citibank and has been awarded additional work
from Ford, Sony, Ericsson and Cadbury-Schweppes in specific markets. DY&R
operates in 27 cities in 16 countries across Asia/Pacific and the United States,
where it operates as The Lord Group.

WUNDERMAN CATO JOHNSON. Wunderman Cato Johnson ("WCJ") is one of the
world's leading behavior-driven marketing and communications companies.
Behavior-driven marketing and communications are designed to assist clients in
producing immediate sales and building brand and customer equity. WCJ addresses
its clients' marketing objectives through direct marketing, sales promotion,
television commercials and infomercials, customer loyalty programs, relationship
marketing programs, database development and management, merchandising,
entertainment and sports marketing, lead generation and new product launches.

WCJ focuses on converting "consumers" to "customers" and mass markets to
individual relationships. WCJ seeks to motivate behavior by focusing on
identifying and acquiring the most valuable customer prospects for clients,
building loyalty among its clients' most profitable customers and managing the
customer's interactions with the brand, the trade and the sales force.

WCJ provides services to KCAs such as AT&T, DuPont, Ford, Taco Bell and the
United States Postal Service. Recent new business projects include the creation
of a global promotion for Ericsson, and, together with Young & Rubicam
Advertising, the launches of the Sears Home Services Division and the Navigator
for Ford's Lincoln-Mercury division.

WCJ was created by the 1992 merger of Wunderman Worldwide, a direct
marketing company acquired by Y&R in 1973, and Cato Johnson Associates, a sales
promotion company acquired by Y&R in 1976. Headquartered in New York, WCJ
operates in 49 cities in 32 countries worldwide. WCJ also has major database
facilities in Europe and Latin America.

OTHER CAPABILITIES. Brand Dialogue specializes in digital interactive
branding and digital commerce. Brand Dialogue's primary offerings consist of:
(i) web advertising, including the design, creation and production of worldwide
websites, banners, home pages and comprehensive interactive campaigns; (ii)
digital commerce applications; (iii) the development of corporate intranets to
improve communications and productivity within and among a defined set of users;
and (iv) interactive marketing consulting services. Brand Dialogue has obtained
new business from both existing Y&R KCAs and other clients, as well as new
clients. During 1997, Brand Dialogue won notable and varied assignments from
clients such as AT&T, Citibank, Ford, United Airlines, the United States Postal
Service and Xerox.

The Bravo Group ("Bravo") creates multi-cultural marketing and
communications programs targeted to the fast-growing U.S. Hispanic community.
Bravo's multi-disciplinary services include advertising, promotion and event
marketing, public relations, research and direct marketing. Bravo provides
services for selected KCAs including American Home Products-Whitehall, AT&T,
Campbell's Soup, Clorox, Kraft and the United States Postal Service.

The Chapman Agency ("Chapman") is a specialized direct marketing agency
which provides a range of services in the United States primarily to the
telecommunications, financial services, technology and healthcare industries.
Chapman focuses on communications designed to build individual relationships
with individual customers, and works with its clients to maximize customer
profitability and build enduring brands over time. Chapman is also involved in
both the development and application of database marketing and communications
techniques. Chapman provides services to Bristol-Myers Squibb, Dow Jones, DuPont
and SmithKline Beecham.

The Media Edge provides integrated media planning, buying and placement
services for both Young & Rubicam Advertising and WCJ. In addition, The Media
Edge provides planning and buying of both traditional and direct response media.
Management believes that The Media Edge is positioned to act as an independent
full-service media provider, offering a range of media-related services to
clients other than those of Young & Rubicam Advertising and WCJ, as well as to
smaller independent advertising and communica-

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<PAGE> 39

tions agencies. The Company believes that these capabilities will enable The
Media Edge to take advantage of opportunities presented by the trend of clients
separating media responsibility assignments from other advertising services.
During 1997, The Media Edge won significant new business, including a number of
agency of record assignments (a preferred media provider designation) and media
research and modeling assignments, from clients such as International Distillers
and Vintners (Grand Metropolitan), Monsanto, Ore-Ida (Heinz), and Revlon. In
addition, The Media Edge recently expanded its relationship with Sears and
retained its long-term relationship with the Irish Tourist Board.

BURSON-MARSTELLER. Burson-Marsteller is one of the world's leading
international perception management, public relations and public affairs
companies. It provides a comprehensive range of perception management
capabilities to its clients, including issues analysis, crisis management,
consumer and business marketing and research, corporate communications, investor
relations and public affairs advocacy. The perception management process begins
with a statement of the desired business results and then identifies current and
targeted perceptions, as well as different approaches to create the desired
mindset with key audiences.

Burson-Marsteller believes a shift is occurring in the perception
management and public relations field, away from a focus on executional delivery
based upon a client's specific instructions and towards a more consultative and
interactive relationship. To that end, in 1996 and 1997, Burson-Marsteller
implemented a client-focused practice structure in the United States. This
client-focused practice structure has replaced the traditional geographic
organizational model in the United States and helps ensure the firm's
professional client teams have the experience and insight required to provide
clients with the in-depth capabilities and knowledge to meet their needs. In
Europe and Asia, Burson-Marsteller intends to maintain a primarily geographic
organizational model and to implement, where feasible, elements of a
client-focused practice structure. Burson-Marsteller's functional and industry
practice areas currently include corporate, healthcare, marketing, advertising,
media, public affairs, strategic consulting and technology. Burson-Marsteller's
resources include three kinds of specialists: (i) industry specialists who are
experienced in specific fields; (ii) practice specialists who are experienced in
specific perception management, public relations and public affairs disciplines;
and (iii) creative and media specialists who are skilled in using a variety of
techniques and different technologies to deliver messages with impact.

Burson-Marsteller serves as counselor to a diverse body of clients ranging
from major corporations, business associations and professional organizations to
governmental bodies and non-profit institutions. During the last 18 months,
Burson-Marsteller has undertaken significant assignments for Qualcomm, Sun
Microsystems and Unilever. In addition, Burson-Marsteller has expanded and
strengthened relationships with existing clients such as Andersen Consulting,
Johnson & Johnson and Philip Morris.

Burson-Marsteller was founded in 1953 and was acquired by Y&R in 1979.
Burson-Marsteller is head-quartered in New York and operates in 46 cities in 36
countries around the world. The Burson-Marsteller network also includes Black,
Kelly, Scruggs & Healey Inc., a lobbying and public affairs firm based in
Washington D.C., Marsteller Advertising, which specializes in corporate,
business-to-business and issues advertising campaigns, with offices in New York,
Chicago, Pittsburgh and London, and The Mead Point Group, a small, strategic
consulting firm located in Greenwich, Connecticut.

LANDOR ASSOCIATES. Landor Associates ("Landor") is one of the world's
leading branding consultancies and strategic design firms. Landor creates,
builds and revitalizes clients' brands and helps position these brands for
continued success. Landor's branding and identity consultants, designers and
researchers work with clients on a full range of branding and identity projects,
including corporate identity, packaging and brand identity systems, retail
design and branded environments, interactive branding and design, verbal
branding and nomenclature systems, corporate literature, brand extensions and
new brand development.

Landor has broad international experience across various industries, and
clients include automobile manufacturers, banks and financial institutions,
commercial airlines, communications and information companies, consumer
products, entertainment industry concerns, hotels, major industrials, packaged
goods companies and petroleum retailers.

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Landor has gained substantial new business momentum during the last 18
months, and has been awarded corporate identity assignments for the 2002 Salt
Lake City Olympics, Lucent Technologies and Delta Airlines; package design
assignments for Frito-Lay and Kellogg's; and branded environment assignments for
Taco Bell, Pizza Hut and Sears. In addition, Landor has expanded relationships
with existing clients. During 1996, Landor was retained by Coors Beer (as sole
supplier) to design packaging, and more recently this assignment expanded to
include verbal branding. In addition, during 1997, Landor worked to develop the
name and corporate identity for Visteon, a Ford subsidiary that supplies
component parts to the automotive industry.

Landor was founded in 1941 and was acquired by Y&R in 1989. Landor is
headquartered in San Francisco and operates in 15 cities in 11 countries
worldwide, including multidisciplinary consulting and design studios in New
York, Seattle, Mexico City, Hamburg, London, Paris, Hong Kong and Tokyo.

SUDLER & HENNESSEY. Sudler & Hennessey ("S&H") is one of the world's
leading healthcare communications firms, developing strategic promotional and
educational programs for a wide spectrum of healthcare brands. S&H creates
advertising, direct marketing and sales promotion programs for prescription
drugs and over-the-counter medications. In addition, S&H provides strategic
consultancy and communications support in the areas of managed care, medical
devices and equipment, nutrition, veterinary medicine and general healthcare.
Communications programs produced by S&H on behalf of its largely pharmaceutical
industry client base are directed to a wide range of healthcare professionals as
well as patients and their support networks.

S&H's medical education division, IntraMed, develops continuing educational
programming on behalf of its pharmaceutical and consumer care clients. These
educational efforts bring credible third-party support to healthcare
professionals as well as patient educational communications.

The healthcare communications industry experienced significant growth
during 1997, due both to a dramatic increase in direct-to-consumer healthcare
communications and numerous new product introductions. S&H has capitalized on
this growth, winning significant new business around the world, including
product launch assignments from Abbott Laboratories, Merck, Roche and Zeneca.

S&H was founded in 1941 and was acquired by Y&R in 1973. S&H is
headquartered in New York and operates in 16 cities in 11 countries in North
America, Europe and Asia/Pacific.

COHN & WOLFE. Cohn & Wolfe is a full-service public relations firm that
provides creative, results-driven services to its clients. Cohn & Wolfe helps
its clients establish and communicate corporate and brand identity, launch new
products and expand sales. Areas of expertise include consumer marketing, sports
publicity and issues management, as well as healthcare, information technology
and business-to-business communications. Current clients include Eli Lilly,
Reebok, Deloitte & Touche, SmithKline Beecham, Phillip Morris, Sony, NEC and the
United States Postal Service.

Cohn & Wolfe was founded in 1970 and was acquired by Burson-Marsteller in
1984. Cohn & Wolfe operates in 12 cities in 11 countries in North America,
Europe and Australia.

COMPETITION

The marketing and communications industry is highly competitive. Y&R's
principal competitors in the advertising, direct marketing and perception
management and public relations businesses are large multinational marketing and
communications companies, as well as numerous smaller agencies that operate only
in the United States or in one or more countries or local markets. Y&R must
compete with such other companies and agencies to maintain existing client
relationships and to obtain new clients and assignments. Some clients, such as
U.S. governmental agencies, require agencies to compete for business at
mandatory intervals. Principal competitive factors include an agency's creative
reputation, knowledge of media, financial controls, geographical coverage and
diversity, relationships with clients and quality and breadth of services.
Recently, traditional advertising agencies have also been competing with major
consulting firms which have developed practices in marketing and communications,
and with smaller companies such as systems integrators, database marketing and
modeling companies and telemarketers, which offer technological solutions to
marketing and communications issues faced by clients. In addition, the trend
towards consolidation of global accounts requires companies seeking to compete
effectively in the international marketing and

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communications industry to make significant investments in additional offices
and personnel around the world and in new and improved technology for linking
such offices and people.

United States clients typically may cancel contracts with agencies upon 90
days' notice, and non-U.S. clients typically also may cancel contracts with
agencies on 90 to 180 days' notice. However, Y&R believes that clients may find
it increasingly difficult to terminate relationships with agencies which
represent their brands on a global basis because of the complexity of
coordinating creative, media and non-media services. In addition, clients
generally remain able to move from one agency to another with relative ease. As
is typical in the marketing and communications industry, Y&R has lost or
resigned client accounts and assignments for a variety of reasons, including due
to conflicts with newly acquired clients. Although Y&R typically has replaced
such losses with new clients and assignments, there can be no assurance that Y&R
will continue to be successful in replacing clients that may leave Y&R or in
replacing revenues when a client significantly reduces the amount of work given
to Y&R.

Representation of a client does not necessarily mean that all advertising
or public relations for that client are handled by one agency. Many large
multinational companies are served by a number of agencies within the marketing
and communications industry. In many cases, clients' conflicts policies or
desire to be served by multiple agencies result in one or more global agency
networks representing a client only for a portion of its marketing and
communications needs or only in particular geographic areas. In addition, the
ability of agencies within marketing and communications organizations to acquire
new clients or additional assignments from existing clients may be limited by
the conflicts policy followed by many clients not to permit agencies to perform
similar services for competing products or companies. Y&R's principal
international competitors are holding companies for more than one global
advertising agency network, which, in some situations, may permit separate
agency networks within such holding companies to perform services for competing
products or for products of competing companies. The Company has one global
advertising agency network, and accordingly, Y&R's ability to compete for new
advertising assignments and, to a lesser extent, other marketing and
communications assignments may be limited by these conflicts policies. Industry
practices in other areas of the marketing and communications business reflect
similar concerns with respect to client relationships.

REGULATION

The regulation of advertising takes several forms. The primary source of
governmental regulation in the United States is the Federal Trade Commission
("FTC") which is charged with administering the Federal Trade Commission Act
(the "FTC Act"). The FTC Act covers a wide range of practices involving false,
misleading and unfair advertising. In the event of violations of federal laws
and regulations, the FTC may seek cease and desist orders, may impose monetary
penalties and may require other remedies. The Federal Food and Drug
Administration, the Federal Communications Commission and other agencies also
have regulatory authority that affects the advertising business. In addition,
many state and local governments have adopted statutes and regulations similar
in scope to the FTC Act and the regulations thereunder.

Self-regulatory activities have become significant in the advertising
business. The Council of Better Business Bureaus has created the National
Advertising Division and the National Advertising Review Board which review and
process possible violations of proper business conduct through advertising. The
national television networks and various other media have also adopted strict
and extensive regulations governing the advertising that they will accept for
broadcast or publication. Trade associations in certain industries publish
advertising guidelines for their members and, in addition, various consumer
groups have been and continue to be powerful advocates of increased regulation
of advertising.

Advertising is also subject to regulation in countries other than the
United States in which Y&R and its affiliates do business. Y&R has developed
internal review procedures to help ensure that its work product, as well as that
of its affiliates, is in compliance with standards of accuracy, fair disclosure
and ethical proprieties, including those established by federal, state and local
laws and regulations and the pre-clearance procedures of the broadcast media.

In addition, as an international organization Y&R is subject to the Foreign
Corrupt Practices Act (the "FCPA"). The FCPA imposes civil and criminal fines
and penalties on companies and individuals which violate its anti-bribery and
other provisions.

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EMPLOYEES

Y&R has approximately 13,000 employees (including part-time employees)
worldwide. None of Y&R's U.S. employees are covered by collective bargaining
agreements. Management believes that the Company's relations with employees are
good.

PRINCIPAL PROPERTIES

Y&R owns its headquarters office building at 285 Madison Avenue, New York,
New York. Y&R has granted a mortgage on such property to the lenders under the
Credit Facilities. Y&R leases other offices and space for its facilities in New
York City and elsewhere throughout the world. The following table sets forth
certain information relating to Y&R's principal properties:

<TABLE>
<CAPTION>
APPROXIMATE
SQUARE LEASE
LOCATION USE FOOTAGE EXPIRATION
<S> <C> <C> <C>
285 Madison Avenue, Young & Rubicam Advertising, Brand 370,000 N/A (owned)
New York, New York Dialogue and corporate headquarters
230 Park Avenue South, Burson-Marsteller, Chapman, Bravo and 340,500 1/22/06
New York, New York Landor
Gallus Park, Young & Rubicam Advertising, WCJ, 154,000 4/26/04
Frankfurt, Germany Burson-Marsteller and Sudler &
Hennessey
Greater London House, Young & Rubicam Advertising, WCJ and 80,000 5/31/13
London, U.K. Sudler & Hennessey
200 Renaissance Center, Young & Rubicam Advertising and WCJ 96,000 11/30/99
Detroit, Michigan
675 Avenue of the Americas, WCJ 92,500 6/30/03
New York, New York
49-59 Avenue Andre Morizet, Young & Rubicam Advertising and WCJ 65,000 12/31/98
Paris, France
One South Wacker Drive, Young & Rubicam Advertising, WCJ and 63,000 11/30/99
Chicago, Illinois Landor
100 First Plaza, Young & Rubicam Advertising, WCJ, 63,000 5/11/03
San Francisco, California Burson-Marsteller and Bravo
1801 K Street N.W., Burson-Marsteller and Cohn & Wolfe 60,000 10/31/06
Washington, D.C.
295 Madison Avenue, Young & Rubicam Advertising 51,500 12/31/03
New York, New York
</TABLE>

Y&R's planned capital expenditures for 1998 include expenditures for
leasehold improvements of facilities which, when completed, are expected to
result in a configuration of owned and leased facilities which Y&R believes will
be adequate for its current and anticipated purposes. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

LEGAL PROCEEDINGS

Y&R is involved from time to time in various claims and legal actions
incident to its operations, both as plaintiff and defendant. In the opinion of
management, none of these existing claims is expected to have a material adverse
effect on the Company.

41
<PAGE> 43

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the
executive officers and Directors of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Peter A. Georgescu..... 58 Chief Executive Officer of the Company and Chairman of the
Board
Alan J. Sheldon........ 56 Vice Chairman and Managing Director of the Company
John P. McGarry, Jr.... 58 President of the Company
Edward H. Vick......... 54 Chief Operating Officer of the Company, Chairman and Chief
Executive Officer of Young & Rubicam Advertising and
Director
Thomas D. Bell, Jr. ... 48 Executive Vice President of the Company, President and Chief
Executive Officer of Burson-Marsteller and Director
Stephanie W. Executive Vice President and General Counsel of the Company
Abramson............. 53
Michael J. Dolan....... 51 Vice Chairman and Chief Financial Officer of the Company and
Director
F. Warren Hellman...... 63 Director
Philip U. Director
Hammarskjold......... 33
Richard S. Bodman...... 60 Director
Alan D. Schwartz....... 48 Director
John F. McGillicuddy... 67 Director
</TABLE>

The business address of each of the Company's executive officers is 285
Madison Avenue, New York, New York 10017. The business address of Messrs.
Hellman and Hammarskjold is One Maritime Plaza, San Francisco, California 94111.
The business address of Mr. Schwartz is 245 Park Avenue, New York, New York
10167. The business address of Mr. Bodman is c/o AT&T Ventures, Chevy Chase
Metro Building, 2 Wisconsin Circle, Suite 610, Chevy Chase, Maryland 20815-7003.
The business address of Mr. McGillicuddy is 270 Park Avenue, 32nd Floor, New
York, New York 10017.

PETER A. GEORGESCU Mr. Georgescu has been Chairman and Chief Executive
Officer of Young & Rubicam Inc. since 1994. He has been a Director of the
Company since 1980. Mr. Georgescu's career at Y&R spans 34 years with top
management experience both in the United States and Europe. Prior to becoming
Chairman, Mr. Georgescu was President of the Company for four years. Mr.
Georgescu joined Young & Rubicam New York in 1963 as a trainee and has held
various positions in research, account management and marketing in New York,
Chicago and Amsterdam. Mr. Georgescu is a member of the Board of Directors of
Briggs and Stratton Company.

ALAN J. SHELDON Mr. Sheldon has been Vice Chairman and Managing Director
of Young & Rubicam Inc. since July 1996. Mr. Sheldon was a Director of the
Company from 1988 to February 1998. From 1994 to 1996, he was Chief Operating
Officer of Young & Rubicam Advertising. Mr. Sheldon was also Chief Financial
Officer of Young & Rubicam Europe from 1993 to 1994, after serving as Executive
Vice President and General Manager of Young & Rubicam Inc. since 1990. Mr.
Sheldon joined Y&R in 1968 in Corporate Finance and subsequently served in
several senior positions at Y&R and Young & Rubicam Advertising.

JOHN P. MCGARRY, JR. Mr. McGarry has been President of the Company since
April 1996. Prior to assuming his present post, he held several positions at Y&R
including Chairman and Chief Executive Officer of Young & Rubicam Advertising,
President and Chief Executive Officer of Young & Rubicam Advertising North
America, President and Chief Executive Officer of Young & Rubicam USA, and
President of Young & Rubicam New York. Mr. McGarry joined Y&R in 1965.

EDWARD H. VICK Mr. Vick has been Chief Operating Officer of the Company
since November 1997 and Chairman and Chief Executive Officer of Young & Rubicam
Advertising since April 1996. He has been a Director of the Company since
February 1998. Mr. Vick joined Young & Rubicam New York as its President and
Chief Executive Officer in February 1994. He began his career with Benton &
Bowles and was a Senior

42
<PAGE> 44

Vice President of Ogilvy & Mather. From 1985 to 1991, he was President of
Ammirati & Puris and, in 1991, was President and Chief Executive Officer of
Levine, Huntley, Vick and Beaver. In 1992, Mr. Vick came to Y&R as President and
Chief Executive Officer of Landor.

THOMAS D. BELL, JR. Mr. Bell has been Executive Vice President of the
Company since 1995 and President and Chief Executive Officer of
Burson-Marsteller since 1995. He has been a Director of the Company since
February 1998. From 1994 to 1995, Mr. Bell served as Vice Chairman of Gulfstream
Aerospace Corporation. Prior thereto, Mr. Bell was Vice Chairman and Chief
Operating Officer of Burson-Marsteller from 1991 to 1994. Before initially
joining Burson-Marsteller in 1989, Mr. Bell held senior positions in business
and government. Mr. Bell is a member of the Board of Directors of Gulfstream
Aerospace Corporation, Lincoln National Corporation and Lincoln Life & Annuity
of New York.

STEPHANIE W. ABRAMSON Ms. Abramson has been Executive Vice President and
General Counsel of the Company since 1995. Ms. Abramson was a Director of the
Company from 1995 until February 1998. From 1980 until joining Y&R in 1995, she
was a partner with Morgan, Lewis & Bockius LLP.

MICHAEL J. DOLAN Mr. Dolan has been Vice Chairman and Chief Financial
Officer and a Director of the Company since July 1996. Prior thereto, from 1991
to 1996, he was President and Chief Executive Officer of the joint venture,
Snack Ventures Europe, between PepsiCo Foods International ("PFI") and General
Mills. Mr. Dolan also served PFI as Senior Vice President, Operations. From 1987
to 1991, Mr. Dolan was with Peter Kiewet Sons, Inc. ("PKS"), a construction and
mining conglomerate. While at PKS, he served as Corporate Executive Vice
President for Continental Can Company when it was acquired and restructured by
PKS.

F. WARREN HELLMAN Mr. Hellman has been a Director of the Company since
December 1996. Mr. Hellman is Chairman of Hellman & Friedman LLC ("Hellman &
Friedman"), a private investment company he founded in 1984. Prior thereto, Mr.
Hellman was President and a Director of Lehman Brothers, as well as head of its
Investment Banking Division, and Chairman of Lehman Corporation (a closed-end
investment company). Mr. Hellman serves on the Company Board as a representative
of the H&F Investors. Mr. Hellman is a member of the Board of Directors of Levi
Strauss & Co., Franklin Resources, Inc., Il Fornaio (America) Corp., MobileMedia
Corporation and PowerBar Inc., as well as a number of private and venture-backed
companies.

PHILIP U. HAMMARSKJOLD Mr. Hammarskjold has been a Director of the Company
since December 1996. Mr. Hammarskjold is a Managing Director of Hellman &
Friedman. Prior to joining Hellman & Friedman in 1992, Mr. Hammarskjold was
employed by Dominquez Barry Samuel Montagu in Australia and by Morgan Stanley &
Co. in New York. Mr. Hammarskjold serves on the Company Board as a
representative of the H&F Investors. Mr. Hammarskjold is a member of the Board
of Directors of The Covenant Group, Inc.

RICHARD S. BODMAN Mr. Bodman has been a Director of the Company since
April 1998. Mr. Bodman has been Managing General Partner of AT&T Ventures, LLC
("AT&T Ventures"), a company which manages a venture capital pool investing in
early stage businesses related to telecommunications and information technology
since May 1996. Prior to joining AT&T Ventures, from 1990 until May 1996, Mr.
Bodman was Senior Vice President for Corporate Strategy & Development and a
member of the Management Executive Committee of AT&T. Mr. Bodman is a member of
the Board of Directors of Reed Elsevier plc, Tyco International, Inc. and ISS
Group.

ALAN D. SCHWARTZ Mr. Schwartz has been a Director of the Company since
December 1996. Mr. Schwartz is Executive Vice President and Head of the
Investment Banking Department at Bear, Stearns & Co. Inc. He is also a member of
the Executive Committee of the parent company, The Bear Stearns Companies Inc.
Mr. Schwartz joined Bear Stearns in 1976. Mr. Schwartz is a member of the Board
of Directors of Unique Casual Restaurants, Inc.

JOHN F. MCGILLICUDDY Mr. McGillicuddy has been a Director of the Company
since May 1997. Mr. McGillicuddy was the Chairman and Chief Executive Officer of
Chemical Banking Corporation from 1992 to 1993 and Chairman and Chief Executive
Officer of Manufacturers Hanover Corporation and Manufacturers Hanover Trust
Company from 1979 to 1991. Mr. McGillicuddy is a member of the Board of
Directors of UAL Corporation, USX Corporation and Southern Peru Copper
Corporation.

43
<PAGE> 45

The Company intends that the Board will continue to be comprised of a
majority of Directors who are independent of management.

Upon the completion of the Offerings, the Board will be divided into three
classes, as nearly equal in number as is possible, serving staggered three-year
terms so that the Directors' initial terms will expire at the annual meetings of
the Company's stockholders held in 1999, 2000 and 2001, respectively. At each
annual meeting of the Company's stockholders, successors to the class of
Directors whose term expires at such meeting will be elected to serve for
three-year terms and until their successors are elected and qualified. Messrs.
Hellman, Schwartz and Vick will be Class I Directors, with terms expiring in
1999. Messrs. Dolan, Georgescu and Hammarskjold will be Class II Directors, with
terms expiring in 2000. Messrs. Bell, Bodman and McGillicuddy will be Class III
Directors, with terms expiring in 2001.

The H&F Investors will have the right to nominate and elect two members of
the Board for so long as they continue to hold in the aggregate at least 10% of
the Outstanding Shares (as defined in the Stockholders' Agreement) and one
member of the Board for so long as they continue to hold in the aggregate at
least 5% of the Outstanding Shares. See "Description of Capital Stock -- The
Stockholders' Agreement."

Executive officers are appointed by, and serve at the discretion of, the
Company Board.

COMMITTEES

The Compensation Committee of Y&R consists of Messrs. Georgescu,
Hammarskjold and Schwartz, Chairman. The Compensation Committee reviews the
compensation of officers of Y&R and makes recommendations to the Board regarding
such compensation and reviews and administers the Restricted Stock Plan and the
Stock Option Plans. Following the consummation of the Offerings, the
Compensation Committee will be comprised entirely of Directors who are
independent of management.

The Audit Committee of Y&R consists of Messrs. Georgescu, McGillicuddy and
Hellman, Chairman. The Audit Committee is responsible for reviewing any
transactions (other than compensation arrangements) between Y&R and its
executive officers and Directors, the plans for and results of audits of Y&R,
and the results of any internal audits, compliance with any written policies and
procedures and the adequacy of Y&R's systems of internal accounting controls.
The Audit Committee also considers annually the qualifications of Y&R's
independent auditors. Following the consummation of the Offerings, the Audit
Committee will be comprised entirely of Directors who are independent of
management in accordance with New York Stock Exchange policy.

The Board may create such other committees as it may determine from time to
time.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Company's Charter and the Company's Bylaws contain provisions
indemnifying the Directors and executive officers of Y&R to the fullest extent
permitted by law. Section 102(b)(7) of the DGCL provides that Delaware
corporations may include in their certificates of incorporation a provision
eliminating or limiting the personal liability of Directors to the corporation
or its stockholders for monetary damages for breach of their fiduciary duty
including acts constituting gross negligence, except under certain
circumstances, including breach of the Director's duty of loyalty, acts or
omissions not in good faith or involving intentional misconduct or a knowing
violation of law or any transaction from which the Director derived improper
personal benefit. The Company's Charter provides that Y&R's Directors are not
liable to it or its stockholders for monetary damages for breach of their
fiduciary duties, subject to the exceptions specified by Delaware law.

COMPENSATION OF DIRECTORS

The Company compensates only those members of the Board who are not
employees of the Company for their participation as Directors. During 1997, Alan
D. Schwartz and John C. McGillicuddy each received $50,000 as an annual stipend
for serving as a member of the Board and each, along with Richard S. Bodman,
will receive $50,000 in 1998. Messrs. Hellman and Hammarskjold each waived such
fee in 1997 and have indicated that they intend to waive it in the future.
Out-of-pocket expenses for attendance at meetings of the Board are reimbursed
for all members.

44
<PAGE> 46

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid or accrued by the
Company to the Chief Executive Officer and the four other most highly
compensated executive officers who were serving as executive officers on
December 31, 1997 (collectively, the "named executive officers").

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------- -----------------------
RESTRICTED SECURITIES ALL
NAME AND STOCK UNDERLYING OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) AWARDS(2) OPTIONS COMPENSATION(3)
<S> <C> <C> <C> <C> <C> <C>
Peter A. Georgescu................ 1997 $950,000 $598,500 -- -- $8,000
Chairman and Chief Executive
Officer, Young & Rubicam Inc.
Edward H. Vick.................... 1997 $700,000 $272,250 $740,000 172,500 $8,199
Chairman and Chief Executive
Officer, Young & Rubicam
Advertising
John P. McGarry, Jr. ............. 1997 $730,000 $297,000 -- -- $8,000
President, Young & Rubicam Inc.
Thomas D. Bell, Jr. .............. 1997 $575,000 $168,750 -- 176,550 $8,000
President and Chief Executive
Officer, Burson-Marsteller
Michael J. Dolan.................. 1997 $550,000 $198,000 $555,000 150,000 $2,190
Vice Chairman and Chief
Financial Officer, Young &
Rubicam Inc.
</TABLE>

- ------------------------------

(1) The named executive officers were awarded annual cash bonuses under the Key
Corporation Managers Bonus Plan, which bonuses were generally based on the
Company's achievement of target levels of operating profit and EBITA
(earnings before interest, taxes and amortization), each as defined in such
plan, as well as the achievement of individual objectives. The Company
intends to grant future annual cash bonuses under the 1997 ICP based on
substantially similar Company and individual performance criteria.

(2) The total number and value of shares of Restricted Stock held by the named
executive officers under the Restricted Stock Plan at December 31, 1997
(based on the value of the Common Stock as of December 31, 1997 as
determined by the Company Board, based upon the valuation opinion of an
independent investment bank, taking into account that prior to the
Offerings, the Company was privately held and that the shares were subject
to contractual transfer restrictions) are as follows: Mr.
Georgescu -- 430,440 shares ($5,308,760); Mr. Vick -- 339,405 shares
($4,185,995); Mr. McGarry -- 155,850 shares ($1,922,150); Mr.
Bell -- 284,790 shares ($3,512,410); and Mr. Dolan -- 305,865 shares
($3,772,335). The Company Board has elected to accelerate the vesting of the
Restricted Stock to the date on which the Offerings are consummated,
provided there is market demand for the sale by the Management Investors of
a sufficient number of shares of Restricted Stock as is necessary to fund
their personal tax liabilities associated with the vesting of the Restricted
Stock. Accordingly, assuming sufficient demand for such shares exists, all
Restricted Stock awarded to the named executive officers will vest and be
distributed to the recipients or a deferral trust, as the case may be, upon
the consummation of the Offerings. If the Restricted Stock does not vest
upon the consummation of the Offerings, then it will vest upon the earliest
of (i) the six-month anniversary of the consummation of the Offerings; (ii)
if occurring during the six-month period following the Offerings,
termination of employment without cause, voluntary termination of employment
with the Company's written approval, death, permanent disability or, in
certain cases, retirement from the Company; (iii) a change of control of the
Company; or (iv) the occurrence of any other event determined by the
Compensation Committee with the written consent of the Management Voting
Trust. Dividends on Restricted Stock are paid on the same basis as ordinary
dividends on the Common Stock and may be distributed to the holders of such
Restricted Stock. 60,000 shares and 45,000 shares of Restricted Stock,
respectively, of Messrs. Vick and Dolan's Restricted Stock awards were
granted to them in December 1997 and are required to be placed in a deferral
trust upon vesting thereof pursuant to the Deferred Compensation Plan. Such
deferral trust will hold the shares prior to their distribution to Messrs.
Vick and Dolan which will occur with respect to 33 1/3% of the shares on
January 15, 2001, with respect to an additional 33 1/3% of the shares on
January 15, 2002, and with respect to the remaining 33 1/3% of the shares on
January 15, 2003. Certain of the named executive officers have voluntarily
elected under the Deferred Compensation Plan to have their Restricted Stock
placed in a deferral trust upon vesting thereof, and to have such shares
distributed to them from such deferral trust at specified times in the
future.

(3) "All other compensation" for 1997 consisted of the Company's contribution
of: (i) $8,000 on behalf of each of the named executive officers (other than
Mr. Dolan) as matching contributions under the Young & Rubicam Employees'
Savings Plan ("Savings Plan") and (ii) an additional $199 and $2,190 on
behalf of Mr. Vick and Mr. Dolan, respectively, as matching contributions
under the Company's Education Incentive Plan (pursuant to which U.S.
employees may elect to have limited amounts of compensation, together with a
Company match, invested in a group annuity insurance contract for purposes
of meeting their children's future education costs). See "-- Savings Plan."

45
<PAGE> 47

During 1997, stock option grants covering 11,469,150 shares in the
aggregate were awarded to 442 employees under the Company's Stock Option Plans.
The option grants in 1997 for the named executive officers are shown in the
following table.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
----------------------------------------------------- --------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Peter A. Georgescu.......... -- -- -- -- -- --
Edward H. Vick.............. 172,500(1) 1.5% $12.33 12/17/07 $1,337,973 $3,390,687
John P. McGarry, Jr......... -- -- -- -- -- --
Thomas D. Bell, Jr.......... 176,550(2) 1.5% $12.33 12/17/07 $1,369,387 $3,470,295
Michael J. Dolan............ 150,000(1) 1.3% $12.33 12/17/07 $1,163,455 $2,948,424
</TABLE>

- ------------------------------

(1) These represent non-qualified options granted under the 1997 ICP. Such
options have a ten-year term and will become exercisable with respect to
33 1/3% of the shares subject to any such option on December 31, 2000, with
respect to an additional 33 1/3% of such shares on December 31, 2001 and
with respect to the remaining 33 1/3% of such shares on December 31, 2002.
These options will become fully exercisable with respect to 100% of the
shares subject thereto upon a change in control of the Company (as defined
in the 1997 ICP) or termination of employment due to death or disability.
Upon termination of employment for any other reason, the portion of any such
option that was not exercisable at such time will expire.

(2) This represents a non-qualified option granted under the 1997 ICP. Such
option has a ten-year term and will become exercisable nine years and nine
months from the date of grant, unless Burson-Marsteller, Landor Associates,
Sudler & Hennessey and Cohn & Wolfe achieve a targeted operating profit
budget commitment for the year ending December 31, 1998, in which case it
will become exercisable with respect to 33 1/3% of the shares subject to
such option on December 31, 2000, with respect to an additional 33 1/3% of
such shares on December 31, 2001 and with respect to the remaining 33 1/3%
of such shares on December 31, 2002. This option will become fully
exercisable with respect to 100% of the shares subject thereto upon a change
in control of the Company (as defined in the 1997 ICP) or termination of
employment due to death or disability. Upon termination of employment for
any other reason, the portion of such option that was not exercisable at
such time will expire.

The exercise of options during 1997, number of options held and their value
at year-end for the named executive officers are shown in the following table:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR END FISCAL YEAR END
ACQUIRED ON VALUE -------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
Peter A. Georgescu......... -- -- --/-- --/--
Edward H. Vick............. -- -- 895,245(1)/172,500(2) $9,325,469/--
John P. McGarry, Jr........ 241,110 $1,386,383 --/-- --/--
Thomas D. Bell, Jr. ....... -- -- 1,165,215(1)/176,550(3) $12,137,656/--
Michael J. Dolan........... -- -- 104,340(4)/306,525(5) $486,948/$730,422
</TABLE>

- ------------------------------
(1) This represents a Rollover Option granted under the Management Stock Option
Plan (see "-- Management Stock Option Plan").

(2) See footnote (1) to the option grant table on the preceding page.

(3) See footnote (2) to the option grant table on the preceding page.

(4) This represents a Closing Option granted under the Management Stock Option
Plan (see "-- Management Stock Option Plan").

(5) This represents (i) with respect to 150,000 shares, a non-qualified option
granted under the 1997 ICP with the terms set forth in footnote (1) to the
option grant table on the preceding page and (ii) with respect to 156,525
shares, a Closing Option granted under the Management Stock Option Plan (see
"-- Management Stock Option Plan").

MANAGEMENT STOCK OPTION PLAN. At the time of the Recapitalization, the
Compensation Committee granted an aggregate of 16,823,565 Rollover Options to
certain members of management of Y&R in

46
<PAGE> 48

consideration of their surrender for cancellation of all or a portion of their
outstanding options to purchase equity units of predecessor companies of Y&R, as
well as an aggregate of 5,200,590 Closing Options pursuant to the Management
Stock Option Plan. The Rollover Options were immediately vested and exercisable
upon grant. Each Rollover Option has an exercise price of $1.92 per share of
Common Stock subject to such Rollover Option, with certain limited exceptions
outside the United States, and has a term of five years with respect to 50% of
the shares subject thereto and a term of seven years with respect to the other
50%. Each Closing Option became exercisable immediately with respect to 40% of
the shares subject thereto and will become exercisable (i) on the third
anniversary of its grant date with respect to 30% of such shares and (ii) on the
fifth anniversary of its grant date with respect to the remaining 30% of such
shares. The exercise price for the Closing Options is $7.67 per share of Common
Stock. Since the time of the Recapitalization, the Compensation Committee
granted an aggregate of 1,891,200 additional options with the same terms and
conditions as the Closing Options (such options, together with the Closing
Options, the "Executive Options"). Through the date hereof, an aggregate of
736,800 Rollover Options and 25,755 Executive Options were exercised and the
underlying shares repurchased by the Company and an aggregate of 426,870
Executive Options were forfeited, all in connection with the termination of the
employment of the option holder. In addition, through the date hereof, an
aggregate of 4,078,695 shares of Common Stock were issued upon exercise of
Rollover Options and an aggregate of 307,980 shares of Common Stock were issued
upon exercise of Executive Options.

Executive Options will not be exercisable after the expiration of ten years
from the date of grant of such Executive Option. Upon termination of employment
for any reason, all Rollover Options and all Executive Options that are then
exercisable will remain exercisable for 30 days and will then be canceled if not
exercised. All Executive Options that have not yet become exercisable will be
canceled immediately on termination of employment.

Among other powers, the Compensation Committee has the authority to
accelerate the right to exercise any or all of the Executive Options, provided
that with respect to the period during which the Recapitalization Investors own
at least 20% of the Outstanding Shares (the "Extended Consent Period"), such
action shall only be effective with the written consent of the Recapitalization
Investors unless such acceleration involves only the waiver of any terms or
conditions not expressly provided for by the Management Stock Option Plan.

No employee may be granted a Rollover Option or Executive Option under the
Management Stock Option Plan unless he or she is or becomes a party to the
Stockholders' Agreement and the Management Voting Trust Agreement, so long as
those agreements are in effect. The Rollover Options and Executive Options are
transferable only by will or intestate succession and upon such a transfer the
transferee must agree to be bound by the Management Stock Option Plan and to
execute any other agreement which the Compensation Committee may prescribe,
including any supplements to the Stockholders' Agreement and Management Voting
Trust Agreement.

The Compensation Committee, with the written consent of the
Recapitalization Investors during the Extended Consent Period, and the
Management Voting Trust may at any time terminate the Management Stock Option
Plan or any Rollover Options or Executive Options then outstanding. Upon the
termination of an outstanding Rollover Option or Executive Option, Y&R would pay
cash consideration for each share underlying such Rollover Option or Executive
Option equal to the value of a share of Common Stock less the exercise price per
share and any applicable withholding taxes or other similar charges. The
Compensation Committee may amend the Management Stock Option Plan and the terms
and conditions of the Rollover Options and the Executive Options with the
written consent of the Recapitalization Investors (during the Extended Consent
Period with respect to any amendment accelerating the right to exercise any or
all of the Executive Options or any other amendment improving the terms of the
Rollover Options or Executive Options unless such acceleration or amendment
involves the waiver or amendment of any terms or conditions not expressly
provided for by the Management Stock Option Plan) and the Management Voting
Trust, provided that no amendment may impair the rights of a holder of a
Rollover Option or Executive Option without such holder's consent and that no
amendment may increase the aggregate number of shares of Common Stock which may
be issued pursuant to Rollover Options and Executive Options granted under the
Management Stock Option Plan or change the definition of employees eligible for
grants without the approval of the

47
<PAGE> 49

stockholders of Y&R. However, the Compensation Committee is authorized to make
certain adjustments to the Management Stock Option Plan and any outstanding
Rollover Options or Executive Options in the event of a change in the
capitalization of Y&R due to certain corporate events specified in the
Management Stock Option Plan.

Under U.S. tax law, the exercise of any Rollover Option or Executive Option
will be a taxable event for U.S. taxpayers, and Y&R will have withholding
obligations. For purposes of U.S. federal income tax, upon exercise, a holder
will be deemed to have received ordinary income in an amount equal to the
difference between the exercise price of the Rollover Option or Executive
Option, as the case may be, and the fair market value of the shares of Common
Stock received on exercise, and, generally, the Company will be entitled to a
tax deduction in an amount equal to the amount of ordinary income realized by
the holder. In order to exercise either a Rollover Option or Executive Option,
the employee will also need to pay the exercise price. Under the Management
Stock Option Plan, upon exercise of a Rollover Option or Executive Option, the
employee may pay the exercise price either in cash or, subject to the approval
of the Compensation Committee, by (i) delivering a number of shares of Common
Stock already owned by such employee with the appropriate value or (ii) a
recourse note to Y&R with such terms and conditions as the Compensation
Committee may require, including a pledge of the related shares. Further, upon
such exercise of a Rollover or Executive Option, the employee may pay the
withholding taxes or other similar charges which are incurred in connection with
such exercise by the same methods and subject to the same approvals as for the
payment of the exercise price or, in addition, subject to the approval of the
Compensation Committee, by having Y&R withhold a number of shares of Common
Stock of the appropriate value from those to be distributed upon such exercise.
Moreover, if the Compensation Committee consents, the employee may have a number
of shares of Common Stock either withheld from those to be distributed upon
exercise or delivered to Y&R with the appropriate value to satisfy the estimated
total taxes and charges that would be incurred by the employee as a result of
such exercise.

The Company has adopted a new incentive compensation plan that has
superseded the Management Stock Option Plan with respect to all future grants of
options. See "-- 1997 ICP" below.

THE RESTRICTED STOCK PLAN AND TRUST AGREEMENT. Pursuant to the Restricted
Stock Plan, upon consummation of the Recapitalization, Y&R issued a total of
11,086,950 shares of Common Stock to the Restricted Stock Trust. Common Stock
held in the Restricted Stock Trust may be granted as Restricted Stock by the
Compensation Committee pursuant to the Restricted Stock Plan. Immediately after
closing of the Recapitalization, the Compensation Committee allocated an
aggregate of 6,172,440 shares of Restricted Stock to certain key employees.
Since the time of the Recapitalization, the Compensation Committee allocated an
aggregate of 2,528,865 shares of Restricted Stock through December 31, 1997,
including 1,832,235 shares of Restricted Stock in December 1997. An aggregate of
313,470 shares of Restricted Stock has been forfeited since the Recapitalization
as a result of the termination of the employment of the Restricted Stock
grantee. In January 1998, the Compensation Committee allocated an aggregate of
368,595 shares of Restricted Stock to members of senior management, including to
each of the named executive officers. Such allocations were made to the
recipients in lieu of target bonus increases and/or salary increases in 1997 and
1998. In 1998, the Compensation Committee also allocated an additional 474,675
shares of Restricted Stock under the Restricted Stock Plan. Upon any such award,
an account is established in the Restricted Stock Trust for such employee and
the appropriate number of shares of Restricted Stock is allocated to such
account.

The Company Board has elected to accelerate the vesting of the Restricted
Stock to the date on which the Offerings are consummated and the amounts held in
each such employee's account in the Restricted Stock Trust will be distributed
to such employees or to a deferral trust pursuant to the Deferred Compensation
Plan on such date, provided there is market demand for the sale by the
Management Investors of a sufficient number of shares of Restricted Stock as is
necessary to fund their personal tax liabilities associated with the vesting of
the Restricted Stock. If the Restricted Stock does not vest upon the
consummation of the Offerings, then it will vest upon the earliest of (i) the
six-month anniversary of the consummation of the Offerings; (ii) if occurring
during the six-month period following the Offerings, termination of employment
without cause, voluntary termination of employment with the Company's written
approval, death, permanent disability or, in
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certain cases, retirement from the Company; (iii) a change of control of the
Company; or (iv) the occurrence of any other event determined by the
Compensation Committee with the written consent of the Management Voting Trust.
With respect to any award granted within six months of a vesting event outlined
above, the Compensation Committee may provide that such award will not vest upon
such vesting event. Restricted Stock awards may also be subject to other
conditions as may be prescribed by the Compensation Committee in the agreement
evidencing such awards.

Shares of Restricted Stock granted in December 1997 will vest as described
above, and recipients of such 1,832,235 shares of Restricted Stock, as a
condition to such grant, will be required to place such shares in a deferral
trust upon vesting (subject to the claims of the creditors of the Company in the
event of its insolvency) pursuant to the Deferred Compensation Plan. Such
deferral trust will hold the shares prior to their distribution to such
recipients which will occur with respect to 33 1/3% of the shares on January 15,
2001, with respect to an additional 33 1/3% of the shares on January 15, 2002
and with respect to the remaining 33 1/3% of the shares on January 15, 2003.

Upon termination of employment for any reason prior to vesting an employee
will forfeit all unvested Restricted Stock granted to him or her without
consideration on the date of such termination.

Dividends payable in cash with respect to Restricted Stock awarded to an
employee may be remitted to such employee (less any applicable withholding tax
or other similar changes) as the Compensation Committee, in its sole discretion,
may determine. Any non-cash dividend with respect to Restricted Stock shall
remain in the Restricted Stock Trust and shall be credited to the account of the
employee to whom any such Restricted Stock has been awarded. While the
Management Voting Trust Agreement is in effect, all Restricted Stock shall be
delivered to the Management Voting Trust and voted in accordance with the
provisions of the Management Voting Trust Agreement. After the Management Voting
Trust Agreement is no longer in effect, each employee who has been awarded
Restricted Stock shall be entitled to instruct the trustee of the Restricted
Stock Trust as to the voting of such Restricted Stock held in his account.
Restricted Stock as to which no voting instructions are received by the trustee
or which have not been granted to any employee shall be voted by the trustee pro
rata in accordance with the vote of the Restricted Stock which has been granted
as to which voting instructions have been given.

Among other powers, the Compensation Committee shall have the authority to
accelerate the vesting of all awards and the release of the related Restricted
Stock.

No employee may be granted an award of Restricted Stock under the
Restricted Stock Plan unless he or she is or becomes a party to the
Stockholders' Agreement and the Management Voting Trust Agreement, so long as
those agreements are in effect. Subject to the following sentence, Restricted
Stock granted to an employee and held in the Restricted Stock Trust is not
transferable and any attempt to transfer such Restricted Stock may lead to its
forfeiture without consideration. Restricted Stock which vests as a result of
the death of the employee during the six-month period after an initial public
offering may be transferred by will or intestate succession and upon such a
transfer the transferee must agree to be bound by the Restricted Stock Plan and
to execute any other agreement which the Compensation Committee may prescribe,
including any supplements to the Stockholders' Agreement and Management Voting
Trust Agreement.

The Compensation Committee, with the written consent of the Management
Voting Trust, may at any time terminate the Restricted Stock Plan or any awards
of Restricted Stock then outstanding. Upon the termination of the Restricted
Stock Plan or of an outstanding award of Restricted Stock, the Compensation
Committee may, with the written consent of the Management Voting Trust, either
declare that a vesting event has occurred and release Restricted Stock to
employees or cause Y&R to pay an amount in cash equal to the value of the
Restricted Stock subject to such terminated award minus any applicable
withholding taxes or other similar charges. Within two years of any such
termination of the Restricted Stock Plan, the Compensation Committee shall
distribute any unawarded Restricted Stock remaining in the Restricted Stock
Trust to such employees as it may designate. In no event shall any Restricted
Stock revert to Y&R as a result of the termination of the Restricted Stock Plan
or any award of Restricted Stock. The Compensation Committee may amend the
Restricted Stock Plan and the terms and conditions of any awards of Restricted
Stock with the written consent of the Management Voting Trust, provided that no
amendment may impair the
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<PAGE> 51

rights of a holder of any such award without such holder's consent. However, the
Compensation Committee is authorized to make certain adjustments to the
Restricted Stock Plan and any outstanding awards of Restricted Stock in the
event of a change in the capitalization of Y&R due to certain corporate events
specified in the Restricted Stock Plan.

Under U.S. tax law, the vesting and distribution of the Restricted Stock
will be a taxable event for U.S. taxpayers, and Y&R will have withholding
obligations. For purposes of U.S. federal income tax, an award holder will be
deemed to have received ordinary income in an amount equal to the fair market
value of the shares of Common Stock received and, generally, the Company will be
entitled to a tax deduction in an amount equal to the amount of ordinary income
realized by the award holder. Under the Restricted Stock Plan, upon the vesting
and receipt of Restricted Stock, the employee may pay the withholding taxes or
other similar charges either in cash or, subject to the approval of the
Compensation Committee, by (i) delivering a number of shares of Common Stock
already owned by such employee with the appropriate value, (ii) a recourse note
to Y&R with such terms and conditions as the Compensation Committee may require,
including a pledge of the related shares or (iii) having a number of shares of
Restricted Stock of the appropriate value withheld from those to be distributed.
Moreover, if the Compensation Committee consents, the employee may have a number
of shares of Common Stock either withheld from those to be distributed or
delivered to Y&R with the appropriate value to satisfy the estimated total taxes
and charges that would be incurred by the employee as a result of such vesting
and distribution.

The Company has adopted a new incentive compensation plan that has amended
and restated the Restricted Stock Plan with respect to all grants made
subsequent to March 31, 1998. See "-- 1997 ICP" below. In order to assist the
Company and its affiliates in meeting various cash compensation obligations of
the Company and its affiliates, the Company has amended the agreement governing
the Restricted Stock Trust to provide for cash distributions to be made from the
Restricted Stock Trust to pay salaries and for the benefit of participants in
various annual bonus programs as the Compensation Committee may direct, and to
permit the trustee of the Restricted Stock Trust to require the Company to
purchase unallocated shares of Common Stock held therein such that proceeds from
the sale are sufficient to make such salary and bonus payments. Pursuant to such
amendment, the Company will repurchase the remaining 1,855,845 unallocated
shares of Common Stock in the Restricted Stock Trust upon the consummation of
the Offerings.

1997 ICP. In December 1997, the Company adopted the 1997 Incentive
Compensation Plan (the "1997 ICP"). The 1997 ICP has superseded the Management
Stock Option Plan and has amended and restated the Restricted Stock Plan (the
Management Stock Option Plan and the Restricted Stock Plan (prior to such
amendment and restatement), the "Preexisting Plans"), although all awards
granted prior to the adoption of the 1997 ICP, and any grants of Restricted
Stock made after such adoption but on or prior to March 31, 1998, will remain
outstanding in accordance with their terms and be subject to the terms of the
Preexisting Plans.

The Board believes that attracting and retaining key employees is essential
to the Company's growth and success. In addition, the Board believes that the
long-term success of the Company is enhanced by a competitive and comprehensive
compensation program, which may include tailored types of incentives designed to
motivate and reward such persons for outstanding service, including awards that
link compensation to applicable measures of the Company's performance and the
creation of stockholder value. Such awards should enable the Company to attract
and retain key employees and enable such persons to acquire and/or increase
their proprietary interest in the Company and thereby align their interests with
the interests of the Company's stockholders. In addition, the Board believes
that the Compensation Committee should be given as much flexibility as possible
to provide for annual and long-term incentive awards contingent on performance.

The Company granted non-qualified options to employees to purchase an
aggregate of 9,577,950 shares of Common Stock in December 1997 under the 1997
ICP. Such options have an exercise price equal to $12.33 per share, which
represents the fair market value of the Common Stock as of the date of grant
(which takes into account that prior to the Offerings, the Company was privately
held and that the shares were subject to contractual transfer restrictions, but
does not give effect to the applicable put and call provisions of the

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<PAGE> 52

Stockholders' Agreement). These options will expire if not exercised ten years
after the date of grant and will be fully exercisable with respect to 33 1/3% of
the shares subject to such option on December 31, 2000, with respect to an
additional 33 1/3% of such shares on December 31, 2001, and with respect to the
remaining 33 1/3% of such shares on December 31, 2002. Out of the options
granted in December 1997, options to purchase 975,600 and 176,550 shares of
Common Stock, respectively, granted to employees of Burson-Marsteller will not
become exercisable until nine years and nine months from the date of their
grant, unless Burson-Marsteller or the group of Burson-Marsteller, Landor
Associates, Sudler & Hennessey and Cohn & Wolfe, as the case may be, achieves a
targeted operating profit budget commitment for the year ending December 31,
1998, in which case the vesting schedule set forth in the previous sentence will
apply to such options. All of these options will become fully exercisable with
respect to 100% of the shares subject thereto upon a change in control of the
Company (as defined in the 1997 ICP) or termination of employment due to death
or disability. Upon termination of employment for any other reason, the portion
of any such option that was not exercisable at such time will expire.

The following is a description of the material features of the 1997 ICP.

Types of Awards. The terms of the 1997 ICP provide for grants of stock
options, stock appreciation rights ("SARs"), restricted stock, deferred stock,
other stock-related awards, and performance or annual incentive awards that may
be settled in cash, stock or other property ("Awards").

Shares Subject to the 1997 ICP; Annual Per-Person Limitations. Under the
1997 ICP, the total number of shares of the Common Stock reserved and available
for delivery to participants in connection with Awards is (i) 19,125,000, plus
(ii) the number of shares of Common Stock subject to awards under Preexisting
Plans that become available (generally due to cancellation or forfeiture) after
the effective date of the 1997 ICP; provided, however, that the total number of
shares of Common Stock with respect to which incentive stock options ("ISOs")
may be granted shall not exceed one million. Any shares of Common Stock
delivered under the 1997 ICP may consist of authorized and unissued shares or
treasury shares.

The 1997 ICP imposes individual limitations on the amount of certain Awards
in order to comply with Section 162(m) of the Internal Revenue Code (the
"Code"). Under these limitations, during any fiscal year the number of options,
SARs, shares of restricted stock, shares of deferred stock, shares of Common
Stock issued as a bonus or in lieu of other obligations, and other stock-based
Awards granted to any one participant must not exceed 200,000 shares for each
type of such Award, subject to adjustment in certain circumstances. In addition,
the maximum cash amount that may be earned as a final annual incentive award or
other annual cash Award in respect of any fiscal year by any one participant and
the maximum cash amount that may be earned as a final performance award or other
cash Award in respect of a performance period other than an annual period by any
one participant may not exceed $10 million. The Company intends for Awards
granted to "covered employees (as defined in Section 162(m)) under the 1997 ICP
to qualify as "performance-based compensation" (as defined in Section 162(m) and
regulations thereunder) for purposes of Section 162(m) to the extent such Awards
may otherwise be subject thereto.

The Compensation Committee is authorized to adjust the number and kind of
shares subject to the aggregate share limitations and annual limitations under
the 1997 ICP and subject to outstanding Awards (including adjustments to
exercise prices and number of shares of options and other affected terms of
Awards) in the event that a dividend or other distribution (whether in cash,
shares, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, or
share exchange, or other similar corporate transaction or event affects the
Common Stock so that an adjustment is determined by the Compensation Committee
to be appropriate. The Compensation Committee is also authorized to adjust
performance conditions and other terms and conditions of Awards in response to
these kinds of events or in response to changes in applicable laws, regulations,
or accounting principles or in view of any other circumstances deemed relevant
by the Compensation Committee; provided that no such adjustment may be made if
and to the extent if would cause Awards to "covered employees" intended to so
qualify to fail to qualify as "performance-based compensation" for purposes of
Section 162(m) of the Code.

Eligibility. Executive officers and other officers and employees of the
Company or any affiliate, including any such person who may also be a director
of the Company, and each other person who provides
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<PAGE> 53

services to the Company or any affiliate shall be eligible to be granted Awards
under the 1997 ICP. An affiliate of the Company for this purpose includes any
entity required to be aggregated with the Company under Section 414 of the Code
and any 10% owned joint venture or partnership of the Company or an affiliate.

Administration. The 1997 ICP is administered by the Compensation Committee
except to the extent the Board elects to administer the 1997 ICP. Subject to the
terms and conditions of the 1997 ICP, the Compensation Committee is authorized
to select participants, determine the type and number of Awards to be granted
and the number of shares of Common Stock to which Awards will relate, specify
times at which Awards will be exercisable or settleable (including performance
conditions that may be required as a condition thereof), set other terms and
conditions of such Awards, prescribe forms of Award agreements, interpret and
specify rules and regulations relating to the 1997 ICP, and make all other
determinations that may be necessary or advisable for the administration of the
1997 ICP. The 1997 ICP provides that Compensation Committee members shall not be
personally liable, and shall be fully indemnified, in connection with any
action, determination, or interpretation taken or made in good faith under the
1997 ICP.

Stock Options and SARs. The Compensation Committee is authorized to grant
stock options, including both ISOs that can result in potentially favorable tax
treatment to the participant and non-qualified stock options (i.e., options not
qualifying as ISOs), and SARs entitling the participant to receive the excess of
the fair market value of a share of Common Stock on the date of exercise over
the grant price of the SAR. The exercise price per share subject to an option
and the grant price of an SAR is determined by the Compensation Committee, but
must not be less than the fair market value of a share of Common Stock on the
date of grant (except to the extent of in-the-money awards or cash obligations
surrendered by the participant at the time of grant). The maximum term of each
option or SAR, the times at which each option or SAR will be exercisable, and
provisions requiring forfeiture of unexercised options or SARs at or following
termination of employment generally is fixed by the Compensation Committee,
except no option or SAR may have a term exceeding ten years. Options may be
exercised by payment of the exercise price in cash, Common Stock, outstanding
Awards, or other property (possibly including notes or obligations to make
payment on a deferred basis) having a fair market value equal to the exercise
price, as the Compensation Committee may determine from time to time. Methods of
exercise and settlement and other terms of the SARs are determined by the
Compensation Committee.

Restricted and Deferred Stock. The Compensation Committee is authorized to
grant restricted stock and deferred stock. Restricted stock is a grant of Common
Stock which may not be sold or disposed of, and which may be forfeited in the
event of certain terminations of employment and/or failure to meet certain
performance requirements prior to the end of a restricted period as specified by
the Compensation Committee. A participant granted restricted stock generally has
all of the rights of a shareholder of the Company, including the right to vote
the shares and to receive dividends thereon, unless otherwise determined by the
Compensation Committee. An Award of deferred stock confers upon a participant
the right to receive shares or cash (or a combination) at the end of a specified
deferral period, subject to possible forfeiture of the Award in the event of
certain terminations of employment and/or failure to meet certain performance
requirements prior to the end of a specified period (which period need not
extend for the entire duration of the deferral period). Prior to settlement, an
Award of deferred stock carries no voting or dividend rights or other rights
associated with share ownership, although dividend equivalents may be granted,
as discussed below.

Dividend Equivalents. The Compensation Committee is authorized to grant
dividend equivalents conferring on participants the right to receive cash,
shares, other Awards, or other property equal in value to dividends paid on a
specific number of shares, or other periodic payments. Dividend equivalents may
be granted on a free-standing basis or in connection with another Award, may be
paid currently or on a deferred basis, and, if deferred, may be deemed to have
been reinvested in additional shares, Awards, or other investment vehicles
specified by the Compensation Committee.

Bonus Stock and Awards in Lieu of Cash Obligations. The Compensation
Committee is authorized to grant shares as a bonus free of restrictions, or to
grant shares or other Awards in lieu of obligations to pay cash or deliver other
property under the 1997 ICP or other plans or compensatory arrangements, subject
to such terms as the Compensation Committee may specify.

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Other Stock-Based Awards. The 1997 ICP authorizes the Compensation
Committee to grant Awards that are denominated or payable in, valued by
reference to, or otherwise based on or related to shares. Such Awards might
include convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares, purchase rights for shares, Awards with value and
payment contingent upon performance of the Company or any other factors
designated by the Compensation Committee, and Awards valued by reference to the
book value of shares or the value of securities of or the performance of
specified affiliates. The Compensation Committee determines the terms and
conditions of such Awards, including consideration to be paid to exercise Awards
in the nature of purchase rights, the period during which Awards will be
outstanding, and forfeiture conditions and restrictions on Awards.

Performance Awards, Including Annual Incentive Awards. The right of a
participant to exercise or receive a grant or settlement of an Award, and the
timing thereof, may be subject to such performance conditions as may be
specified by the Compensation Committee (measurable over performance periods of
up to 10 years). In addition, the 1997 ICP authorizes specific annual incentive
awards, which represent a conditional right to receive cash, shares or other
Awards upon achievement of preestablished performance goals during a specified
one-year period. Performance awards and annual incentive awards granted to
persons the Compensation Committee expects will, for the year in which a
deduction arises, be among the Chief Executive Officer and four other most
highly compensated executive officers, will, if so intended by the Compensation
Committee, be subject to provisions that should qualify such Awards as
"performance-based compensation" not subject to the limitation on tax
deductibility by the Company under Code Section 162(m).

The performance goals to be achieved as a condition of payment or
settlement of a performance award or annual incentive award will consist of (i)
one or more business criteria and (ii) a targeted level or levels of performance
with respect to each such business criteria as specified by the Committee. In
the case of performance awards intended to meet the requirements of Code Section
162(m), the business criteria used must be one of those specified in the 1997
ICP, although for other participants the Compensation Committee may specify any
other criteria. The business criteria specified in the 1997 ICP are: (1)
earnings per share; (2) increase in revenues; (3) cash flow; (4) cash flow
return on investment; (5) return on net assets, return on assets, return on
investment, return on capital, return on equity; (6) economic value added; (7)
operating margin; (8) net income, net income before taxes, operating profits,
earnings before interest, taxes and amortization, earnings before interest,
taxes, depreciation and amortization; (9) total shareholder return; (10) ratio
of staff cost to revenues or gross margin; and (11) any of the above goals as
compared to the performance of a published or special index deemed applicable by
the Compensation Committee including, but not limited to, the Standard & Poor's
500 Stock Index or a group of comparator companies.

In granting annual incentive or performance awards, the Compensation
Committee shall establish a performance goal or goals and may establish unfunded
award "pools," the amounts of which will be based upon the achievement of such
performance goal or goals using one or more of the business criteria described
in the preceding paragraph. During the first 90 days of a fiscal year or
performance period, the Compensation Committee will determine who will
potentially receive annual incentive or performance awards for that fiscal year
or performance period, either out of the pool or otherwise, and the amounts
potentially payable with respect thereto. After the end of each fiscal year or
performance period, the Compensation Committee will determine the amount, if
any, of the pool and the maximum amount of potential annual incentive or
performance awards payable to each participant in the pool, or the amount of any
potential annual incentive or performance award otherwise payable to a
participant. The Compensation Committee may, in its discretion, determine that
the amount payable as a final annual incentive or performance award will be
increased or reduced from the amount of any potential Award, but may not
exercise discretion to increase any such amount in the case of an Award intended
to qualify under Code Section 162(m).

Subject to the requirements of the 1997 ICP, the Compensation Committee
will determine other performance award and annual incentive award terms,
including the required levels of performance with respect to the business
criteria, the corresponding amounts payable upon achievement of such levels of
performance, termination and forfeiture provisions, and the form of settlement.

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Other Terms of Awards. Awards may be settled in the form of cash, Common
Stock, other Awards, or other property, in the discretion of the Compensation
Committee. The Compensation Committee may require or permit participants to
defer the settlement of all or part of an Award in accordance with such terms
and conditions as the Compensation Committee may establish, including payment or
crediting of interest or dividend equivalents on deferred amounts, and the
crediting of earnings, gains, and losses based on deemed investment of deferred
amounts in specified investment vehicles. The Compensation Committee is
authorized to place cash, shares, or other property in trusts or make other
arrangements to provide for payment of the Company's obligations under the 1997
ICP. The Compensation Committee may condition any payment relating to an Award
on the withholding of taxes and may provide that a portion of any shares or
other property to be distributed will be withheld (or previously acquired shares
or other property surrendered by the participant) to satisfy withholding and
other tax obligations. Awards granted under the 1997 ICP generally may not be
pledged or otherwise encumbered and are not transferable except by will or by
the laws of descent and distribution, or to a designated beneficiary upon the
participant's death, except that the Compensation Committee may, in its
discretion, permit transfers for estate planning or other purposes.

Awards under the 1997 ICP are generally granted without a requirement that
the participant pay consideration in the form of cash or property for the grant
(as distinguished from the exercise), except to the extent required by law. The
Compensation Committee may, however, grant Awards in exchange for other Awards
under the 1997 ICP, awards under other plans of the Company, or other rights to
payment from the Company, and may grant Awards in addition to and in tandem with
such other Awards, awards, or rights as well.

The Compensation Committee may cancel or rescind Awards, or require
repayment of any profits resulting from Awards, if the participant fails to
comply with certain restrictive or other covenants set forth in the 1997 ICP
and/or an Award agreement.

Acceleration of Vesting. The Compensation Committee may, in its
discretion, accelerate the exercisability, the lapsing of restrictions, or the
expiration of deferral or vesting periods of any Award, and such accelerated
exercisability, lapse, expiration and vesting shall occur automatically in the
case of a "change in control" of the Company except to the extent otherwise
provided in the Award agreement. In addition, the Compensation Committee may
provide that the performance goals relating to any performance-based award will
be deemed to have been met upon the occurrence of any change in control. "Change
in control" is defined in the 1997 ICP to include (i)(x) any person (other than
the Company, certain companies owned by the stockholders of the Company or any
employee benefit plans of the Company) becoming the beneficial owner of
securities representing 40% or more of the combined voting power of the
Company's then outstanding securities and (y) so long as the Management Voting
Trust is still in existence, representing a greater percentage of the combined
voting power of the Company's then outstanding securities than is represented by
securities held by the Management Voting Trust, provided, that all shares of
Common Stock subject to vested options under the 1997 ICP and the Management
Stock Option Plan (not including options which would vest on such change in
control) are counted as outstanding securities of the Company; (ii) during a
two-year period, individuals who constitute the Board at the start of such
period, and any new director whose election or nomination for election to the
Board was approved by a vote of at least two-thirds of the directors then in
office who either were directors at the start of such period or whose election
or nomination was previously so approved (excluding directors whose elections
were as a result of certain proxy contests or who were designated by any entity
who had entered into a change in control agreement with the Company), ceasing to
constitute a majority of the Board; (iii) the consummation of a merger or
consolidation of the Company with another entity which would result in either
(A) the voting securities of the Company outstanding immediately prior to such
merger or consolidation failing to represent (either by remaining outstanding or
being converted into voting securities of the surviving or resulting entity) 40%
or more of the combined voting power of the surviving or resulting entity
outstanding immediately after such merger or consolidation or (B)(I) the voting
securities of the Company outstanding immediately prior to such merger or
consolidation continuing to represent at least 40% but less than 60% of the
combined voting power of the surviving or resulting entity outstanding
immediately after such merger or consolidation and (II) as a result of such
merger or consolidation, there is an acceleration of the vesting or
exercisability of any material amount of, or material

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percentage of, outstanding stock options or other stock awards granted by the
entity with which such merger or consolidation is taking place or any of its
affiliates; (iv) the stockholders of the Company approve a plan or agreement for
the sale or disposition of all or substantially all of the consolidated assets
of the Company (other than a sale or disposition immediately after which such
assets will be owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of common stock of the
Company immediately prior thereto) in which case the Board shall determine the
effective date of the change in control; or (v) any other event which the Board
determines, in its discretion, would materially alter the structure of the
Company or its ownership. A change in control will also be deemed to have
occurred immediately prior to the consummation of (i) a tender offer for
securities of the Company representing more than 50% of the combined voting
power of the Company's then outstanding securities in which there is not
disclosed an intention to follow the consummation of the tender offer with a
merger, reorganization, consolidation, share exchange or similar transaction or
(ii) a tender offer for securities of the Company representing any percentage of
the combined voting power of the Company's then outstanding securities in which
there is disclosed an intention to follow the consummation of the tender offer
with a merger, reorganization, consolidation, share exchange or similar
transaction in which the value of the consideration to be offered for such
securities is lower than the value of the consideration offered for such
securities in the tender offer (as determined by the Board at the time) in order
to allow holders of previously unexercisable Options the opportunity to
participate therein with respect to shares underlying such Options.

Amendment and Termination of the 1997 ICP. The Board may amend, alter,
suspend, discontinue, or terminate the 1997 ICP or the Compensation Committee's
authority to grant Awards without the consent of shareholders or participants,
except shareholder approval must be obtained for any amendment or alteration if
required by law or regulation or under the rules of any stock exchange or
automated quotation system on which the shares are then listed or quoted and
participant consent must be obtained if such action would materially and
adversely affect the rights of a participant under an outstanding Award.
Shareholder approval will not be deemed to be required under laws or
regulations, such as those relating to ISOs, that condition favorable treatment
of participants on such approval, although the Board may, in its discretion,
seek shareholder approval in any circumstance in which it deems such approval
advisable. Thus, shareholder approval will not necessarily be required for
amendments that might increase the cost of the 1997 ICP or broaden eligibility.
The Committee may amend, alter, suspend, discontinue or terminate any
outstanding Award or Award agreement, except as otherwise provided in the 1997
ICP. Participant consent must be obtained if such action would materially and
adversely affect the rights of a participant under such Award. Notwithstanding
the foregoing, the Compensation Committee may terminate any outstanding Award in
whole or in part, provided that upon such termination the Company pays to such
Participant (i) with respect to an option (whether or not exercisable) or
portion thereof, an amount in cash for each share of Common Stock subject to
such option or portion thereof being terminated equal to the excess, if any, of
(a) the value at which a share of Common Stock received pursuant to the exercise
of such option would have been valued by the Company at that time for purposes
of determining applicable withholding taxes or other similar charges, over
(b) the sum of the exercise price per share of such option and applicable
withholding taxes and other similar charges, and (ii) with respect to any other
type of Award, an amount in Common Stock or cash (as determined by the
Compensation Committee in its sole discretion) equal to the value of such Award
or portion thereof being terminated as of the date of termination (assuming the
acceleration of the exercisability of such Award or portion thereof, the lapsing
of any restrictions on such Award or portion thereof or the expiration of any
deferral or vesting period of such Award or portion thereof) as determined by
the Compensation Committee in its sole discretion.

Federal Income Tax Implications. The following is a summary description of
the federal income tax consequences generally arising with respect to Awards
under the 1997 ICP.

The grant of an option or SAR will create no tax consequences for the
participant or the Company. A participant will not generally recognize taxable
income upon exercising an ISO (except that the alternative minimum tax may
apply). Upon exercising an option other than an ISO, the participant must
generally recognize ordinary income equal to the difference between the exercise
price and fair market value of the freely transferable and nonforfeitable shares
acquired on the date of exercise. Upon exercising an SAR, the

55
<PAGE> 57

participant must generally recognize ordinary income equal to the cash or the
fair market value of the freely transferable and nonforfeitable shares received.

Upon a disposition of shares acquired upon exercise of an ISO before the
end of the applicable ISO holding periods, the participant must generally
recognize ordinary income equal to the lesser of (i) the fair market value of
the shares at the date of exercise of the ISO minus the exercise price, or (ii)
the amount realized upon the disposition of the ISO shares minus the exercise
price. Otherwise, a participant's disposition of shares acquired upon the
exercise of an option (including an ISO for which the ISO holding periods are
met) or SAR generally will result in short-term or long-term capital gain or
loss measured by the difference between the sale price and the participant's tax
basis in such shares (the tax basis generally being the exercise price plus any
amount previously recognized as ordinary income in connection with the exercise
of the option or SAR).

The Company generally will be entitled to a tax deduction equal to the
amount recognized as ordinary income by the participant in connection with an
option or SAR. The Company generally is not entitled to a tax deduction relating
to amounts that represent a capital gain to a participant. Accordingly, the
Company will not be entitled to any tax deduction with respect to an ISO if the
participant holds the shares for the ISO holding periods prior to disposition of
the shares.

With respect to Awards granted under the 1997 ICP that result in the
payment or issuance of cash or shares or other property that is either not
restricted as to transferability or not subject to a substantial risk of
forfeiture, the participant must generally recognize ordinary income equal to
the cash or the fair market value of shares or other property received. Thus,
deferral of the time of payment or issuance will generally result in the
deferral of the time the participant will be liable for income taxes with
respect to such payment or issuance. The Company generally will be entitled to a
deduction in an amount equal to the ordinary income recognized by the
participant.

With respect to Awards involving the issuance of shares or other property
that is restricted as to transferability and subject to a substantial risk of
forfeiture, the participant must generally recognize ordinary income equal to
the fair market value of the shares or other property received at the first time
the shares or other property becomes transferable or is not subject to a
substantial risk of forfeiture, whichever occurs earlier. A participant may
elect to be taxed at the time of receipt of shares or other property rather than
upon lapse of restrictions on transferability or substantial risk of forfeiture,
but if the participant subsequently forfeits such shares or property, the
participant would not be entitled to any tax deduction, including as a capital
loss, for the value of the shares or property on which he previously paid tax.
The participant must file such election with the Internal Revenue Service within
30 days of the receipt of the shares or other property. The Company generally
will be entitled to a deduction in an amount equal to the ordinary income
recognized by the participant.

Awards that are granted, accelerated or enhanced upon the occurrence of a
change in control may give rise, in whole or in part, to "excess parachute
payments" within the meaning of Section 280G of the Code and, to such extent,
will be non-deductible by the Company and subject to a 20% excise tax by the
participant.

DEFERRED COMPENSATION PLAN. In December 1997, the Company also adopted the
Deferred Compensation Plan in order to permit certain members of a select group
of management or highly compensated employees of the Company and its affiliates
to defer receipt of specified portions of compensation (either cash, stock or
stock-based compensation) and to have such deferred amounts treated as if
invested in specified investment vehicles, all in accordance with the terms of
the Deferred Compensation Plan. Amounts deferred under the Deferred Compensation
Plan will be distributed to a participant as soon as practicable after the date
or dates (including upon the occurrence of specified events), and in such number
of installments, as may be elected by the participant or earlier in the case of
Retirement, Disability or a Change in Control (as defined in the 1997 ICP). The
Deferred Compensation Plan will be "unfunded". However, the Compensation
Committee has authorized the creation of a trust to aid in meeting the Company's
obligations thereunder. Such trust will be subject to the claims of the
creditors of the Company in the event of the Company's insolvency.

CAREER CASH BALANCE PLAN (THE "CCB PLAN"). The CCB Plan is a defined
benefit plan available to all employees of the Company and its participating
affiliates. Subject to certain limitations, most vested
56
<PAGE> 58

retirement benefits available under the CCB Plan are insured by the Pension
Benefit Guaranty Corporation. The Company pays the full cost of the benefit
provided under the CCB Plan. Eligible retired employees may begin receiving full
CCB Plan benefits at or after age 60 if he or she had at least five years of
service. Alternatively a reduced benefit is payable at age 55 at the election of
the participant. Under the CCB Plan, effective July 1, 1996, the Company
annually credits to each participant's account 3.2% of the participant's salary.
Salary is defined to include base salary or wages and excludes bonus, overtime,
commissions and other special compensation. The Company will credit to each
account interest equal to the average 1-year U.S. Treasury Bill interest rate
for the month of November for the previous calendar year, rounded up to the
nearest tenth of a percent, up to a maximum average of $150,000, multiplied by
the number of benefit years (equal to twelve months of service or 2,280 hours).
If the present value of the earned benefit at the time of termination is less
than $3,500, the participant receives a lump sum distribution from the Company.
If the earned benefit is greater than $3,500, the cash balance account is
payable as a lump sum in cash or as an annuity (under certain circumstances) to
the participant for reinvestment in other qualified plans prior to retirement at
the participant's election, or for distribution upon retirement. CCB Plan
benefits are not reduced by Social Security benefits. Loans cannot be taken from
the CCB Plan.

The estimated annual benefits payable upon retirement at normal retirement
age for the named executive officers are as follows: Mr. Georgescu -- $18,756,
Mr. Vick -- $3,384, Mr. McGarry -- $18,756, Mr. Bell -- $4,632, and Mr.
Dolan -- $1,152.

SAVINGS PLAN. The Savings Plan is a defined contribution plan to which
employees may make contributions after one hour of service with the Company and
to which the Company will make matching contributions on behalf of employees who
have completed at least 1,000 hours of service with the Company. Eligible
employees may choose to save up to 15% of their base pay and up to 10% of their
additional pay (e.g., overtime, bonus, etc.) in any calendar year. Eligible
employees can elect the amount of base pay they want to contribute to the
Savings Plan through payroll deductions and can elect to save with before-tax
and/or after-tax dollars. The Company matches employee contributions
dollar-for-dollar at year-end up to the first 5% of annual base pay, provided
the eligible participant is employed at year-end. Savings Plan accounts
(consisting of employee contributions, Company contributions and earnings) grow
on a tax-deferred basis. Such accounts can be invested by the participant in any
of the investment options made available by the Company from time to time.

SELECTED EXECUTIVE RETIREMENT INCOME PLAN ("SERIP"). The SERIP is a
supplemental executive retirement arrangement for selected members of senior
management under separate contracts with the Company. Subject to certain
non-competition and non-solicitation provisions, cash payments in a fixed annual
amount varying as to each individual will be made to a participant whose rights
have vested in accordance with his agreement when such participant's employment
terminates or when he reaches a specified age (typically 60), whichever occurs
later. Payments are made for the balance of the participant's life and, if fewer
than ten annual payments are made during the participant's life, his beneficiary
will receive the balance of the payments until ten annual payments are made. The
Company's obligations to participants under the SERIP are subordinate in right
of payment to its obligations to senior lenders and certain other creditors.

The estimated annual benefits payable upon retirement at normal retirement
age for the named executive officers are as follows: Mr.
Georgescu -- $1,050,000, Mr. Vick -- $300,000, Mr. McGarry -- $200,000, Mr.
Bell -- none, and Mr. Dolan -- none.

THE YOUNG & RUBICAM PROFIT SHARING PLAN (INACTIVE) (THE "PROFIT SHARING
PLAN"). The Profit Sharing Plan is a defined contribution plan which has been
inactive since 1975 and is being continued only for the benefit of current and
former employees (and their beneficiaries) who still have Profit Sharing Plan
account balances. Participants can direct the investment of their Profit Sharing
Plan account balances in any of the investment options made available by the
Company from time to time. Certain named executive officers have accrued
benefits under the Profit Sharing Plan but no additional accruals have been made
for their accounts since 1975. The Company recently merged the Profit Sharing
Plan into the Savings Plan.

57
<PAGE> 59

EMPLOYMENT AND TERMINATION OF EMPLOYMENT ARRANGEMENTS. The Company and
Michael Dolan entered into a letter agreement, as amended, regarding Mr. Dolan's
principal terms of employment with the Company as Vice Chairman and Chief
Financial Officer. This letter agreement entitles Mr. Dolan to an annual base
salary and eligibility for a bonus under the Key Corporation Managers Bonus Plan
as well as to the same perquisites and benefits under Company policies as other
employees of the same rank. This letter agreement also provides that if Mr.
Dolan should die while in the employ of the Company prior to the consummation of
an initial public offering, the Company will treat as vested all shares of
Restricted Stock and options to purchase Common Stock to the extent necessary to
realize a value of $1,500,000 to Mr. Dolan.

Under the Management Voting Trust Agreement, Y&R has agreed to give each
Management Investor, including each named executive officer, six months
severance pay upon termination of employment for any reason other than for
cause, but each Management Investor is required to waive any possible right to
more than six months severance pay (and any claims for damages under any
employment agreement). Upon termination of the Management Voting Trust, in the
event of termination of employment, the named executive officers may be eligible
to receive severance pay of up to 13 weeks base salary (based upon length of
service) pursuant to a severance plan previously established for U.S. employees
of the Company.

The Management Voting Trust has the unqualified right and power to vote and
to execute consents with respect to all shares of Common Stock held by the
Management Voting Trust. The voting rights of the Management Voting Trust will
be exercised by certain members of senior management of Y&R, as Voting Trustees.
The Voting Trustees are Peter A. Georgescu, Stephanie W. Abramson, Thomas D.
Bell, Jr., Michael J. Dolan, Mitchell Kurz, John P. McGarry, Jr., Alan J.
Sheldon and Edward H. Vick. So long as Peter A. Georgescu (or a successor Chief
Executive Officer elected with the approval of the Management Voting Trust) is a
Voting Trustee, his (or such successor's) decision will be binding unless he is
outvoted by a super majority of the other Voting Trustees. If at any time there
is no Chief Executive Officer, or if the Chief Executive Officer was not
approved in advance by the Management Voting Trust, a majority vote of the
Voting Trustees will constitute the action of the Management Voting Trust. The
foregoing voting procedures will also apply to the election of Voting Trustees.

CERTAIN TRANSACTIONS

Upon consummation of the Recapitalization, certain of the Recapitalization
Investors were granted an approval right over a number of specified fundamental
corporate actions, and were granted the right to nominate and have elected three
members of the Company Board. After the Offerings, such approval right will
terminate, and the H&F Investors will retain the right to nominate and have
elected (i) two members of the Board for so long as such investors continue to
hold, in the aggregate, at least 10% of the Outstanding Shares and (ii) one
member of the Board for so long as the H&F Investors continue to hold, in the
aggregate, at least 5% of the Outstanding Shares.

In addition, certain of the Recapitalization Investors have demand and
piggyback registration rights with respect to the Common Stock they hold. Such
Recapitalization Investors have the right to have shares they hold included in
any public offering of Common Stock made by the Company, and after the
Offerings, such Recapitalization Investors will have certain demand registration
rights to require the Company to register for resale shares of Common Stock held
by the Recapitalization Investors. See "Shares Eligible for Future Sale."

58
<PAGE> 60

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Common Stock and options to purchase Common Stock as of the
date hereof and as adjusted to reflect the sale of 16,600,000 shares of Common
Stock in the Offerings, including beneficial ownership by (i) each person who is
known by the Company to own beneficially 5% or more of the outstanding shares of
the Common Stock, (ii) each of the Company's Directors and named executive
officers, (iii) all Directors and executive officers as a group and (iv) the
Selling Stockholders. The information in the table assumes that all shares of
Restricted Stock vest within 60 days. The information in the table below has
been calculated in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. Except as indicated in the footnotes to the table, the
persons named in the table have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them, subject to
community property laws where applicable. The address of each of the Selling
Stockholders other than the H&F Investors is c/o the Company at 285 Madison
Avenue, New York, New York 10017. The address of the H&F Investors is c/o
Hellman & Friedman LLC, One Maritime Plaza, San Francisco, California 94111.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRIOR TO OFFERINGS
-----------------------------------------
SHARES AND SHARES BEING
NAME VESTED OPTIONS VESTED OPTIONS PERCENT OFFERED
<S> <C> <C> <C> <C>
Management Voting Trust(1)......... 45,411,870 14,102,220 60.0% 1,855,797
Hellman & Friedman Capital Partners
III, L.P......................... 28,961,100 2,311,590 45.4% 7,002,762
H&F Orchard Partners III, L.P...... 2,109,060 168,270 3.4% 509,969
H&F International Partners III,
L.P.............................. 631,770 50,400 1.0% 152,761
BearTel Corp. ..................... 260,880 -- * 63,160
Peter A. Georgescu(2).............. 1,783,560 -- 2.9% --
Edward H. Vick (2)................. 1,495,290 895,245 2.4% 110,580
Thomas D. Bell, Jr.(2)............. 1,463,655 1,165,215 2.3% 154,747
John P. McGarry, Jr.(2)............ 1,155,450 -- 1.9% 123,097
Alan Sheldon(2).................... 906,510 -- 1.5% 40,200
Stephanie W. Abramson(2)........... 475,350 26,085 * 8,372
Michael J. Dolan(2)................ 419,625 104,340 * --
Richard S. Bodman.................. -- -- * --
Philip U. Hammarskjold(3).......... -- -- * --
F. Warren Hellman(3)............... -- -- * --
John F. McGillicuddy............... 13,035 -- * --
Alan D. Schwartz(4)................ -- -- * --
All directors and executive
officers as a group.............. 7,712,475 2,190,885 12.1% 436,996
American Media Management, Inc. ... 141,750 11,310 * 34,275
Frank Anfield...................... 377,325 21,465 * 33,225
Matt Asinari....................... 156,525 26,085 * 56,662
Jean-Marc Bara..................... 304,080 -- * 66,823
Stephen Baum....................... 21,600 -- * 11,200
Jed Beitler........................ 76,185 15,660 * 1,350
Ted Bell........................... 827,820 334,065 1.3% 74,010
Bill Borrelle...................... 17,025 -- * 3,841
Roger Chiocchi..................... 79,140 25,875 * 2,333
Michael Claes...................... 47,550 24,360 * 7,320
Neil Clark......................... 91,305 52,170 * 15,654
Don Cogman......................... 425,745 191,775 * 15,075
Janet Coombs....................... 178,770 104,355 * 31,922
Cindy Giller....................... 9,780 -- * 3,669
H. Irving Grousbeck................ 283,485 22,620 * 68,546
Barbara Jack....................... 600,750 395,565 1.0% 5,551
Paul Jandreau-Smith................ 153,525 85,725 * 14,235
William Johnston................... 82,605 60,000 * 2,420
Christopher Komisarjevsky.......... 153,420 109,575 * 3,043
Philippe Krakowsky................. 67,560 26,085 * 18,391
Kurt Krauss........................ 21,600 -- * 11,200
Stephanie Kugelman................. 473,355 88,485 * 20,672
Mitchell Kurz(2)................... 1,397,745 589,455 2.2% 211,182
Jay Kushner........................ 103,500 42,000 * 23,540
Helmut Matthies.................... 497,340 -- * 5,250
Thomas McQueeney................... 201,060 -- * 25,895

<CAPTION>
BENEFICIAL OWNERSHIP
AFTER OFFERINGS
--------------------------------------------
SHARES AND
NAME VESTED OPTIONS VESTED OPTIONS PERCENT
<S> <C> <C> <C>
Management Voting Trust(1)......... 41,700,228 14,102,220 51.7%
Hellman & Friedman Capital Partners
III, L.P......................... 21,958,338 2,311,590 31.9%
H&F Orchard Partners III, L.P...... 1,599,091 168,270 2.4%
H&F International Partners III,
L.P.............................. 479,009 50,400 *
BearTel Corp. ..................... 197,720 -- *
Peter A. Georgescu(2).............. 1,783,560 -- 2.7%
Edward H. Vick (2)................. 1,384,710 895,245 2.1%
Thomas D. Bell, Jr.(2)............. 1,308,908 1,165,215 1.9%
John P. McGarry, Jr.(2)............ 1,032,353 -- 1.6%
Alan Sheldon(2).................... 866,310 -- 1.3%
Stephanie W. Abramson(2)........... 466,978 26,085 *
Michael J. Dolan(2)................ 419,625 104,340 *
Richard S. Bodman.................. -- -- *
Philip U. Hammarskjold(3).......... -- -- *
F. Warren Hellman(3)............... -- -- *
John F. McGillicuddy............... 13,035 -- *
Alan D. Schwartz(4)................ -- -- *
All directors and executive
officers as a group.............. 7,275,479 2,190,885 10.6%
American Media Management, Inc. ... 107,475 11,310 *
Frank Anfield...................... 344,100 21,465 *
Matt Asinari....................... 99,863 26,085 *
Jean-Marc Bara..................... 237,257 -- *
Stephen Baum....................... 10,400 -- *
Jed Beitler........................ 74,835 15,660 *
Ted Bell........................... 753,810 334,065 1.1%
Bill Borrelle...................... 13,184 -- *
Roger Chiocchi..................... 76,807 25,875 *
Michael Claes...................... 40,230 24,360 *
Neil Clark......................... 75,651 52,170 *
Don Cogman......................... 410,670 191,775 *
Janet Coombs....................... 146,848 104,355 *
Cindy Giller....................... 6,111 -- *
H. Irving Grousbeck................ 214,939 22,620 *
Barbara Jack....................... 595,199 395,565 *
Paul Jandreau-Smith................ 139,290 85,725 *
William Johnston................... 80,185 60,000 *
Christopher Komisarjevsky.......... 150,377 109,575 *
Philippe Krakowsky................. 49,169 26,085 *
Kurt Krauss........................ 10,400 -- *
Stephanie Kugelman................. 452,683 88,485 *
Mitchell Kurz(2)................... 1,186,563 589,455 1.8%
Jay Kushner........................ 79,960 42,000 *
Helmut Matthies.................... 492,090 -- *
Thomas McQueeney................... 175,165 -- *
</TABLE>

59
<PAGE> 61
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRIOR TO OFFERINGS
-----------------------------------------
SHARES AND SHARES BEING
NAME VESTED OPTIONS VESTED OPTIONS PERCENT OFFERED
<S> <C> <C> <C> <C>
William Melzer..................... 532,605 434,790 * 43,926
Craig Middleton.................... 308,970 26,085 * 72,529
Fernan Montero..................... 980,535 -- 1.6% 40,535
James O'Malley..................... 26,610 13,560 * 6,767
Steve Oroho........................ 217,590 112,605 * 1,325
Stewart Owen....................... 268,365 119,265 * 48,002
Graham Phillips.................... 55,170 -- * 16,259
Dan Plouffe........................ 7,500 -- * 4,200
Tim Pollak......................... 981,165 -- 1.6% 91,608
Hans-Henrik Rasmussen.............. 118,110 -- * 52,230
Ken Rietz.......................... 135,150 117,390 * 9,500
Ilene Rosenthal.................... 21,360 -- * 2,045
Michael Samet...................... 328,740 14,625 * 71,620
Carol Schautz...................... 117,315 -- * 14,697
Matthew Schetlick.................. 118,485 60,870 * 28,000
Nico Schou......................... 22,965 -- * 9,210
Barbara Smith...................... 62,625 10,440 * 3,955
Stanley Stefanski.................. 675,285 111,675 1.1% 139,810
Peter Stringham.................... 52,500 -- * 20,778
Clay Timon......................... 603,735 521,745 1.0% 36,479
Joanne Zaiac....................... 179,010 -- * 40,863

<CAPTION>
BENEFICIAL OWNERSHIP
AFTER OFFERINGS
--------------------------------------------
SHARES AND
NAME VESTED OPTIONS VESTED OPTIONS PERCENT
<S> <C> <C> <C>
William Melzer..................... 488,679 434,790 *
Craig Middleton.................... 236,441 26,085 *
Fernan Montero..................... 940,000 -- 1.4%
James O'Malley..................... 19,843 13,560 *
Steve Oroho........................ 216,265 112,605 *
Stewart Owen....................... 220,363 119,265 *
Graham Phillips.................... 38,911 -- *
Dan Plouffe........................ 3,300 -- *
Tim Pollak......................... 889,557 -- 1.3%
Hans-Henrik Rasmussen.............. 65,880 -- *
Ken Rietz.......................... 125,650 117,390 *
Ilene Rosenthal.................... 19,315 -- *
Michael Samet...................... 257,120 14,625 *
Carol Schautz...................... 102,618 -- *
Matthew Schetlick.................. 90,485 60,870 *
Nico Schou......................... 13,755 -- *
Barbara Smith...................... 58,670 10,440 *
Stanley Stefanski.................. 535,475 111,675 *
Peter Stringham.................... 31,722 -- *
Clay Timon......................... 567,256 521,745 *
Joanne Zaiac....................... 138,147 -- *
</TABLE>

- ------------------------------

* Less than one percent.

(1) "Beneficial Ownership Prior to Offerings" includes 11,086,950 shares held
in the Restricted Stock Trust and "Beneficial Ownership After Offerings"
includes 9,231,105 shares which will vest and be distributed by the
Restricted Stock Trust upon consummation of the Offerings. Beneficial
ownership by the Management Voting Trust includes an aggregate of 1,855,797
shares offered hereby by Management Investors who are Selling Stockholders,
which shares are held by the Management Voting Trust. Other than the H&F
Investors, BearTel Corp., H. Irving Grousbeck and American Media
Management, Inc., all Selling Stockholders are Management Investors who are
officers, directors or employees of the Company and whose shares of Common
Stock are held by the Management Voting Trust. See "Management -- Executive
Officers and Directors." All such shares offered hereby will be delivered
out of the Management Voting Trust upon consummation of the Offerings. All
shares of Common Stock held by Management Investors have been deposited
into the Management Voting Trust, and the Management Voting Trust exercises
sole voting power over all such shares. See "Description of Capital
Stock -- The Management Voting Trust Agreement."

(2) This amount does not include any of the 45,411,870 shares beneficially
owned by the Management Voting Trust prior to the Offerings in excess of
the amount reported as beneficially owned by the stockholder, which the
stockholder may be deemed to beneficially own as a result of such
stockholder's position as a Voting Trustee of the Management Voting Trust.
The stockholder disclaims beneficial ownership of any such shares in excess
of the amount reported as beneficially owned by such stockholder.

(3) Excludes 31,701,930 shares beneficially owned by the H&F Investors prior to
the Offerings. The sole general partner of the H&F Investors is H&F
Investors III ("Investors III"). The managing general partner of Investors
III is Hellman & Friedman Associates III, L.P. ("Associates III"), and the
general partners of Associates III are H&F Management III, L.L.C.
("Management III LLC") and H&F Investors III, Inc. ("H&F Inc."). The sole
shareholder of H&F Inc. is The Hellman Family Revocable Trust (the
"Trust"). Mr. Hammarskjold is a member of Management III LLC. Mr. Hellman
is a managing member of Management III LLC, a director of H&F Inc. and a
trustee of the Trust. Investors III, Associates III, Management III LLC,
H&F Inc., the Trust and Messrs. Hammarskjold and Hellman exercise, directly
or indirectly, voting and investment discretion with respect to the shares
held by the H&F Investors and could be deemed to beneficially own such
shares, but each of them disclaims such beneficial ownership except to the
extent of its or his indirect pecuniary interest in such shares.

(4) Excludes 260,880 shares held by BearTel Corp., a wholly owned subsidiary of
The Bear Stearns Companies Inc., the parent company of Bear Stearns, of
which Mr. Schwartz is an executive officer.

60
<PAGE> 62

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company is authorized to issue 250,000,000 shares of Common Stock, par
value $0.01 per share (the "Common Stock"), and 10,000,000 shares of Preferred
Stock, par value $0.01 per share (the "Preferred Stock"). As of the date hereof,
and after giving effect to the Stock Split, the Company's issued and outstanding
capital stock consisted of 59,682,000 shares of issued and outstanding Common
Stock held by approximately 210 holders and 87 shares of issued and outstanding
Money Market Preferred Stock, par value $0.01 per share (the "Money Market
Preferred Stock") held by one holder. Based upon shares outstanding as of the
date hereof, the Company estimates that immediately after the closing of the
Offerings there will be an aggregate of 66,594,730 shares of Common Stock issued
and outstanding, 31,481,820 shares of Common Stock will be issuable upon
exercise of outstanding options, 87 shares of Money Market Preferred Stock will
be issued and outstanding and no other shares of Preferred Stock will be issued
and outstanding. All of the Company's issued and outstanding capital stock has
been fully paid.

The following description of the Company's capital stock does not purport
to be complete and is subject to and qualified in its entirety by the Company's
Charter and the Company's By-Laws, which are included as exhibits to the
Registration Statement of which this Prospectus forms a part, and by the
provisions of applicable Delaware law.

The Company's Charter and the Company's By-Laws contain certain provisions
that are intended to enhance the likelihood of continuity and stability in the
composition of the Board and which may have the effect of delaying, deferring,
or preventing a future takeover or change in control of the Company unless such
takeover or change in control is approved by the Board.

COMMON STOCK

The holders of Common Stock will be entitled to one vote for each share on
all matters voted on by stockholders, and the holders of such shares, together
with the holders of shares of Money Market Preferred Stock (as described
herein), will possess all voting power, except as otherwise required by law or
as provided in the Company's Charter. Holders of Common Stock who are employees
of Y&R or its affiliates are subject to the provisions of the Management Voting
Trust and the Stockholders' Agreement and will be subject to the provisions of
the Amended Stockholders' Agreement upon consummation of the Offerings. See
"-- The Management Voting Trust Agreement" and "The Stockholders' Agreement."
The holders of Common Stock will not have cumulative voting rights. Holders of
Common Stock will not have any preemptive right to subscribe for or purchase any
kind or class of securities of the Company. Holders of Common Stock will have no
subscription, conversion or redemption rights, and will not be subject to
further calls or assessments. Subject to any preferential or other rights of any
outstanding series of Preferred Stock that may be designated by the Company
Board, the holders of Common Stock will be entitled to such dividends, if any,
as may be declared from time to time by the Company Board. The Company's Credit
Facilities contain restrictive covenants that limit the Company's ability to pay
cash dividends or make certain stock repurchases above certain permitted limits
without the prior written consent of the lenders. The New Facility, which the
Company expects to enter into effective upon the consummation of the Offerings,
is expected to permit the payment of cash dividends except in the event of a
continuing default under the credit agreement. See "Dividend Policy." In the
event of the liquidation, dissolution or winding up of the Company, holders of
Common Stock will be entitled to receive on a pro rata basis any assets of the
Company remaining after provision for payment of creditors and after payment of
any liquidation preferences to holders of Preferred Stock.

PREFERRED STOCK

The Company is authorized to issue 10,000,000 shares of Preferred Stock.
The Company Board has the authority to establish and designate series of the
Preferred Stock and, except with respect to the Money Market Preferred Stock, to
fix the number of shares constituting each such series, to fix the designations
and the relative rights, preferences and limitations of the shares of each such
series and the variations in the relative rights, preferences and limitations as
between such series, and to increase and decrease the number of

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shares constituting each such series. See "-- Authorized But Unissued Capital
Stock" and "-- Anti-Takeover Effects of Certain Provisions of the Charter, the
By-Laws, the Rights Plan and Delaware Law -- Preferred Stock."

The Company's Charter designates an initial series of Preferred Stock,
consisting of 50,000 shares, as the Money Market Preferred Stock. Holders of
Money Market Preferred Stock are entitled to receive, subject to declaration by
the Board, certain cumulative cash dividends which are payable quarterly and
calculated with reference to the interest rate for the three-month London
interbank deposit market. On or after December 12, 2001, any Money Market
Preferred Stock issued and outstanding for five years may, at the option of the
Board and subject to providing holders with notice of redemption, be redeemed by
the Company at a redemption price per share of $115.00 (together with all
accrued and unpaid dividends thereon). Redeemed Money Market Preferred Stock may
be reissued by the Board as shares of such series or as shares of any other
series of Preferred Stock. Shares of Money Market Preferred Stock are not
convertible, have a liquidation preference of $115.00 per share (together with
all accrued and unpaid dividends thereon) and have voting rights equal to
one-tenth of one vote for each share of Money Market Preferred Stock.

Effective upon the closing of the Offerings, in connection with the Rights
Plan, the Company's Charter will authorize a series of Preferred Stock
designated Cumulative Participating Junior Preferred Stock (the "Junior
Preferred Stock"), consisting of 2,500,000 shares. For a description of the
Rights Plan and the Junior Preferred Stock, see "-- Rights Plan" and
"-- Anti-Takeover Effects of Certain Provisions of the Charter, the By-Laws, the
Rights Plan and Delaware Law."

AUTHORIZED BUT UNISSUED CAPITAL STOCK

Based on the calculations set forth above, the Company estimates that,
following the completion of the Offerings, it will have approximately
183,405,270 shares of authorized but unissued Common Stock (including an
aggregate of 28,883,715 shares reserved for issuance upon the exercise of
options under the Stock Option Plans and 2,598,105 shares reserved for issuance
upon the exercise of options issued to certain of the Recapitalization Investors
and 9,999,913 shares of authorized but unissued Preferred Stock (including the
2,500,000 shares designated as Junior Preferred Stock and 49,913 shares
designated as Money Market Preferred Stock). Delaware law does not require
stockholder approval for the issuance of authorized shares. However, the listing
requirements of the New York Stock Exchange, which apply so long as the Common
Stock is listed on such exchange, require prior stockholder approval of certain
issuances, including issuances of shares bearing voting power equal to or
exceeding 20% of the pre-issuance outstanding voting power or pre-issuance
outstanding number of shares of Common Stock. These additional shares could be
used for a variety of corporate purposes, including future public offerings to
raise additional capital or to facilitate corporate acquisitions. The Company
currently does not have any plans to issue additional shares of Common Stock or
Preferred Stock other than in connection with employee compensation plans. See
"Management -- Executive Compensation." One of the effects of the existence of
unissued and unreserved Common Stock and Preferred Stock may be to enable the
Board of the Company to issue shares to persons friendly to current management,
which issuance could render more difficult or discourage an attempt to obtain
control of the Company by means of a merger, tender offer, proxy contest or
otherwise, and thereby protect the continuity of the Company's management and
possibly deprive the stockholders of the opportunity to sell their shares of
Common Stock at prices higher than prevailing market prices. Such additional
shares also could be used to dilute the stock ownership of persons seeking to
obtain control of the Company pursuant to the operation of the Rights Plan,
which is discussed below. See "-- Anti-Takeover Effects of Certain Provisions of
the Charter, the By-Laws, the Rights Plan and Delaware Law."

THE MANAGEMENT VOTING TRUST AGREEMENT

Pursuant to the agreement establishing the Management Voting Trust (the
"Management Voting Trust Agreement"), the Management Investors and the
Restricted Stock Trust are required to deposit with the Management Voting Trust
all shares of Common Stock and all shares of Money Market Preferred Stock
acquired by them prior to the termination of the Management Voting Trust
(including Common Stock acquired upon the exercise of options, distributions
from the Restricted Stock Trust or otherwise). Common

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Stock sold in the public market by Management Investors and the Restricted Stock
Trust will be withdrawn from, and delivered free of, the Management Voting
Trust.

The Management Voting Trust will have the unqualified right and power to
vote and to execute consents with respect to all shares of Common Stock and all
shares of Money Market Preferred Stock held by the Management Voting Trust. The
voting rights of the Management Voting Trust are exercised by certain members of
senior management of Y&R, in their capacities as Voting Trustees. The current
Voting Trustees are Peter A. Georgescu, Stephanie W. Abramson, Thomas D. Bell,
Jr., Michael J. Dolan, Mitchell Kurz, John P. McGarry, Jr., Alan J. Sheldon and
Edward H. Vick (each of whom is currently a member of the senior management of
Y&R). So long as Peter A. Georgescu (or a successor Chief Executive Officer
elected with the approval of the Management Voting Trust) is a Voting Trustee,
any action (i) approved in writing or at a meeting by Peter A. Georgescu (or
such successor) and any two other Voting Trustees and (ii) any action approved
over the objection of Peter A. Georgescu (or such successor) at a meeting of the
Voting Trustees by an aggregate vote of Voting Trustees equal to not less than
the total number of Voting Trustees then in office minus two, shall constitute
the action of, and shall be binding upon, the Management Voting Trust (unless
there shall be fewer than seven Voting Trustees then in office, in which event
any action under clause (ii) shall require the vote of all the Voting Trustees
other than Peter A. Georgescu (or such successor)). The foregoing voting
procedures will also apply to the election and removal of Voting Trustees, to
proposals to increase or decrease the number of Voting Trustees and to proposals
to amend the foregoing voting procedures.

The Management Voting Trust will terminate at such time that (i) no person
(including the Recapitalization Investors and the Management Voting Trust) is
the owner of more than 20% of the Outstanding Shares, (ii) the number of shares
of Common Stock held by the Management Voting Trust is less than 10% of the
Outstanding Shares or (iii) the Voting Trustees determine to terminate the
Management Voting Trust. Pursuant to an irrevocable unanimous written consent of
the Voting Trustees, the Management Voting Trust will terminate 24 months after
the consummation of the Offerings, assuming no earlier termination in accordance
with its terms.

The Management Voting Trust has issued and will issue voting trust
certificates ("Voting Trust Certificates") representing the shares of Common
Stock and Money Market Preferred Stock deposited with it. The Voting Trust
Certificates will be subject to the transfer restrictions set forth in the
Amended Stockholders' Agreement. See "-- The Stockholders' Agreement."

Y&R has agreed to assume all liability and indemnify and defend all Voting
Trustees and their successors, assigns, agents and servants from any and all
losses incurred or asserted against any Voting Trustees relating to their
administration of the Management Voting Trust, unless there is clear and
convincing evidence that such losses were proximately caused by an act or
omission that was not taken in good faith or not reasonably believed to be in
the best interest of Y&R and the Management Investors as a group. See
"Management -- Limitation of Liability and Indemnification."

Under the Management Voting Trust Agreement and certain stock option and
restricted stock agreements, each of the Management Investors is subject to
certain non-competition, non-solicitation, confidentiality and notice
requirements in connection with the termination of such person's employment.
They include the following: (i) for one year after termination of employment, a
Management Investor may not work for any competitor of Y&R on the account of any
client of Y&R or any of its affiliates with whom such Management Investor had a
direct relationship or as to which such Management Investor had a significant
supervisory responsibility or otherwise was significantly involved at any time
during the two years prior to termination; (ii) for six months after termination
of employment, (a) a Management Investor with principally corporate type job
responsibilities that do not principally involve client service related
functions may not work for a principal competitor of Y&R or any of its
affiliates in any substantially similar role as that held with Y&R or any of its
affiliates during the two years prior to termination, and (b) a Management
Investor with principally client service related responsibilities may not work
for a competitor of Y&R or its affiliates on the account of any substantial
competitor (or directly for such competitor) of any client of Y&R or any of its
affiliates for whom such Management Investor had substantial responsibility
during the two years prior to termination; (iii) for one year after termination
of employment, a Management Investor may not (a) directly or indirectly solicit
or hire, or assist in the soliciting or hiring of, any person employed by Y&R or
any of its

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affiliates as of the date of termination or any person who was then being
recruited by Y&R or any of its subsidiaries or (b) induce any such employee to
terminate his or her employment with Y&R or any of its affiliates; (iv) a
Management Investor shall keep confidential information of Y&R, its affiliates
and their clients learned during his or her employment and (v) a Management
Investor shall give six weeks written notice prior to voluntary termination
unless a shorter period is approved by the Company.

Y&R has agreed, under the Management Voting Trust Agreement, to give each
Management Investor six months severance pay upon termination of employment for
any reason other than for cause (as defined), and each Management Investor is
required to waive any possible right to more than six months' severance pay (or
similar compensation) (and any claims for damages under any employment
agreement). Y&R has the right under the Stockholders' Agreement to offset
against any payments to be made in connection with the purchase of securities
from a Management Investor in connection with his or her termination of
employment (i) any severance or similar obligations to be paid to such
Management Investor in excess of or in addition to six months severance pay
required to be made under applicable law despite such Management Investor's
waiver of entitlement thereto, as provided in the Management Voting Trust
Agreement) and (ii) any damages or expenses incurred as a result of any
malfeasance by such Management Investor or a breach by such Management Investor
of the covenants described in the preceding paragraph.

THE STOCKHOLDERS' AGREEMENT

In connection with the Recapitalization, the Recapitalization Investors,
the Management Investors, the Restricted Stock Trust, the Management Voting
Trust and Y&R entered into a stockholders' agreement (the "Stockholders'
Agreement") with respect to the restrictions on transferability of shares of
Common Stock and related Voting Trust Certificates, and with respect to the
management of Y&R.

Upon consummation of the Offerings, the Stockholders' Agreement will be
terminated as to certain parties, and the H&F Investors, the Management
Investors, the Management Voting Trust and Y&R will enter into an amended
stockholders' agreement (the "Amended Stockholders' Agreement").

RIGHT TO NOMINATE DIRECTORS. Under the Amended Stockholders' Agreement,
the H&F Investors will have the right to nominate and have elected two members
of the Company Board for so long as they continue to hold, in the aggregate, at
least 10% of the Outstanding Shares, and one member of the Board for so long as
they continue to hold, in the aggregate, at least 5% of the Outstanding Shares.
Outstanding Shares is defined in the Stockholders' Agreement to include all
shares of Common Stock subject to vested options (not including options which
would vest on a change in control).

TRANSFER RESTRICTIONS. Under the Amended Stockholders' Agreement, the
transfer restrictions described below will apply. Purported transfers in
violation of these restrictions will be null and void.

H&F Investors may not transfer shares of Common Stock, options to purchase
Common Stock or other voting capital stock, (i) prior to termination of the
Management Voting Trust (which will occur no later than the second anniversary
of the consummation of the Offerings), if at least 20% of the Outstanding Shares
are then subject to the Management Voting Trust, to any party who as a result
thereof would (together with its affiliates) own a percentage of the Outstanding
Shares which is greater than the percentage then subject to the Management
Voting Trust, or (ii) after such termination of the Management Voting Trust and
(A) prior to the first anniversary of such termination, to any party who as a
result thereof would (together with its affiliates) own a percentage of the
Outstanding Shares which is greater than the greater of (1) 20% and (2) the
percentage of the Outstanding Shares subject to the Management Voting Trust upon
termination thereof (the "Termination Percentage") less 5% and (B) from and
after the first anniversary of such termination until December 12, 2002, to any
party who as a result thereof would (together with its affiliates) own a
percentage of the Outstanding Shares which is greater than the greater of (1)
20% and (2) the Termination Percentage less 10%, unless, in any such case (A)
Y&R fails to arrange for the sale of such shares to a third party for the
benefit of the H&F Investors at a price to the H&F Investors not less than the
price proposed to be paid by the proposed transferee and (B) the Management
Voting Trust (or, following its termination, the Company) consents to the
proposed transfer, which consent may not be unreasonably withheld.

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Prior to termination of the Management Voting Trust, proposed transfers of
shares of Common Stock, options to purchase Common Stock or other voting capital
stock by Management Investors (other than transfers by will or intestate
succession) to any party who as a result thereof (together with its affiliates)
would own more than 20% of the Outstanding Shares are subject to a right of
first refusal by each of Y&R and the H&F Investors, exercisable in that order.

CERTAIN TRANSFER RESTRICTIONS

The following transfer restrictions apply to shares of Common Stock issued
to Management Investors pursuant to Regulation S under the Securities Act, but
will not apply to shares of Common Stock sold in the Offerings. Under the
Company's By-Laws, any direct or indirect sale, transfer, assignment, pledge,
hypothecation or other encumbrance or disposition (a "Transfer") of legal or
beneficial ownership of any stock heretofore or hereafter issued and sold by the
Company pursuant to Regulation S under the Securities Act of 1933, as amended
(the "Securities Act"), may be made only (i) pursuant to an effective
registration statement under the Securities Act or (ii) pursuant to a
transaction that is exempt from, or not subject to, the registration
requirements of the Securities Act. Neither the Company nor any employee or
agent of the Company shall record any Transfer prohibited by the preceding
sentence, and the purported transferee of such a prohibited Transfer (the
"Purported Transferee") shall not be recognized as a securityholder of the
Company for any purpose whatsoever in respect of the security or securities that
are the subject of the prohibited Transfer. The Purported Transferee shall not
be entitled, with respect to such securities, to any rights of a securityholder
of the Company, including without limitation, in the case of securities that are
Common Stock, the right to vote such Common Stock or to receive dividends or
distributions in respect thereof, if any. All certificates representing
securities subject to the transfer restrictions set forth in this Article V
shall bear a legend to the effect that the securities represented by such
certificates are subject to such restrictions, unless and until the Company
determines in its sole discretion that such legend may be removed consistent
with applicable law.

NO PREEMPTIVE RIGHTS

No holder of any class of stock of the Company has any preemptive right to
subscribe for or purchase any kind or class of securities of the Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is The Bank of New
York.

RIGHTS PLAN

The Company has adopted the Rights Plan and expects to enter into a Rights
Agreement (the "Rights Agreement") between the Company and The Bank of New York,
as Rights Agent (the "Rights Agent"), prior to consummation of the Offerings. In
connection with the Rights Plan, the Board has declared a dividend distribution
of one Right for each share of Common Stock outstanding immediately prior to
consummation of the Offerings and after the Stock Split (the "Record Date"). The
dividend is payable immediately prior to consummation of the Offerings. The
Company will distribute one associated Right with each share of Common Stock
distributed in the Offerings. The terms of the Rights are set forth in the
Rights Agreement. The Company's Charter authorizes the Board to adopt a
stockholder rights plan such as the Rights Plan.

Each Right entitles the registered holder under certain circumstances to
purchase from the Company one one-hundredth of a share of Junior Preferred Stock
at a purchase price of $87.50, subject to adjustment (the "Purchase Price"). The
Purchase Price shall be payable in cash or by certified check or bank draft.

Junior Preferred Stock purchasable upon exercise of the Rights will not be
redeemable. Each share of Junior Preferred Stock will be entitled to a minimum
preferential quarterly dividend payment of $1.00 per share but will be entitled
to an aggregate dividend of 100 times the dividend declared per share of Common
Stock. In the event of liquidation, the holders of shares of Junior Preferred
Stock will be entitled to a minimum preferential liquidation payment of $1 per
share, plus an amount equal to accrued and unpaid dividends and distributions
thereon, whether or not declared, to the date of such payment. Each share of
Junior Preferred Stock will have 100 votes, voting together with the Common
Stock and the Money Market

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Preferred Stock and, in the event of certain dividend arrearages, will also have
the right to elect one director voting as a class. In the event of any merger,
consolidation or other transaction in which shares of Common Stock are
exchanged, each share of Junior Preferred Stock will be entitled to receive 100
times the amount received per share of Common Stock. These rights are protected
by customary anti-dilution provisions. Because of the nature of their dividend,
liquidation and voting rights, the value of the one-one-hundredth interest in a
share of Junior Preferred Stock purchasable upon exercise of each Right should
approximate the value of one share of Common Stock.

Until the close of business on the earlier of (i) the tenth business day
after the Stock Acquisition Date (as defined below) and (ii) the tenth business
day (or such later day as may be determined by action of the Company Board prior
to such time as any person becomes an Acquiring Person (as defined below)) after
the date of the commencement by any person (other than any Company Entity (as
defined below)) of, or the first public announcement of the intent of any person
(other than any Company Entity) to commence (which intention to commence remains
in effect for five business days after such announcement), a tender or exchange
offer the consummation of which would result in any person becoming an Acquiring
Person (the earlier of the dates referred to in clauses (i) and (ii) above being
herein referred to as the "Distribution Date"), the Rights will be evidenced by
the certificates representing shares of Common Stock and no separate Right
Certificates (as defined below) will be issued or distributed. All shares of
Common Stock outstanding as of the Record Date or issued prior to the earlier of
the Distribution Date or the Expiration Date (as defined below) will be issued
with Rights.

The term "Stock Acquisition Date" means the time and day of the first
public announcement (which includes, without limitation, the filing of a report
pursuant to the Exchange Act) by the Company or an Acquiring Person indicating
that an Acquiring Person has become such.

The term "Acquiring Person" means (i) any person (other than the H&F
Investors and other than any Permitted H&F 15% Transferee (as defined below))
who or which, together with all affiliates and associates of such person,
acquires beneficial ownership (as defined in the Rights Agreement) of 15% or
more of the then outstanding shares of Common Stock (other than as a result of
an Approved Offer (as defined below)), or (ii) the H&F Investors if, after the
Offerings, the H&F Investors, together with all of their affiliates and
associates, acquire beneficial ownership of any additional shares of Common
Stock such that following such acquisition (A) the H&F Investors beneficially
own in excess of 15% of the then outstanding shares of Common Stock and (B) if
the Management Voting Trust is then in existence, following such acquisition the
H&F Investors beneficially own a greater percentage of the Diluted Shares
Outstanding (as defined below) than the percentage of the Diluted Shares
Outstanding subject to the Management Voting Trust at the time of such
acquisition (it being understood that neither sales by, nor termination of, the
Management Voting Trust will trigger this provision absent a subsequent
acquisition of beneficial ownership of additional shares by the H&F Investors or
any of their affiliates or associates) or (iii) any Permitted H&F 15% Transferee
if contemporaneously with or subsequent to the transfer from the H&F Investors
that resulted in such person becoming a Permitted H&F 15% Transferee, such
Permitted H&F 15% Transferee, together with all affiliates and associates of
such Permitted H&F 15% Transferee, acquires beneficial ownership of any
additional shares; provided, however, that (1) a person shall not become an
Acquiring Person if such person, together with all of its affiliates and
associates, becomes the beneficial owner of 15% or more (in the case of clause
(i) above) of the then outstanding shares of Common Stock as a result of a
reduction in the number of shares of Common Stock outstanding due to the
repurchase of shares of Common Stock by the Company, unless and until such time
as such person purchases or otherwise becomes (as a result of actions taken by
such person or any of its affiliates or associates) the beneficial owner of any
additional shares of Common Stock; (2) the term "Acquiring Person" shall not
include any Company Entity; and (3) the term "Acquiring Person" shall not
include any person who or which, together with all affiliates and associates of
such person, becomes the beneficial owner of 15% or more of the then outstanding
shares of Common Stock (in the case of clause (i) above) or any additional
shares of Common Stock (in the case of clauses (ii) and (iii) above) but who
acquired beneficial ownership of shares of Common Stock inadvertently, and such
person promptly (and in any event within 10 business days after being so
requested by the Company) enters into an irrevocable commitment satisfactory to
the Company Board promptly (and in any event within 20 business days or such
shorter period as shall be determined by the Company Board) to divest, and
thereafter promptly divests as
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required by such commitment, sufficient shares of Common Stock so that such
person, together with all of its affiliates and associates, ceases to be a
beneficial owner of 15% or more of the then outstanding shares of Common Stock
(in the case of clause (i) above) or any additional shares of Common Stock (in
the case of clauses (ii) and (iii) above).

The term "Company Entity" means any of the Company, any wholly owned
subsidiary of the Company, any employee benefit plan or employee stock plan of
the Company or any wholly owned subsidiary of the Company, any person or entity
holding shares of Common Stock which was organized, appointed or established by
the Company or any such wholly owned subsidiary for or pursuant to the terms of
any such plan, the Management Voting Trust, the Restricted Stock Trust, the
trustees under the Management Voting Trust or the Restricted Stock Trust, any
affiliate or associate of the Management Voting Trust or the Restricted Stock
Trust or any trustee under either such trust and any group that includes the
Management Voting Trust, the Restricted Stock Trust, any trustee under either
such trust or any affiliate or associate thereof.

The term "Permitted H&F 15% Transferee" means any person who is a Permitted
H&F Transferee (as defined below) who or which, immediately after the transfer
from the H&F Investors that resulted in such person becoming a Permitted H&F
Transferee, together with all affiliates and associates of such person, is the
beneficial owner of 15% or more of the then outstanding shares of Common Stock.

The term "Permitted H&F Transferee" means any person that acquires
beneficial ownership of shares of Common Stock from the H&F Investors pursuant
to a transfer that is either not restricted under, or occurs in compliance with,
the transfer restrictions applicable to the H&F Investors set forth in the
Amended Stockholders' Agreement.

The term "Approved Offer" means a tender offer or exchange offer for all
the outstanding shares of Common Stock which is at a price and on terms
approved, prior to the acceptance for payment of shares under such tender or
exchange offer, by the Company Board.

The term "Diluted Shares Outstanding" as of any given time means the sum of
(a) the number of shares of Common Stock then issued and outstanding (including
all shares of Common Stock held in the Restricted Stock Trust) and (b) the
number of shares of Common Stock issuable upon exercise of the (1) HFCP Options
(as defined in the Amended Stockholders' Agreement) and the Rollover Options and
(2) all other options, warrants and rights to acquire, and the conversion of any
securities convertible into, shares of Common Stock, to the extent such rights
to acquire shares of Common Stock are then exercisable. For purposes of clause
(ii)(B) of the definition of "Acquiring Person" above, when calculating the
percentage of the Diluted Shares Outstanding owned by the H&F Investors or the
Management Voting Trust, as the case may be, the H&F Investors or the Management
Voting Trust, as the case may be, shall be deemed to own all shares of Common
Stock beneficially owned by them assuming the exercise of all of their options,
warrants and rights to acquire, and the conversion by them of any securities
convertible into, shares of Common Stock to the extent, but only to the extent,
such rights to acquire shares of Common Stock are then exercisable by them. For
purposes of calculating the percentage of Diluted Shares Outstanding owned by
the Management Voting Trust, the Management Voting Trust shall be deemed to own
all shares of Common Stock (including all shares of Common Stock required to be
deposited thereunder upon exercise of vested options) then subject to the
Management Voting Trust.

The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with and only with the Common Stock. Certificates
representing shares of Common Stock issued after the Record Date and prior to
the earlier of the Distribution Date and the Expiration Date will contain a
legend incorporating the Rights Agreement by reference. Until the Distribution
Date, the surrender for transfer of any of the certificates representing shares
of Common Stock outstanding as of the Record Date or issued prior to the
Distribution Date will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate and the number of Rights
associated with each share of Common Stock will be proportionately adjusted in
the event of any dividend in Common Stock on the Common Stock or subdivision,
combination or reclassification of the Common Stock. In the event that the
Company purchases or acquires any shares of Common Stock after the Record Date
but prior to the Distribution Date, any Rights associated with such shares of
Common Stock shall be deemed canceled and retired so that the Company shall not
be
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entitled to exercise any Rights associated with the shares of Common Stock which
are no longer outstanding. As soon as practicable following the Distribution
Date, separate certificates evidencing the Rights ("Rights Certificates") will
be mailed to holders of record of Common Stock as of the close of business on
the Distribution Date and such separate Rights Certificates alone will evidence
the Rights. The Rights are not exercisable until the Distribution Date. The
Rights will expire at the close of business on May 31, 2008, unless they have
previously expired in connection with an Approved Offer (as described in the
Rights Agreement) or have been previously exchanged for shares of Common Stock
or have been previously redeemed by the Company as described below (the date and
time of the earliest of such events to occur, the "Expiration Date").

Immediately upon the Stock Acquisition Date, proper provision shall be made
so that each holder of a Right will thereafter have the right to receive, upon
exercise, Common Stock (or, in certain circumstances, cash, property or other
securities of the Company) having a preexisting market value (as of shortly
before the Stock Acquisition Date), equal to two times the then current Purchase
Price of the Right. Notwithstanding any of the foregoing, following the
occurrence of the Stock Acquisition Date, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person and certain related parties will become null and void.

To illustrate the rights described in the preceding paragraph, at a
Purchase Price of $87.50 per Right, each Right not owned by an Acquiring Person
(or by certain related parties) following an event set forth in the preceding
paragraph would entitle its holder to purchase Common Stock (or other
consideration, as noted above) with a preexisting market value of $175.00 for
$87.50. Assuming that the Common Stock has a preexisting market value of $25.00
per share at such time, the holder of each Right would be entitled to purchase
seven shares of Common Stock for $87.50.

In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business consolidation transaction,
(ii) the Company is the surviving corporation in a merger or other business
consolidation with any person and the Common Stock is changed into or exchanged
for stock or other securities of any other person or cash or any other property
(other than, in the case of any transaction described in (i) or (ii), a merger
or consolidation which would result in all of the voting securities of the
Company outstanding immediately prior thereto continuing to represent all of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation and holders of such securities
not having changed as a result of such merger or consolidation) or (iii) 50% or
more of the Company's assets or earning power is sold or transferred, each
holder of a Right (except Rights that previously have been voided as set forth
above) shall thereafter have the right to receive, upon exercise, common stock
of the acquiring company having a market value equal to two times the then
current Purchase Price of the Right.

The Purchase Price payable, and the fraction of a share of Junior Preferred
Stock or other securities or property issuable, upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Junior Preferred Stock (prior to the Distribution Date) or the Common Stock,
(ii) if holders of the Junior Preferred Stock are granted certain rights or
warrants to subscribe for Junior Preferred Stock or convertible securities at
less than the current market price of the Junior Preferred Stock, or (iii) upon
the distribution to holders of the Junior Preferred Stock of evidences of
indebtedness or assets (excluding regular quarterly cash dividends below certain
levels or dividends payable in shares of Junior Preferred Stock) or of
subscription rights or warrants (other than those referred to above).

With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. In addition, to the extent that the Company does not have sufficient
shares of Common Stock issuable upon exercise of the Rights following the Stock
Acquisition Date, the Company may, under certain circumstances, reduce the
Purchase Price. No fractional shares of Junior Preferred Stock (other than
fractions which are integral multiples of one one-hundredth) will be issued and,
in lieu thereof, an adjustment in cash will be made based on the market price of
the Junior Preferred Stock or the Common Stock on the last trading date prior to
the date of exercise.

At any time until the Stock Acquisition Date, the Company may redeem the
Rights in whole, but not in part, at a price of $0.01 per Right (payable in
cash, shares of Common Stock or other consideration deemed
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appropriate by the Board). Immediately upon the action of the Board ordering
redemption of the Rights, the Rights will terminate and thereafter the only
right of the holders of Rights will be to receive the $0.01 redemption price. In
addition, at any time after the Stock Acquisition Date, the Board may elect to
exchange all or part of the then-outstanding and exercisable Rights (other than
Rights that have become null and void as described above) for one share of
Company Common Stock. Both the redemption price and the exchange rate are
subject to adjustment.

Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) or for common stock of an
acquiring company as set forth above.

Any of the provisions of the Rights Agreement may be amended by the Board
prior to the Stock Acquisition Date. After the Stock Acquisition Date, the
provisions of the Rights Agreement may be amended by the Board in order to cure
any ambiguity, to correct any defects or inconsistencies, to make changes which
do not adversely affect the interests of holders of Rights (excluding the
interests of any Acquiring Person) or to shorten or lengthen any time period
under the Rights Agreement; provided, however, that no amendment to adjust the
time period governing redemption or to modify the ability (or inability) of the
Board to redeem the Rights shall be made at such time when the Rights are not
redeemable.

As long as the Rights are attached to the Common Stock, the Company will
issue one Right for each share of Common Stock issued prior to the Distribution
Date so that all such shares will have attached Rights. Two million five hundred
thousand shares of Junior Preferred Stock will initially be reserved for
issuance upon exercise of the Rights.

The Rights have certain anti-takeover effects. See "-- Anti-Takeover
Effects of Certain Provisions of the Charter, the By-Laws, the Rights Plan and
Delaware Law."

The foregoing summary of certain terms of the Rights is qualified in its
entirety by reference to the Rights Agreement, which is filed as an exhibit to
the Registration Statement and is incorporated herein by reference.

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CHARTER, THE BY-LAWS, THE
RIGHTS PLAN AND DELAWARE LAW

The Company's Charter, the Company's By-Laws, the Rights Plan and the DGCL
contain certain provisions that could make more difficult the acquisition of
control of the Company by means of a tender offer, open market purchases, a
proxy contest or otherwise. Set forth below is a description of such provisions
in the Company's Charter, the Company's By-Laws, the Rights Plan and the DGCL.
The following description is intended as a summary only and is qualified in its
entirety by reference to the Company's Charter, the Company's By-Laws and the
Rights Agreement, the forms of which are included as exhibits to the
Registration Statement of which this Prospectus forms a part, and to the DGCL.
Upon consummation of the Offerings, the Management Voting Trust will hold
approximately 51.7% of the outstanding shares of Common Stock (assuming the
exercise of all currently vested options held by Management Investors), which
could discourage potential acquisition proposals and could delay or prevent a
change in control of the Company. See "Description of Capital Stock -- The
Management Voting Trust Agreement."

CLASSIFIED BOARD OF DIRECTORS; REMOVAL OF DIRECTORS. The Company's Charter
provides that the number of Directors shall be not less than five nor more than
fifteen, with the exact number of Directors to be determined from time to time
by a majority of the entire Board. The Directors shall be divided into three
classes, as nearly equal in number as is possible, serving staggered three-year
terms so that Directors' initial terms will expire at the annual meeting of the
Company's stockholders held in 1999, 2000 and 2001, respectively. Starting with
the 1999 annual meeting of the Company's stockholders, one class of Directors
will be elected each year for a three-year term. See "Management."

The Company believes that a classified Board will help to assure the
continuity and stability of the Board and the Company's business strategies and
policies, since a majority of the Directors at any given time will have had
prior experience as Directors of the Company. The Company believes that this in
turn will permit the Board to represent more effectively the interests of
stockholders.

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With a classified Board, at least two annual meetings of stockholders,
instead of one, will generally be required to effect a change in a majority of
the members of the Board. As a result, the classification of the Board of the
Company may discourage proxy contests for the election of Directors, unsolicited
tender offers or purchases of a substantial block of the Common Stock because it
could prevent an acquirer from obtaining control of the Board in a relatively
short period of time. In addition, pursuant to the DGCL and the Company's
Charter, a Director may be removed only for cause and only by the affirmative
vote of holders of not less than 80% of the outstanding shares of Common Stock
entitled to vote thereon. As a result, a classified Board delays stockholders
who do not agree with the policies of the Board from replacing Directors, unless
they can demonstrate that the Directors should be removed for cause and obtain
the requisite vote. Such a delay may help ensure that the Company Board, if
confronted with a proxy contest or an unsolicited proposal for an extraordinary
corporate transaction, will have sufficient time to review the proposal and
appropriate alternatives to the proposal and to act in what it believes is the
best interest of the Company's stockholders.

FILLING VACANCIES ON THE BOARD. The Company's Charter provides that,
subject to the rights of holders of any shares of Preferred Stock, any vacancy
in the Board that results from an increase in the number of Directors may be
filled only by a majority of the Directors then in office, provided that a
quorum is present, and any other vacancy may be filled by a majority of the
Directors then in office, even if less than a quorum, or by the sole remaining
Director. Accordingly, these provisions could temporarily prevent any
stockholder from obtaining majority representation on the Board by enlarging the
Board and filling the new Directorships with its own nominees.

WRITTEN CONSENTS AND SPECIAL MEETINGS. The Company's Charter provides that
no action required or permitted to be taken at any annual or special meeting of
stockholders may be taken by stockholders of the Company except at such a
meeting of stockholders. The Company's By-Laws provide that special meetings of
stockholders may be called only by the Chairman of the Board or the Company
Board. Stockholders are not permitted to call a special meeting or to require
that the Board call a special meeting of stockholders. Moreover, the business
permitted to be conducted at any special meeting of stockholders is limited to
the purpose or purposes specified in the written notice of such meeting. The
provisions of the Company's Charter prohibiting action by written consent
without a meeting and the provisions of the Company's By-Laws governing the
calling of and matters considered at special meetings may have the effect of
delaying consideration of a stockholder proposal until the next annual meeting.
These provisions would also prevent the holders of a majority of the voting
power of the outstanding shares of stock entitled to vote generally in the
election of Directors from using the written consent procedure to take
stockholder action and from taking action by written consent without giving all
the stockholders entitled to vote on a proposed action the opportunity to
participate in determining such proposed action at a meeting.

ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND PROPOSALS. The
Company's By-Laws establish an advance notice provision with regard to the
nomination, other than by or at the direction of the Board, of candidates for
election as Directors, or the bringing before any annual meeting of any
stockholder proposal (the "Notice of Meeting Provision").

The Notice of Meeting Provision provides that, subject to any rights of
holders of any Preferred Stock, business other than that proposed by the Board
may be transacted and candidates for Director other than those selected by the
Board may be nominated at the annual meeting only if the Secretary of the
Company has received a written notice identifying such business or candidates
and providing specified additional information not less than ninety nor more
than one hundred twenty days before the first Tuesday in June (or, if the Board
has set a different date for the annual meeting, not less than ninety nor more
than one hundred twenty days before such other date or, if such other date has
not been publicly disclosed or announced at least one hundred five days in
advance, then not less than fifteen days after such public disclosure or
announcement). In addition, not more than ten days after receipt by the
sponsoring stockholder of the Secretary's written request, the sponsoring
stockholder must provide the Secretary with such additional information as the
Secretary may reasonably require.

By requiring advance notice of nominations by stockholders, the Notice of
Meeting Provision will afford the Board a meaningful opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board, to inform the stockholders about such qualifications. By
requiring

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advance notice of proposed business, the Notice of Meeting Proposal Provision
will provide the Board with a meaningful opportunity to inform stockholders,
prior to such meeting, of any business proposed to be conducted at such meeting,
together with any recommendation or statement of the Board's position as to
action to be taken with respect to such business, so as to enable stockholders
better to determine whether they desire to attend such a meeting or to grant a
proxy to the Board as to the disposition of any such business. Although the
Company's By-Laws do not give the Board any power to approve or disapprove
stockholder nominations for the election of Directors or proposals for action,
they may have the effect of precluding a contest for the election of Directors
or the consideration of stockholder proposals if the proper procedures are not
followed, and of discouraging or deterring a third party from conducting a
solicitation of proxies to elect its own slate of Directors or to approve its
proposal without regard to whether consideration of such nominees or proposals
might be harmful or beneficial to the Company and its stockholders.

RESTRICTIONS ON AMENDMENT. The Company's Charter provides that the
approval of holders of at least 80% of the voting power entitled to vote
generally in the election of Directors, voting together as a single class, is
required to adopt any charter provision inconsistent with or to alter, amend or
repeal the provisions of the Company's Charter classifying the Board; governing
the removal of directors; establishing the minimum and maximum number of members
of the Board; eliminating the ability of stockholders to act by written consent;
authorizing the Board to consider the interests of clients and other customers,
creditors, employees and other constituencies of the Corporation and its
subsidiaries and the effect upon communities in which the Corporation and its
subsidiaries do business, in evaluating proposed corporate transactions;
establishing the Board's authority to issue, without a vote or any other action
of the stockholders, any or all authorized shares of stock of the Corporation,
securities convertible into or exchangeable for any authorized shares of stock
of the Corporation and warrants, options or rights to purchase, subscribe for or
otherwise acquire shares of stock of the Corporation for any such consideration
and on such terms as the Board in its discretion lawfully may determine; and
authorizing that the By-Laws of the Corporation may establish procedures
regulating the submission by stockholders of nominations and proposals for
consideration at meetings of stockholders of the Corporation. In addition, the
Company's Charter provides that the approval of the Board or the affirmative
vote of the holders of 80% of the voting power entitled to vote generally in the
election of Directors, voting together as a single class, is required to alter,
amend or repeal the above provisions of the Company's Charter or to adopt any
provision of the Charter inconsistent with such provisions or to alter, amend or
repeal certain provisions of the Company's By-Laws or to adopt any provision of
the By-Laws inconsistent with such provisions.

PREFERRED STOCK. Subject to the Company's Charter and applicable law, the
authority of the Company Board with respect to each series of Preferred Stock,
excluding the Money Market Preferred Stock, includes but is not limited to the
authority to generally determine the following: the designation of such series,
the number of shares initially constituting such series and whether to increase
or decrease such number of shares, dividend rights and rates, terms of
redemption and redemption prices, liquidation preferences, voting rights,
conversion rights, whether a sinking fund will be provided for the redemption of
the shares of such series (and, if so, the terms and conditions thereof) and
whether a purchase fund shall be provided for the shares of such series (and, if
so, the terms and conditions thereof).

The Company believes that the availability of the Preferred Stock will
provide increased flexibility in structuring possible future financings and
acquisitions and in meeting other corporate needs that might arise. Having such
authorized shares available for issuance will allow the Company to issue shares
of Preferred Stock without the expense and delay of a special stockholders'
meeting. The authorized shares of Preferred Stock, as well as shares of Common
Stock, will be available for issuance without further action by the
stockholders, unless such action is required by applicable law or the rules of
any stock exchange on which the Company's securities may be listed. Although the
Board has no current intention to do so, it would have the power (subject to
applicable law) to issue a series of Preferred Stock that could, depending on
the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. For instance, subject to applicable law, such series of
Preferred Stock might impede a business combination by including class voting
rights that would enable the holder to block such a transaction. The Board will
make any determination to issue such shares based on its judgment as to the best
interests of the Company and its stockholders. The Board, in so acting, could
issue Preferred Stock having terms which could discourage an acquisition attempt
or other transaction that some, or a

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majority, of the stockholders might believe to be in their best interest or in
which stockholders might receive a premium for their stock over the then market
price of such stock. See "-- Rights Plan."

OTHER CONSIDERATIONS. Article XII of the Company's Charter generally
provides that, in determining whether to take or refrain from taking corporate
action on any matter, including proposing any matter to the stockholders of the
Company, the Company Board may, but shall not be obligated to, take into account
the interests of clients and other customers, creditors, employees and other
constituencies of the Company and its subsidiaries and the effect upon
communities in which the Company and its subsidiaries do business.

CERTAIN EFFECTS OF THE RIGHTS PLAN. The Rights Plan is designed to protect
stockholders of the Company in the event of unsolicited offers to acquire the
Company and other coercive takeover tactics which, in the opinion of the Board,
could impair its ability to represent stockholder interests. The provisions of
the Rights Agreement may render an unsolicited takeover of the Company more
difficult or less likely to occur or might prevent such a takeover, even though
such takeover may offer the Company's stockholders the opportunity to sell their
stock at a price above the then prevailing market rate and may be favored by a
majority of the Company's stockholders. See "-- Rights Plan." The Company's
Charter authorizes the Board to adopt a stockholder rights plan.

DELAWARE BUSINESS COMBINATION STATUTE. The terms of Section 203 of the
DGCL apply to the Company. With certain exceptions, Section 203 generally
prohibits an "interested stockholder" from engaging in a broad range of
"business combination" transactions, including mergers, consolidations and sales
of 10% or more of a corporation's assets, with a Delaware corporation for three
years following the date on which such person became an interested stockholder
unless (i) the transaction that results in the person's becoming an interested
stockholder or the business combination is approved by the board of directors of
the corporation before the person becomes an interested stockholder, (ii) upon
consummation of the transaction which results in the stockholder becoming an
interested stockholder, the interested stockholder owns 85% or more of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also officers
and shares owned by certain employee stock plans, or (iii) on or after the date
the person becomes an interested stockholder, the business combination is
approved by the corporation's board of directors and by holders of at least
two-thirds of the corporation's outstanding voting stock, excluding shares owned
by the interested stockholder, at a meeting of stockholders. Under Section 203,
an "interested stockholder" is generally defined as any person (and the
affiliates and associates of any such person), other than the corporation and
any direct or indirect majority-owned subsidiary, that is (a) the owner of 15%
or more of the outstanding voting stock of the corporation or (b) an affiliate
or associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an interested stockholder. The restrictions contained in
Section 203 do not apply to a corporation that so provides in an amendment to
its certificate of incorporation or by-laws passed by a majority of its
outstanding voting shares, but such stockholder action generally does not become
effective for 12 months following its adoption and would not apply to persons
who were already interested stockholders at the time of the amendment. The
Company's Charter and Company's By-Laws do not exclude the Company from the
restrictions imposed under Section 203, but the Company's Charter provides that
in no case shall the H&F Investors or any person who is a Permitted H&F 15%
Transferee, regardless of the total percentage of the Company's Common Stock or
other voting stock owned by the H&F Investors or such person, be deemed an
interested stockholder for any purpose under Section 203 whatsoever.

Under certain circumstances, Section 203 makes it more difficult for a
person who would be an "interested stockholder" to effect various business
combinations with a corporation for a three-year period. The provisions of
Section 203 may encourage companies interested in acquiring the Company to
negotiate in advance with the Company Board, because the stockholder approval
requirement would be avoided if the Board approves either the business
combination or the transaction which results in the stockholder becoming an
interested stockholder. Such provisions also may have the effect of preventing
changes in the Board. It is further possible that such provisions could make it
more difficult to accomplish transactions which stockholders may otherwise deem
to be in their best interests.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offerings, there has been no market for the Common Stock and
there is no assurance that a significant public market for the Common Stock will
develop or be sustained after the Offerings. Sales of substantial amounts of
Common Stock in the public market following the Offerings could adversely affect
the market price of the Common Stock and could impair the Company's future
ability to raise capital through the sale of its equity securities.

Upon the closing of the Offerings, the Company will have outstanding
66,594,730 shares of Common Stock. Of these shares, approximately (i) 20,219,305
shares will be freely tradeable by persons, other than "affiliates" of the
Company, without restriction under the Securities Act of 1933, as amended (the
"Securities Act"); (ii) 45,338,970 shares will be "restricted" securities,
within the meaning of Rule 144 under the Securities Act, and may not be sold in
the absence of registration under the Securities Act unless an exemption from
registration is available, including the exemption provided by Rule 144; and
(iii) 1,036,455 shares originally issued pursuant to Regulation S under the
Securities Act will be subject to transfer restrictions thereunder.

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated),
including any affiliate of the Company, who has beneficially owned restricted
securities for at least one year (including the holding period of any prior
owner except an affiliate of the Company) would be entitled to sell within any
three-month period, a number of shares that does not exceed the greater of: (i)
one percent of the number of Common Stock then outstanding (approximately
665,947 shares immediately after the Offerings); or (ii) the average weekly
trading volume of the Common Stock during the four calendar weeks preceding the
filing of a Form 144 with respect to such sale. Sales under Rule 144 are also
subject to certain manner of sale and notice requirements and to the
availability of current public information about the Company. Under Rule 144(k),
a person who is not deemed to have been an affiliate of the Company at any time
during the 90 days preceding a sale, and who has beneficially owned restricted
securities for at least two years (including the holding period of any prior
owner except an affiliate of the Company), is entitled to sell such shares
without complying with the manner of sale, public information requirements,
volume limitations or notice requirements of Rule 144. Sale of shares by
affiliates of the Company will continue to be subject to such volume
limitations, and manner of sale, notice and public information requirements.

Each of the Company, all of the Management Investors, the Directors, and
the Recapitalization Investors, including the Selling Stockholders, who, upon
consummation of the Offerings, will collectively be the beneficial owners of an
aggregate of 49,994,730 shares of Common Stock and hold vested options to
acquire an aggregate of 16,700,325 shares of Common Stock have agreed not to (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers all or a portion of the economic consequences associated with the
ownership of any Common Stock (regardless of whether any of the transactions
described in clause (i) or (ii) is to be settled by the delivery of Common
Stock, or such other securities, in cash or otherwise), without the prior
written consent of Donaldson, Lufkin & Jenrette Securities Corporation and Bear,
Stearns & Co. Inc. (and, in the case of Management Investors, the Company), for
a period of 180 days after the date of this Prospectus (except that (i) the
Company may grant stock options or stock awards pursuant to the Company's
existing benefit or compensation plans, (ii) the Company may issue shares of
Common Stock upon the exercise of options, warrants or Rights or the conversion
of currently outstanding securities, (iii) the H&F Investors may transfer shares
of Common Stock to partners or affiliates thereof in transactions not involving
a public offering provided that each transferee agrees in writing to be bound by
the restrictions set forth in this paragraph and (iv) the Company may issue,
offer and sell shares of Common Stock or securities convertible, exercisable or
exchangeable therefor in transactions not involving a public offering as
consideration for the acquisition (pursuant to merger or otherwise) of one or
more entities provided that each recipient of such securities agrees in writing
to be bound by the restrictions set forth in this paragraph). In addition,
during such period, the Company has also agreed not to file any registration
statement with respect to, and the Company's executive officers and Directors,
and certain other stockholders, including the Selling Stockholders, have agreed
not to make any demand for, or exercise any right with respect

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to, the registration of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation and Bear, Stearns
& Co. Inc., except that the Company may file a registration statement on Form
S-8 under the Act to register shares of Common Stock issuable upon the exercise
of options. The Company intends to file a registration statement on Form S-8
under the Act on or shortly after the date of consummation of the Offerings. See
"Underwriting."

REGISTRATION RIGHTS AGREEMENT

In connection with the Recapitalization, Y&R, the Recapitalization
Investors and the Management Voting Trust entered into a Registration Rights
Agreement in favor of the Recapitalization Investors and, to the extent
necessary to permit a Management Investor to pay taxes when such sales would not
otherwise be permitted, the Management Investors, under which registration
rights are available after the consummation of the Offerings. Pursuant to the
Registration Rights Agreement, effective upon consummation of the Offerings, the
Company has granted (i) the Recapitalization Investors the right to require,
subject to the terms and conditions set forth therein, the Company to register
shares of Common Stock held by them for sale in accordance with their intended
method of disposition thereof and (ii) the Management Voting Trust the right to
require, subject to the terms and conditions set forth therein, the Company to
register such number of shares of Common Stock as is necessary to permit
Management Investors to pay taxes as a result of the exercise by such Management
Investors of Rollover Options or Closing Options or the vesting of Restricted
Stock awarded to such Management Investors (each a "demand registration"),
provided that in the case of the Management Voting Trust no such request may be
made without the consent of the Company. Subject to certain limitations, the
Recapitalization Investors may request up to four demand registrations and the
Management Voting Trust may request up to two demand registrations. The Company
will not be required to effect any demand registration if (i) the aggregate
market value of the shares of Common Stock proposed to be registered is less
than $100 million or (ii) such demand registration is requested by the
Recapitalization Investors or the Management Voting Trust within six months of
the effective date of a prior demand registration requested by the
Recapitalization Investors or the Management Voting Trust, respectively. The
Company may postpone the filing of a demand registration for up to 60 days in
certain circumstances.

In addition, the Company has granted the Recapitalization Investors and the
Management Voting Trust (to the extent of such number of shares of Common Stock
as is necessary to permit Management Investors to pay taxes as a result of the
exercise by such Management Investors of Rollover Options or Closing Options or
the vesting of Restricted Stock awarded to such Management Investors) the right,
subject to certain exceptions, to participate in registrations of Common Stock
initiated by the Company on its own behalf or on behalf of any other stockholder
(a "piggy-back registration"). The Recapitalization Investors and the Management
Voting Trust (on behalf of those Management Investors that are Selling
Stockholders) have exercised these piggy-back registration rights in connection
with the Offerings.

The Registration Rights Agreement provides that if requested by the
managing underwriter(s) of any underwritten offering of shares of Common Stock,
the Recapitalization Investors and the Management Voting Trust will agree, on
the same terms applicable to officers and directors of the Company, not to
effect any public sale or distribution of any shares of Common Stock for a
period of up to 180 days following and 15 days prior to the date of the final
prospectus contained in the registration statement filed in connection with such
offering. See "Underwriting."

The Company is required to pay expenses incurred by it and the reasonable
fees and disbursements of one counsel to the selling stockholders under the
Registration Rights Agreement in connection with the demand and piggy-back
registrations under the Registration Rights Agreement. In connection with any
registration under the Registration Rights Agreement, the Company has agreed to
indemnify five of the Recapitalization Investors against certain liabilities,
including liabilities under the Securities Act, and to contribute to certain
payments they may be required to make. The Registration Rights Agreement will
terminate on December 12, 2011.

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CERTAIN U.S. TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

The following is a general discussion of certain U.S. federal income and
estate tax consequences of the ownership and disposition of Common Stock by a
person that, for U.S. federal income tax purposes, is not a U.S. Person (a
"non-U.S. holder"). For purposes of this Section a "U.S. Person" means a citizen
or resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, an estate the income of which is subject to United States
federal income taxation regardless of its source or a trust if (i) a U.S. court
is able to exercise primary supervision over the trust's administration and (ii)
one or more United States persons have the authority to control all of the
trust's substantial decisions, and the term "United States" means the U.S. of
America (including the States and the District of Columbia). The discussion does
not consider specific facts and circumstances that may be relevant to a
particular non-U.S. holder's tax position. Accordingly, each non-U.S. holder is
urged to consult its own tax advisor with respect to the U.S. tax consequences
of the ownership and disposition of Common Stock, as well as any tax
consequences that may arise under the laws of any state, municipality, foreign
country or other taxing jurisdiction.

DIVIDENDS

Dividends paid to a non-U.S. holder of Common Stock ordinarily will be
subject to withholding of U.S. federal income tax at a 30 percent rate, or at a
lower rate under an applicable income tax treaty that provides for a reduced
rate of withholding. However, if the dividends are effectively connected with
the conduct by the holder of a trade or business within the United States, then
the dividends will be exempt from the withholding tax described above and
instead will be subject to U.S. federal income tax on a net income basis.

GAIN ON DISPOSITION OF COMMON STOCK

A non-U.S. holder generally will not be subject to U.S. federal income tax
in respect of gain realized on a disposition of Common Stock, provided that (a)
the gain is not effectively connected with a trade or business conducted by the
non-U.S. holder in the United States and (b) in the case of a non-U.S. holder
who is an individual and who holds the Common Stock as a capital asset, such
holder is present in the United States for less than 183 days in the taxable
year of the sale and other conditions are met.

FEDERAL ESTATE TAXES

Common Stock owned or treated as being owned by a non-U.S. holder at the
time of death will be included in such holder's gross estate for U.S. federal
estate tax purposes, unless an applicable estate tax treaty provides otherwise.

U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX

U.S. information reporting requirements and backup withholding tax will not
apply to dividends paid on Common Stock to a non-U.S. holder address outside the
United States, except that with regard to payments made after December 31, 1998,
a Non-U.S. Holder will be entitled to such an exemption only if it provides a
Form W-8 (or satisfies certain documentary evidence requirements for
establishing that it is a non-United States person) or otherwise establishes an
exemption. As a general matter, information reporting and backup withholding
also will not apply to a payment of the proceeds of a sale of Common Stock
effected outside the United States by a foreign office of a foreign broker.
However, information reporting requirements (but not backup withholding) will
apply to a payment of the proceeds of a sale of Common Stock effected outside
the United States by a foreign office of a broker if the broker (i) is a U.S.
person, (ii) derives 50 percent or more of its gross income for certain periods
from the conduct of a trade or business in the United States, or (iii) is a
"controlled foreign corporation" as to the United States, or (iv) with respect
to payments made after December 31, 1998, is a foreign partnership that, at any
time during its taxable year is 50 percent or more (by income or capital
interest) owned by U.S. persons or is engaged in the conduct of a U.S. trade or
business, unless the broker has documentary evidence in its records that the
holder is a non-U.S. holder and certain conditions are met, or the holder
otherwise establishes an exemption. Payment by a United States office of a
broker of the proceeds of a sale of Common Stock will be subject to both backup
withholding and information reporting unless the holder certifies its non-United
States status under penalties of perjury or otherwise establishes an exemption.

75
<PAGE> 77

UNDERWRITING

Subject to the terms and conditions of an Underwriting Agreement, dated May
11, 1998 (the "Underwriting Agreement"), the U.S. Underwriters named below (the
"U.S. Underwriters"), who are represented by Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), Bear, Stearns & Co. Inc. ("Bear Stearns"),
Furman Selz LLC, Goldman, Sachs & Co. and Smith Barney Inc. (the "U.S.
Representatives"), and the International Managers named below (the
"International Managers" and, together with the U.S. Underwriters, the
"Underwriters"), who are represented by Donaldson, Lufkin & Jenrette
International ("DLJ International"), Bear, Stearns International Limited, Furman
Selz LLC, Goldman Sachs International and Smith Barney Inc. are acting as
representatives (the "International Representatives" and, together with the U.S.
Representatives, the "Representatives"), have severally agreed to purchase from
the Company and the Selling Stockholders the respective number of shares of
Common Stock set forth opposite their names below.

<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITERS OF SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......... 2,424,126
Bear, Stearns & Co. Inc. ................................... 2,424,126
Furman Selz LLC............................................. 1,265,916
Goldman, Sachs & Co. ....................................... 1,265,916
Smith Barney Inc............................................ 1,265,916
ABN AMRO Incorporated....................................... 165,000
Allen & Company Incorporated................................ 165,000
CIBC Oppenheimer Corp. ..................................... 165,000
Credit Suisse First Boston Corporation...................... 165,000
A.G. Edwards & Sons, Inc. .................................. 165,000
Lehman Brothers Inc. ....................................... 165,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated.......... 165,000
J.P. Morgan Securities Inc. ................................ 165,000
Morgan Stanley & Co. Incorporated........................... 165,000
NationsBanc Montgomery Securities LLC....................... 165,000
PaineWebber Incorporated.................................... 165,000
Prudential Securities Incorporated.......................... 165,000
SBC Warburg Dillon Read Inc. ............................... 165,000
Sands Brothers & Co., Ltd. ................................. 165,000
Advest, Inc. ............................................... 83,000
Robert W. Baird & Co. Incorporated.......................... 83,000
George K. Baum & Company.................................... 83,000
William Blair & Company, L.L.C. ............................ 83,000
J.C. Bradford & Co. ........................................ 83,000
Burnham Securities Inc. .................................... 83,000
Chatsworth Securities, Llc ................................. 83,000
Gabelli & Company, Inc. .................................... 83,000
Gerard Klauer Mattison & Co., LLC........................... 83,000
GS2 Securities, Inc. ....................................... 83,000
Hanifen, Imhoff Inc. ....................................... 83,000
Hoak Breedlove Wesneski & Co. .............................. 83,000
Janney Montgomery Scott Inc. ............................... 83,000
Johnston, Lemon & Co. Incorporated.......................... 83,000
EDWARD D. JONES & CO., L.P. ................................ 83,000
C.L. King & Associates, Inc. ............................... 83,000
</TABLE>

76
<PAGE> 78

<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITERS OF SHARES
<S> <C>
Ladenburg Thalmann & Co. Inc. .............................. 83,000
Needham & Company, Inc. .................................... 83,000
Ormes Capital Markets, Inc. ................................ 83,000
Parker/Hunter Incorporated.................................. 83,000
Pennsylvania Merchant Group................................. 83,000
Roney & Co. LLC............................................. 83,000
Ryan, Beck & Co. ........................................... 83,000
Sanders Morris Mundy........................................ 83,000
Stifel, Nicolaus & Company, Incorporated.................... 83,000
Sutro & Co. Incorporated.................................... 83,000
Tucker Anthony Incorporated................................. 83,000
C.E. UNTERBERG, TOWBIN...................................... 83,000
----------
Subtotal............................................... 13,280,000
==========
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF
INTERNATIONAL MANAGERS SHARES
<S> <C>
Donaldson, Lufkin & Jenrette International.................. 867,350
Bear, Stearns International Limited......................... 867,350
Furman Selz LLC............................................. 473,100
Goldman Sachs International................................. 473,100
Smith Barney Inc............................................ 473,100
Cazenove & Co. ............................................. 166,000
----------
Subtotal............................................... 3,320,000
==========
Total............................................. 16,600,000
==========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval by their counsel of certain legal matters
and to certain other conditions. The Underwriters are obligated to purchase and
accept delivery of all the shares of Common Stock offered hereby (other than
those shares covered by the over-allotment option described below) if any are
purchased.

The Underwriters initially propose to offer the shares of Common Stock in
part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain dealers (including the
Underwriters) at such price less a concession not in excess of $0.825 per share.
The Underwriters may allow, and such dealers may re-allow, to certain other
dealers a concession not in excess of $0.10 per share. After the initial
offering of the Common Stock, the public offering price and other selling terms
may be changed by the Representatives at any time without notice. The
Underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.

The H&F Investors, H. Irving Grousbeck and American Media Management, Inc.
have granted to the U.S. Underwriters an option, exercisable within 30 days
after the date of this Prospectus, to purchase, from time to time, in whole or
in part, up to an aggregate of 2,490,000 additional shares of Common Stock at
the initial public offering price less underwriting discounts and commissions.
The U.S. Underwriters may exercise such option solely to cover over-allotments,
if any, made in connection with the Offerings. To the extent that the U.S.
Underwriters exercise such option, each U.S. Underwriter will become obligated,
subject to certain conditions, to purchase its pro rata portion of such
additional shares based on such U.S. Underwriter's percentage underwriting
commitment in the U.S. portion of the Offerings as indicated in the preceding
table.

77
<PAGE> 79

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

Each of the Company, all of the Management Investors, the Directors and the
Recapitalization Investors (including the Selling Stockholders) has agreed not
to (i) offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or indirectly,
any shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers all or a portion of the economic consequences associated with the
ownership of any Common Stock (regardless of whether any of the transactions
described in clause (i) or (ii) is to be settled by the delivery of Common
Stock, or such other securities, in cash or otherwise) for a period of 180 days
after the date of this Prospectus without the prior written consent of DLJ and
Bear Stearns (and, in the case of Management Investors, the Company) (except
that (i) the Company may grant stock options or stock awards pursuant to the
Company's existing benefit or compensation plans, (ii) the Company may issue
shares of Common Stock upon the exercise of options, warrants or Rights or the
conversion of currently outstanding securities, (iii) the H&F Investors may
transfer shares of Common Stock to partners or affiliates thereof in
transactions not involving a public offering provided that each transferee
agrees in writing to be bound by the restrictions set forth in this paragraph
and (iv) the Company may issue, offer and sell shares of Common Stock or
securities convertible, exercisable or exchangeable therefor in transactions not
involving a public offering as consideration for the acquisition (pursuant to
merger or otherwise) of one or more entities provided that each recipient of
such securities agrees in writing to be bound by the restrictions set forth in
this paragraph). In addition, during such period, the Company has also agreed
not to file any registration statement with respect to, and each of its
executive officers, directors and certain stockholders of the Company (including
the Selling Stockholders) has agreed not to make any demand for, or exercise any
right with respect to, the registration of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock
without the prior written consent of DLJ and Bear Stearns, except that the
Company may file a registration statement on Form S-8 under the Act to register
shares of Common Stock issuable upon the exercise of options. The Company
intends to file a registration statement on Form S-8 under the Act on or shortly
after the date of consummation of the Offerings.

Prior to the Offerings, there has been no established public trading market
for the Common Stock. The initial public offering price for the shares of Common
Stock offered hereby has been determined by negotiation between the Company and
the Representatives. The factors considered in determining the initial public
offering price include the history of and the prospects for the industry in
which the Company competes, the past and present operations of the Company, the
prospects for future earnings of the Company, the recent market prices of
securities of generally comparable companies and the general condition of the
securities markets at the time of the Offerings.

The Common Stock has been approved for listing on the New York Stock
Exchange (the "NYSE") under the symbol "YNR," subject to official notice of
issuance. In order to meet the requirements for listing the Common Stock on the
NYSE, the U.S. Underwriters have undertaken to sell lots of 100 or more shares
to a minimum of 2,000 beneficial owners.

Pursuant to an Agreement Between U.S. Underwriters and International
Managers (the "Intersyndicate Agreement"), each U.S. Underwriter has represented
and agreed that, with certain exceptions, (i) it is not purchasing any shares of
Common Stock offered hereby for the account of anyone other than a United States
or Canadian Person (as defined below) and (ii) it has not offered or sold, and
will not offer or sell, directly or indirectly, any shares of Common Stock
offered hereby or distribute any prospectus relating to such shares of Common
Stock outside the United States or Canada or to anyone other than a United
States or Canadian Person. Pursuant to the Intersyndicate Agreement, each
International Manager has represented and agreed that, with certain exceptions,
(i) it is not purchasing any shares of Common Stock offered hereby for the
account of any United States or Canadian Person and (ii) it has not offered or
sold, and will not offer or sell, directly or indirectly, any shares of Common
stock offered hereby or distribute any prospectus relating to such shares of
Common Stock in the United States or Canada or to any United States or Canadian
Person. With
78
<PAGE> 80

respect to any Underwriter that is both a U.S. Underwriter and an International
Manager, the foregoing representations and agreements (i) made by it in its
capacity as a U.S. Underwriter apply only to it in its capacity as a U.S.
Underwriter and (ii) made by it in its capacity as an International Manager
apply only to it in its capacity as an International Manager. The foregoing
limitations do not apply to stabilization transactions and to certain other
transactions specified in the Intersyndicate Agreement. As used herein, "United
States or Canadian Person" means any individual who is resident in the United
States or Canada, or any corporation, pension, profit-sharing or other trust or
other entity organized under or governed by the laws of the United States or
Canada or of any political subdivision thereof (other than the foreign branch of
any United States or Canadian Person), and includes any United States or
Canadian branch of a person other than a United States or Canadian Person.

Pursuant to the Intersyndicate Agreement, sales may be made between the
syndicates of U.S. Underwriters and International Managers of such number of
shares of Common Stock offered hereby as may be mutually agreed. Unless
otherwise determined by the Representatives, the per share price of any shares
of Common Stock so sold shall be the initial public offering price set forth on
cover page hereof, in United States dollars, less an amount not greater than the
per share amount of the concession to dealers set forth above.

Pursuant to the Intersyndicate Agreement, each U.S. Underwriter has
represented and agreed that (i) it has not offered or sold and will not offer or
sell, directly or indirectly, any shares of Common Stock offered hereby in any
province or territory of Canada or to, or for the benefit of, any resident of
any province or territory of Canada in contravention of the securities laws
thereof and (ii) without limiting the generality of the foregoing, any offer or
sale of such shares of Common Stock in Canada will be made only pursuant to an
exemption from the requirement to file a prospectus in the province or territory
of Canada in which such offer or sale is made. Each U.S. Underwriter has further
agreed to send to any dealer who purchases from it any shares of Common Stock
offered hereby a notice stating in substance that by purchasing such shares of
Common Stock such dealer represents and agrees that (i) it has not offered or
sold and will not offer or sell, directly or indirectly, any of such shares of
Common Stock in any province or territory of Canada or to, or for the benefit
of, any resident of any province or territory of Canada in contravention of
securities laws thereof, (ii) any offer or sale of such shares of Common Stock
in Canada will be made only pursuant to an exemption from the requirement to
file a prospectus in the province or territory of Canada in which such offer or
sale is made and (iii) it will send to any other dealer to whom it sells any of
such shares of Common Stock a notice containing substantially the same statement
as is contained in this sentence.

Pursuant to the Intersyndicate Agreement, each International Manager has
represented and agreed that (i) it has not offered or sold and, prior to the
date six months after the closing date for the sale of shares of Common Stock to
the International Managers pursuant to the Underwriting Agreement, will not
offer or sell, any shares of Common Stock offered hereby to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or agent)
for the purposes of their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995; (ii) it
has complied and will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the shares
of Common Stock offered hereby in, from or otherwise involving the United
Kingdom; and (iii) it has only issued or passed on and will only issue or pass
on in the United Kingdom any document received by it in connection with the
Offerings to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
or is a person to whom the document may otherwise lawfully be issued or passed
on.

Pursuant to the Intersyndicate Agreement, each International Manager has
further represented and agreed that it has not offered or sold and will not
offer or sell, directly or indirectly, any shares of Common Stock acquired in
connection with the distribution contemplated hereby in Japan or to or for the
account of any resident thereof, except for offers or sales to Japanese
International Managers or dealers and except pursuant to an exemption from the
registration requirements of the Securities and Exchange Law of Japan and
otherwise in compliance with applicable provisions of Japanese law. Each
International manager has further
79
<PAGE> 81

agreed to send to any dealer who purchases from it any shares of Common Stock
offered hereby a notice stating in substance that by purchasing such shares of
Common Stock such dealer represents and agrees that (i) it has not offered or
sold and will not offer or sell, directly or indirectly, any of such shares on
Common Stock in Japan or to or for the account of any resident thereof, except
for offers or sales to Japanese International Managers or dealers and except
pursuant to an exemption from the registration requirements of the Securities
and Exchange Law of Japan and otherwise in compliance with applicable provisions
of Japanese law and (ii) it will send to any other dealer to whom it sells any
of such shares of Common Stock a notice containing substantially the same
statement as is contained in this sentence.

Other than in the United States, no action has been taken by the Company,
the Selling Stockholders or the Underwriters that would permit a public offering
of the shares of Common Stock offered hereby in any jurisdiction where action
for that purpose is required. The shares of Common Stock offered hereby may not
be offered or sold, directly or indirectly, nor may this Prospectus or any other
offering material or advertisements in connection with the offer and sale of any
such shares of Common Stock be distributed or published in any jurisdiction,
except under circumstances that will result in compliance with the applicable
rules and regulations of such jurisdiction. Persons into whose possession this
Prospectus comes are advised to inform themselves about and to observe any
restrictions relating to the Offerings and the distribution of this Prospectus.
This Prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any shares of Common Stock offered hereby in any jurisdiction in
which such an offer or a solicitation is unlawful.

In connection with the Offerings, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may overallot in connection with
the Offerings, creating a syndicate short position. The Underwriters may bid for
and purchase shares of Common Stock in the open market to cover such syndicate
short position or to stabilize the price of the Common Stock. In addition, the
underwriting syndicate may reclaim selling concessions from syndicate members,
if DLJ repurchases previously distributed Common Stock in syndicate covering
transactions, in stabilization transactions or otherwise or if DLJ receives a
report that indicates that the clients of such syndicate members have "flipped"
the Common Stock. These activities may stabilize or maintain the market price of
the Common Stock above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.

830,000 of the shares offered hereby have been reserved for sale to certain
employees of the Company and certain of its subsidiaries, certain clients and
certain other persons designated by the Company ("Eligible Participants"), in
each case to the extent permitted by applicable law. The price per share of the
shares to be sold to Eligible Participants will be the same as the price to the
public in the Offerings. The maximum investment of any Eligible Participant may
be limited by the Company in its sole discretion. This program is being
administered by DLJ or DLJ International or, where required by applicable law, a
locally licensed or authorized broker-dealer. It is currently anticipated that
the number of shares to be sold under this program will not exceed 5% of the
number of shares of Common Stock offered in connection with the Offerings.

Bear Stearns from time to time performs investment banking and other
financial services for the Company and its affiliates for which Bear Stearns may
receive advisory or transaction fees, as applicable, plus out-of-pocket
expenses, of the nature and in amounts customary in the industry for such
services. Alan D. Schwartz, an Executive Vice President and Head of the
Investment Banking Department of Bear Stearns, is a member of the Company Board.
BearTel Corp. ("BearTel"), a wholly owned subsidiary of The Bear Stearns
Companies Inc., the parent company of Bear Stearns, is a Selling Stockholder in
the Offerings. See "Principal and Selling Stockholders."

BearTel is a wholly owned subsidiary of The Bear Stearns Companies Inc.,
the parent company of Bear Stearns, a member of the National Association of
Securities Dealers, Inc. ("NASD"), which is acting as an Underwriter in the
Offerings. Due to the fact that BearTel beneficially owns over 1% of the shares
of Common Stock to be offered in the Offerings, under Rule 2710(c)(7)(C) of the
Conduct Rules of the NASD, the price at which the shares of Common Stock are to
be distributed to the public must be no higher than the price recommended by a
qualified independent underwriter ("QIU"). In accordance with this requirement,
DLJ has assumed the responsibilities of acting as QIU and has recommended a
price in compliance with the

80
<PAGE> 82

requirements of Rule 2720. In connection with the Offerings, DLJ has performed
due diligence investigations and reviewed and participated in the preparation of
this Prospectus and the Registration Statement of which this Prospectus forms a
part. As compensation for the services of DLJ as QIU, the Company has agreed to
pay DLJ $5,000.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Cleary, Gottlieb, Steen & Hamilton, New York, New York.
Certain legal matters in connection with the Offerings will be passed upon for
the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York.

EXPERTS

The consolidated financial statements as of December 31, 1996 and 1997 and
for each of the three years in the period ended December 31, 1997 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on authority of said firm as
experts in auditing and accounting.

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (including all amendments thereto, the "Registration Statement"), of which
this Prospectus forms a part, covering the Common Stock offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto, certain items of which are omitted as
permitted by the rules and regulations of the Commission. Statements made in
this Prospectus as to the contents of any contract or other document are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in its entirety by such
reference.

Following the Offerings, the Company will become subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, and in
accordance therewith will be required to file reports and other information with
the Commission. The Registration Statement (including exhibits), as well as such
reports and other information, when so filed, can be inspected without charge
and copied, at prescribed rates, at the public reference facilities maintained
by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; and at the
regional offices of the Commission at 7 World Trade Center, Suite 1300, New
York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of such material may be obtained from
the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates or at the Commission's web site at
http.//www.sec.gov. Such reports and other information may also be inspected at
the offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005, once the Common Stock has been approved for listing.

The Company will furnish its stockholders annual reports and unaudited
quarterly reports for the first three quarters of each fiscal year. Annual
reports will include audited consolidated financial statements prepared in
accordance with U.S. generally accepted accounting principles. The financial
statements included in the annual reports will be examined and reported upon,
with an opinion expressed, by the Company's independent auditors.

81
<PAGE> 83

[ADDITIONAL PAGE FOR INTERNATIONAL PROSPECTUS]

ADDITIONAL INFORMATION

The following information is required pursuant to the United Kingdom Public
Offers of Securities Regulations 1995. A copy of this document, which comprises
a prospectus prepared in accordance with the Public Offers of Securities
Regulations 1995, has been delivered to the Registrar of Companies in England
and Wales in accordance with Regulation 4(2) of those Regulations.

RESPONSIBILITY

The Directors of the Company accept responsibility for the information
contained in this document. To the best knowledge and belief of such persons
(who have taken all reasonable care to ensure that such is the case), such
information is in accordance with the facts and does not omit anything likely to
affect the import of such information. The business address of Messrs.
Georgescu, Vick, Bell and Dolan is 285 Madison Avenue, New York, New York 10017.
The business address of Messrs. Hellman and Hammarskjold is One Maritime Plaza,
San Francisco, California 94111. The business address of Mr. Schwartz is 245
Park Avenue, New York, New York 10167. The business address of Mr. Bodman is c/o
AT&T Ventures, Chevy Chase Metro Building, 2 Wisconsin Circle, Suite 610, Chevy
Chase, Maryland 20815-7003. The business address of Mr. McGillicuddy is 270 Park
Avenue, 32nd Floor, New York, New York 10017.

DIRECTORS' SERVICE CONTRACTS

Any service contracts with Directors are determinable by the Company upon
less than one year's notice without payment of compensation.

INCORPORATION AND PURPOSE

The Company was incorporated as a corporation with limited liability under
the laws of the State of Delaware in October 1996 under the name "Young &
Rubicam Inc." The Company's Charter provides that the purposes for which the
Company is formed are to engage in any lawful act or activity for which
corporations may be organized and incorporated under the General Corporation Law
of the State of Delaware. The principal offices of the Company in the United
Kingdom are Young & Rubicam Holdings (U.K.) Ltd., Greater London House,
Hampstead Road, London NW1 7QP, United Kingdom.

CONSENT

Price Waterhouse LLP have given and have not withdrawn their written
consent to the inclusion of their report and, for the purposes of paragraph
45(2)(a)(iv) of Schedule 1 of The Public Offers of Securities Regulations 1995,
accept responsibility for the report and have not become aware, since the date
of the audit report, of any matter affecting the validity of the report at that
date. The address of Price Waterhouse LLP is 1177 Avenue of the Americas, New
York, New York 10036.

THE OFFER

The Offering in the United Kingdom commenced on April 20, 1998 and will
remain open until on or about May 11, 1998. DLJ International will contact
Eligible Participants in the United Kingdom to arrange for the sale of shares of
Common Stock offered hereby. Eligible Participants may choose which specified
number of shares of Common Stock they wish to purchase on the share reservation
form to be provided to them by DLJ International. DLJ International will provide
information on setting up the appropriate account with them for payment and
delivery of shares of Common Stock, which is expected to occur on or about May
15, 1998. Payment for such shares shall be upon their delivery.

IF YOU ARE IN ANY DOUBT ABOUT THE CONTENTS OF THIS DOCUMENT YOU SHOULD
CONSULT A PERSON AUTHORIZED UNDER THE FINANCIAL SERVICES ACT 1986 WHO
SPECIALIZES IN ADVISING ON THE ACQUISITION OF SHARES AND OTHER SECURITIES.

82
<PAGE> 84

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 31, 1996 and
1997...................................................... F-3
Consolidated Statements of Operations for the three years
ended December 31, 1997................................... F-4
Consolidated Statements of Cash Flows for the three years
ended December 31, 1997................................... F-5
Consolidated Statements of Changes in Equity (Deficit) for
the three years ended December 31, 1997................... F-6
Notes to Financial Statements............................... F-7
</TABLE>

F-1
<PAGE> 85

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Young & Rubicam Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in equity
(deficit) present fairly, in all material respects, the financial position of
Young & Rubicam Inc. and its subsidiaries at December 31, 1996 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

Price Waterhouse LLP
New York, New York
February 19, 1998

F-2
<PAGE> 86

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
DECEMBER 31, 1997
------------------------ ------------
PRO FORMA
1996 1997 (SEE NOTE 2)
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................. $ 110,180 $ 160,263 $ 160,263
Accounts receivable, net of allowance for doubtful
accounts of $9,849 and $14,125 at December 31, 1996 and
1997, respectively...................................... 847,653 790,342 790,342
Costs billable to clients................................. 78,723 50,479 50,479
Other receivables......................................... 50,302 35,218 35,218
Deferred income taxes..................................... 78,732 32,832 32,832
Prepaid expenses and other assets......................... 17,102 16,891 16,891
Due from employees........................................ 2,340 1,098 1,098
---------- ---------- ----------
Total Current Assets................................ 1,185,032 1,087,123 1,087,123
---------- ---------- ----------
NONCURRENT ASSETS
Property and equipment, net............................... 129,088 125,014 125,014
Deferred income taxes..................................... 79,411 124,192 124,192
Goodwill, less accumulated amortization of $64,062 and
$80,166 at December 31, 1996 and 1997, respectively..... 131,511 116,637 116,637
Equity in net assets of and advances to unconsolidated
companies............................................... 25,219 26,393 26,393
Due from employees........................................ 705 300 300
Other assets.............................................. 47,846 48,360 48,360
---------- ---------- ----------
Total Noncurrent Assets............................. 413,780 440,896 440,896
---------- ---------- ----------
Total Assets........................................ $1,598,812 $1,528,019 $1,528,019
========== ========== ==========
CURRENT LIABILITIES
Loans payable............................................. $ 36,282 $ 10,765 $ 10,765
Accounts payable.......................................... 805,710 811,162 811,162
Installment notes payable -- related parties.............. 24,874 3,231 3,231
Accrued expenses and other liabilities.................... 247,816 273,011 273,011
Accrued payroll and bonuses............................... 252,487 65,458 65,458
Income taxes payable...................................... 14,372 29,665 29,665
---------- ---------- ----------
Total Current Liabilities........................... 1,381,541 1,193,292 1,193,292
---------- ---------- ----------
NONCURRENT LIABILITIES
Loans payable............................................. 206,082 330,552 330,552
Installment notes payable -- related parties.............. -- 6,503 6,503
Deferred compensation -- related parties.................. 17,887 31,077 31,077
Other liabilities......................................... 104,502 112,851 112,851
---------- ---------- ----------
Total Noncurrent Liabilities........................ 328,471 480,983 480,983
---------- ---------- ----------
Commitments and Contingencies (Note 18)
Minority Interest........................................... 5,569 6,987 6,987
---------- ---------- ----------
MANDATORILY REDEEMABLE EQUITY SECURITIES
Common stock, par value $.01 per share;
authorized -- 250,000,000 shares at December 31, 1996
and 1997 (actual and pro forma); issued and
outstanding -- 47,382,330 shares, 50,658,180 shares and
0 shares at December 31, 1996 (actual), December 31,
1997 (actual) and pro forma December 31, 1997,
respectively............................................ 363,264 508,471 --
---------- ---------- ----------
STOCKHOLDERS' DEFICIT
Money Market Preferred Stock -- Cumulative variable
dividend; liquidating value of $115.00 per share;
one-tenth of one vote per share; 50,000 shares
authorized December 31, 1996 and 1997 (actual and pro
forma); 87 shares issued and outstanding (actual and pro
forma).................................................. -- -- --
Common stock, par value $.01 per share; authorized
250,000,000 shares at December 31, 1996 and 1997 (actual
and pro forma); issued and outstanding -- 11,086,950
shares at December 31, 1996 and 1997 (actual) and
61,745,130 shares pro forma December 31, 1997........... 111 111 617
Capital surplus........................................... 106,825 23,613 531,578
Accumulated deficit....................................... (498,928) (522,866) (522,866)
Cumulative translation adjustment......................... (2,322) (16,577) (16,577)
Pension liability adjustment.............................. (719) (706) (706)
---------- ---------- ----------
(395,033) (516,425) (7,954)
Common stock in treasury, at cost; 0 shares at December
31, 1996 and 1,115,160 shares at December 31, 1997
(actual and pro forma).................................. -- (8,550) (8,550)
Unearned compensation -- Restricted Stock................. (85,000) (136,739) (136,739)
---------- ---------- ----------
Total Stockholders' Deficit......................... (480,033) (661,714) (153,243)
---------- ---------- ----------
Total Liabilities, Mandatorily Redeemable Equity
Securities and Stockholders' Deficit.............. $1,598,812 $1,528,019 $1,528,019
========== ========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 87

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1995 1996 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
Revenues............................................... $1,085,494 $1,222,139 $1,382,740
Compensation expense, including employee benefits...... 672,026 730,261 836,150
General and administrative expenses.................... 356,523 391,617 463,936
Recapitalization-related charges....................... -- 315,397 --
Other operating charges................................ 31,465 17,166 11,925
---------- ---------- ----------
Operating expenses..................................... 1,060,014 1,454,441 1,312,011
---------- ---------- ----------
Income (loss) from operations.......................... 25,480 (232,302) 70,729
Interest income........................................ 9,866 10,269 8,454
Interest expense....................................... (27,441) (28,584) (42,879)
---------- ---------- ----------
Income (loss) before income taxes...................... 7,905 (250,617) 36,304
Income tax provision (benefit)......................... 9,130 (20,611) 58,290
---------- ---------- ----------
(1,225) (230,006) (21,986)
Equity in net income (loss) of unconsolidated
companies............................................ 5,197 (9,837) 342
Minority interest in net (income) loss of consolidated
subsidiaries......................................... (3,152) 1,532 (2,294)
---------- ---------- ----------
Net income (loss)...................................... $ 820 $ (238,311) $ (23,938)
========== ========== ==========
Basic and diluted loss per common share (Note 3)....... $ (.51)
==========
Weighted average shares outstanding (Note 3)........... 46,949,355
==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 88

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)........................................... $ 820 $(238,311) $ (23,938)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Recapitalization-related charges............................ -- 315,397 --
Depreciation and amortization............................... 47,492 53,030 56,721
Other operating charges..................................... 24,360 11,096 11,925
Deferred income tax expense................................. (14,866) (59,671) (384)
Equity in net (income) loss of unconsolidated companies..... (5,197) 9,837 (342)
Dividends from unconsolidated companies..................... 2,101 2,691 2,728
Minority interest in net income (loss) of consolidated
subsidiaries.............................................. 3,152 (1,532) 2,294
Change in assets and liabilities, excluding effects from
acquisitions, dispositions, recapitalization and foreign
exchange:
Accounts receivable......................................... (44,156) (209,518) 42,144
Costs billable to clients................................... (19,637) 7,784 25,622
Other receivables........................................... 5,462 (2,883) 13,930
Prepaid expenses and other assets........................... (1,922) 5,342 (876)
Due from employees.......................................... (453) 3,434 1,145
Accounts payable............................................ 58,635 256,460 18,547
Accrued expenses and other liabilities...................... 7,368 (7,565) 25,621
Accrued payroll and bonuses................................. (90) 3,192 2,179
Income taxes payable........................................ 2,383 4,263 19,352
Deferred compensation....................................... 10,921 4,950 13,052
Other liabilities........................................... 2,188 11,225 9,457
Other....................................................... 1,248 8,843 5,334
-------- --------- ---------
Net cash provided by operating activities................... 79,809 178,064 224,511
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment......................... (42,096) (51,792) (51,899)
Acquisitions, net of cash acquired.......................... (5,298) (23,887) (11,281)
Investment in net assets of and advances to unconsolidated
companies................................................. (189) (775) (5,640)
Proceeds from notes receivable.............................. 1,762 360 1,678
-------- --------- ---------
Net cash used in investing activities....................... (45,821) (76,094) (67,142)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable, long-term...................... -- 319,282 226,770
Repayment of loans payable, long-term....................... (29,743) (252,496) (105,870)
Proceeds from loans payable, short-term, net................ 11,052 27,849 20,103
Deferred financing costs.................................... -- (9,157) --
Recapitalization cash contributions......................... -- 242,007 --
Recapitalization payments................................... -- (323,920) (247,789)
Payments of non-recapitalization deferred compensation...... (15,243) (13,886) (961)
Proceeds (loans) due from employees, net.................... 1,145 2,262 (157)
Common stock/LPUs issued.................................... 9,732 4,163 10,390
Common stock/LPUs repurchased............................... (21,647) (8,971) (1,500)
Dividends paid on preferred and common stock................ (491) (696) --
(Dividends paid to) capital contributions from minority
shareholders.............................................. (1,770) 1,652 347
Distributions to limited partners........................... (3,060) (703) --
-------- --------- ---------
Net cash used in financing activities....................... (50,025) (12,614) (98,667)
-------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................... 1,148 (822) (8,619)
-------- --------- ---------
Net (decrease) increase in cash and cash equivalents........ (14,889) 88,534 50,083
Cash and cash equivalents, beginning of period.............. 36,535 21,646 110,180
-------- --------- ---------
Cash and cash equivalents, end of period.................... $ 21,646 $ 110,180 $ 160,263
======== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid............................................... $ 30,161 $ 28,612 $ 39,986
======== ========= =========
Income taxes paid........................................... $ 20,350 $ 20,732 $ 25,020
======== ========= =========
NONCASH INVESTING ACTIVITY
Common Stock issued in acquisitions......................... -- -- $ 1,126
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 89

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

<TABLE>
<CAPTION>
RETAINED AND
LIMITED UNDISTRIBUTED
NON-VOTING VOTING PARTNERS' EARNINGS COMMON
PREFERRED COMMON COMMON CONTRIBUTED CAPITAL (ACCUMULATED STOCK IN RESTRICTED
STOCK STOCK STOCK EQUITY SURPLUS DEFICIT) TREASURY STOCK
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1994................. $ 63 $ 4,000 $ -- $ 946 $ 53,006 $ 29,616 $ 3,298 $ --
==== ======= ===== ======= ========= ========= ======= =========
Net income............. -- -- -- -- -- 820 -- --
Dividends paid......... -- -- -- -- -- (491) -- --
Common stock/Limited
Partnership Units
issued............... 28 -- -- 1,359 12,237 183 (72) --
Limited Partnership
Units
repurchased/capital
distributions........ -- -- -- (4,000) -- (6,733) -- --
Common Stock
repurchased.......... (25) -- -- -- (10,051) (5,759) 91 --
Capitalization of tax
benefits of options
exercised............ -- -- -- -- 29 -- -- --
Equityholder loans..... -- -- -- 4,231 1,882 -- -- --
---- ------- ----- ------- --------- --------- ------- ---------
BALANCE AT DECEMBER 31,
1995................. $ 66 $ 4,000 $ -- $ 2,536 $ 57,103 $ 17,636 $ 3,317 $ --
==== ======= ===== ======= ========= ========= ======= =========
Net loss............... -- -- -- -- -- (238,311) -- --
Dividends paid......... -- -- -- -- -- (696) -- --
Common stock/Limited
Partnership Units
issued............... 3 -- -- 4,067 13,269 -- (61) --
Limited Partnership
Units
repurchased/capital
distributions........ -- -- -- (2,370) -- (3,329) -- --
Common stock
repurchased.......... (2) -- -- -- (14,699) (8,863) 123 --
Recapitalization
redemptions.......... (67) (3,900) -- (1,534) (36,435) (265,365) (3,379) --
Recapitalization
issuances............ -- -- 427 -- 326,590 -- -- (85,000)
Recapitalization
exchanges............ -- (100) 158 (2,914) 122,732 -- -- --
Mandatorily Redeemable
Equity Securities.... -- -- (474) -- (362,790) -- -- --
Equityholder loans..... -- -- -- 215 1,055 -- -- --
---- ------- ----- ------- --------- --------- ------- ---------
BALANCE AT DECEMBER 31,
1996................. $ -- $ -- $ 111 $ -- $ 106,825 $(498,928) $ -- $ (85,000)
==== ======= ===== ======= ========= ========= ======= =========
Net loss............... -- -- -- -- -- (23,938) -- --
Common stock issued.... -- -- -- -- 1,501 -- -- --
Common stock
repurchased.......... -- -- -- -- -- -- (8,550) --
Unearned
compensation --
Restricted Stock..... -- -- -- -- 51,739 -- -- (51,739)
Common stock options
exercised............ -- -- 44 -- 8,711 -- -- --
Accretion of
Mandatorily
Redeemable Equity
Securities........... -- -- (44) -- (145,163) -- -- --
---- ------- ----- ------- --------- --------- ------- ---------
BALANCE AT DECEMBER 31,
1997................. $ -- $ -- $ 111 $ -- $ 23,613 $(522,866) $(8,550) $(136,739)
==== ======= ===== ======= ========= ========= ======= =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 90

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- OPERATIONS AND BASIS OF PRESENTATION:

NATURE OF OPERATIONS: Young and Rubicam Inc. (the "Company") is a global
marketing and communications enterprise with integrated services in advertising,
perception management and public relations, identity and design, sales
promotion, direct marketing and healthcare communications. The Company operates
in the U.S., Canada, Europe, Latin America and Asia/Pacific as well as through
certain affiliations in other parts of the world.

BASIS OF PRESENTATION: On December 12, 1996, the Company effected a
recapitalization (the "Recapitalization"). As the equity holders prior to the
Recapitalization retained control of the Company, the financial statements
reflect the consolidated financial position, results of operations and cash
flows of the Company on a continuous basis (see Note 4).

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company, a Delaware corporation, and all subsidiaries in
which it holds a controlling interest, including a Delaware Limited Partnership,
Young & Rubicam L.P. (the "LP"). Investments in affiliates in which the Company
owns more than 20% but less than or equal to 50% of the voting interest are
accounted for under the equity method. All significant intercompany transactions
are eliminated.

UNAUDITED PRO FORMA BALANCE SHEET: The unaudited pro forma balance sheet at
December 31, 1997 has been presented after giving effect to the termination of
the redeemable feature and subsequent reclassification of the Mandatorily
Redeemable Equity Securities to stockholders' deficit concurrent with the
closing of the contemplated initial public offering (see Note 16).

CASH EQUIVALENTS: The Company considers all highly liquid instruments with
an initial maturity of three months or less at the time of purchase to be cash
equivalents.

REVENUE RECOGNITION: Revenue from advertising and related services is
comprised of commissions and fees derived from billings to clients for media and
production activities. Public relations, sales promotion and other services are
generally billed on the basis of negotiated fees. Commission revenue is
recognized primarily when media placements appear on television, on radio or in
print, and when labor and production costs are billed. Fee revenue is recognized
when services are rendered.

BENEFIT PLANS: The Company maintains a noncontributory defined benefit
pension plan for all full-time U.S. employees. The Company also contributes to
government mandated plans and maintains various noncontributory retirement plans
at certain foreign subsidiaries in accordance with local laws and customs. The
Company also maintains deferred compensation plans and has made appropriate
provisions for future payments due under these plans.

DEPRECIATION AND AMORTIZATION: Depreciation and amortization are computed
using the straight-line method over the estimated useful life of the respective
asset. Leasehold improvements are amortized over the shorter of their estimated
useful life or the remaining term of the lease. Goodwill is amortized on a
straight-line basis generally over twenty to forty years.

INCOME TAXES: In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes", deferred tax assets
and liabilities are determined based on differences between the financial
reporting and the tax basis of assets and liabilities and are measured by
applying enacted tax rates and laws to taxable years in which such differences
are expected to reverse. The Company's practice is to provide currently for
taxes that will be payable upon remittance of foreign earnings of subsidiaries
and affiliates to the extent that such earnings are not considered to be
indefinitely reinvested.

STOCK-BASED COMPENSATION: SFAS No. 123, "Accounting for Stock-Based
Compensation", ("SFAS 123") encourages entities to account for employee stock
options or similar equity instruments using a
F-7
<PAGE> 91
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

fair value approach for all such plans. However, it also allows an entity to
continue to measure compensation costs for those plans using the method
prescribed by Accounting Principles Bulletin ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees." The Company has elected to continue to account
for such plans under the provisions of APB Opinion No. 25 and has included, in
Note 17, the required SFAS 123 pro forma disclosures of net income (loss) and
earnings (loss) per share as if the fair value-based method of accounting had
been applied.

FOREIGN CURRENCY TRANSLATION: Assets and liabilities of certain non-U.S.
subsidiaries are translated at current exchange rates, and related revenues and
expenses are translated at average exchange rates in effect during the period.
Resulting translation adjustments are recorded as a component of stockholders'
deficit in the accompanying Consolidated Balance Sheets. Financial results of
non-U.S. subsidiaries in countries with highly inflationary economies are
translated using a combination of current and historical exchange rates and any
translation adjustments are included in net income (loss) along with all
transaction gains and losses for the period.

DERIVATIVE FINANCIAL INSTRUMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Derivative financial instruments are used by the Company principally in the
management of its interest rate and foreign currency exposures. The Company does
not hold or issue derivative financial investments for trading purposes. Gains
and losses on hedges of existing assets and liabilities are included in the
carrying amounts of those assets and liabilities and are ultimately recognized
in income as part of those carrying amounts. Gains and losses related to hedges
of firm commitments are also deferred and included in the basis of the
transaction when it is completed. Amounts to be paid or received under interest
rate swap agreements are accrued as interest and are recognized over the life of
the swap agreements as an adjustment to interest expense.

LONG-LIVED ASSETS: In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
("SFAS 121") management reviews long-lived assets and the related intangible
assets for impairment whenever events or changes in circumstances indicate the
carrying amount of such assets may not be recoverable. Recoverability of these
assets is determined by comparing the forecasted undiscounted net cash flows of
the operation to which the assets relate, to the carrying amount including
associated intangible assets of such operation. If the operation is determined
to be unable to recover the carrying amount of its assets, then intangible
assets are written down first, followed by the other long-lived assets of the
operation, to fair value. Fair value is determined based on discounted cash
flows or appraised values, depending upon the nature of the assets.

CONCENTRATIONS OF CREDIT RISK: The Company's clients are engaged in various
businesses located primarily in North America, Europe, Latin America and
Asia/Pacific. The Company performs ongoing credit evaluations of its clients.
Reserves for credit losses are maintained at levels considered adequate by
management. The Company invests its excess cash in deposits with major banks and
in money market securities. These securities typically mature within 90 days and
bear minimal risk. Additionally, due to the Company's strategy, the Company is
dependent upon a relatively small number of clients who contribute a significant
percentage of revenues. The Company's largest client accounted for approximately
9%, 9%, and 10% of consolidated revenues for the years ended December 31, 1995,
1996 and 1997, respectively.

USE OF ESTIMATES: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

RECENT ACCOUNTING PRONOUNCEMENTS: In June 1997, SFAS No. 130, "Reporting
Comprehensive Income", ("SFAS 130") was issued. SFAS 130 establishes standards
for the reporting of comprehensive income and its components. It requires all
items that are required to be recognized as components of comprehensive income
be reported in a financial statement that is displayed with the same prominence
as other income statement
F-8
<PAGE> 92
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

information. SFAS 130 is effective for financial statements for periods
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods presented for comparative purposes is required upon adoption.

In June 1997, SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information", ("SFAS 131") was issued. SFAS 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in annual
financial statements and in interim financial reports issued to shareholders.
SFAS 131 is effective for financial statements for periods beginning after
December 15, 1997.

In February 1998, SFAS No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits", ("SFAS 132") was issued. SFAS 132 revises
disclosures about pensions and other postretirement benefit plans. SFAS 132 is
effective for financial statements for periods beginning after December 15,
1997. Restatement of disclosures for earlier periods provided for comparative
purposes is required upon adoption.

The Company anticipates that the adoption of SFAS 130, SFAS 131 and SFAS
132 will not have a significant effect on its 1998 financial statements.

NOTE 3 -- NET LOSS PER COMMON SHARE:

The Company computes earnings (loss) per share in accordance with SFAS No.
128, "Earnings Per Share".

Basic net loss per share was computed by dividing net loss by the
weighted-average number of common shares outstanding during the period. In
computing basic net loss per share, the Company's 11,086,950 shares of
restricted stock were excluded from the weighted average number of common shares
outstanding as such shares vest upon the six-month anniversary of an initial
public offering or the six-month anniversary thereof, a condition which was not
satisfied at December 31, 1997. Diluted net loss per share for the period was
computed in the same manner as basic net loss per share since the Company
experienced a net loss for the period and therefore including potential common
shares would be antidilutive.

There are 31,013,205 common stock options that could potentially dilute
basic earnings (loss) per share in the future that were excluded from the
computation of diluted net loss per share because the effect would be
antidilutive. In addition, there exists 11,086,950 shares of Restricted Stock,
which would also be potentially dilutive upon the occurrence of the Company's
contemplated initial public offering which is further described in Note 21.

Earnings per share for the years ended December 31, 1996 and 1995 cannot be
computed because the Company's capital structure prior to the 1996
Recapitalization consisted of both common shares and Limited Partnership Units
in Predecessor entities (see Note 4).

NOTE 4 -- RECAPITALIZATION:

On December 12, 1996, a recapitalization (the "Recapitalization") was
effected of Young & Rubicam Inc., a New York corporation (the "Predecessor
Company") whereby (a) the Predecessor Company, Young & Rubicam Holdings Inc.
("Holdings"), or subsidiaries of the Predecessor Company (i) acquired 2,058,678
of the 2,458,102 outstanding shares of Predecessor Company common stock for an
amount equal to $115 per share less the principal and accrued interest of any
outstanding loans relating to such shares (which loans were thereby repaid),
(ii) acquired 760,232 of the 1,869,682 outstanding Limited Partnership Units of
the LP ("LPUs") together with any related subordinated promissory notes of the
Predecessor Company for an amount equal to $115 per LPU less the principal and
accrued interest of any outstanding loans relating to such LPUs (which loans
were thereby repaid); (iii) canceled 332,636 of the 690,249 common stock options
and 596,448 of the 1,600,414 LPU options (collectively, the "Nonrollover
Options") and all outstanding Growth
F-9
<PAGE> 93
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Participation Units ("GPUs") for cash consideration of $115 per unit less the
aggregate option exercise price and (iv) exchanged for, or canceled in
consideration of, the remaining outstanding common stock, LPUs and options on
common stock and LPUs held by certain members of the management of the
Predecessor Company (the "Management Investors") for 15,815,985 shares of
Holdings common stock and 16,823,565 options on common stock of Holdings
("Rollover Options"); (b) Hellman & Friedman Capital Partners III, L.P. ("HFCP")
and certain other investors contributed $242 million in cash to Holdings in
exchange for 31,566,345 shares of Holdings common stock at a price of $7.67 per
share ($115 per share prior to the stock dividend which is further described in
Note 20) and 2,598,105 options to purchase additional shares of Holdings common
stock at $7.67 per share ($115 per share prior to the stock dividend which is
further described in Note 20)(the "HFCP Options" -- see Note 17), and (c) Senior
Secured Credit Facilities of $700 million (the "Credit Facilities") were
arranged (see Note 14).

Common stock, LPUs, Nonrollover Options on common stock and LPUs and GPUs
held by non U.S.-based equity holders were acquired or canceled prior to
December 31, 1996. Payment for previously tendered Nonrollover options and GPUs
of $161.7 million (included as a component of accrued payroll and bonuses at
December 31, 1996) held by U.S. based equity holders occurred on March 18, 1997.

Following the closing of the Recapitalization, Holdings was merged with and
into the Predecessor Company. As a result of the merger, the 1,391 outstanding
shares of Predecessor Company preferred stock were each converted into the right
to receive par value $50 in cash. On December 31, 1996, the Predecessor Company
then merged into Young & Rubicam Inc., a Delaware corporation (the "Company").

Under the Stockholders' Agreement, the Management Investors are required to
deposit all Company common stock currently held or acquired in the future into a
voting trust (the "Management Voting Trust") under which all rights to vote such
shares are assigned to certain members of the Company's senior management as
voting trustees. In the event that HFCP holds greater than 49% of Company common
stock, HFCP is required to transfer those shares in excess of 49% to a separate
voting trust (the "HFCP Voting Trust") with the Chief Executive Officer of the
Company as voting trustee, provided that the Company is not in default under
certain terms of the Credit Facilities.

As the equity holders of the Predecessor Company retained control of the
Company, the transaction has been reported as a recapitalization. The financial
statements reflect the financial position, results of operations and cash flows
of the Company and the Predecessor Company on a continuous basis. The excess of
the Predecessor common stock and LPUs repurchase transaction amount over the
stated amount of the Predecessor common stock and LPUs repurchased has been
reported as a distribution to equity holders and charged to limited partners'
contributed equity, capital surplus and accumulated deficit.

As a result of the Recapitalization, the Company recorded charges of $315.4
million, primarily related to compensation. A summary of the significant
Recapitalization and related charges include the following:

(1) The cancellation of 1,244,647 GPUs outstanding for cash
consideration of $115 per unit. Compensation expense of $83.1 million
represents the difference between the cash consideration paid to GPU
holders and the amount of previously accrued compensation under the
original terms of the GPU plan.

(2) The cancellation of 929,084 Nonrollover Options for cash
consideration. The cash consideration and the associated compensation
expense of $66.6 million represents the difference between the transaction
price of $115 and the $40.2 million aggregate exercise price of the
Nonrollover Options.

(3) Cancellation of the remaining outstanding options and award of
Rollover Options to acquire 16,823,565 shares of Company common stock at an
exercise price of $1.92 ($28.75 per share prior to the stock split which is
further described in Note 20) per share, with certain limited exceptions
outside of the U.S. As a result of the change in the terms of the former
stock option plan, which resulted in a new measurement date, the Company
recognized compensation expense of $96.7 million representing the
F-10
<PAGE> 94
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

difference between the transaction price per Rollover Option of $7.67 ($115
per share prior to the stock split which is further described in Note 20)
and the aggregate exercise price of the Rollover Options.

(4) Professional fees and other charges amounted to approximately $69
million.

NOTE 5 -- EQUITY IN NET ASSETS OF UNCONSOLIDATED COMPANIES:

<TABLE>
<CAPTION>
1995 1996 1997
---------------- ----------------- -----------------
EQUITY
EQUITY EQUITY EQUITY EQUITY EQUITY IN NET
OWNERSHIP IN NET IN NET IN NET IN NET IN NET INCOME
INTEREST ASSETS INCOME ASSETS INCOME ASSETS (LOSS)
AFFILIATE (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Dentsu, Y&R Partnerships........ 50% $16,957 $ 534 $12,954 $(9,181) $17,510 $ 2,587
J.M.C. Creatividad Orientada
(Venezuela)................... 49% 4,509 1,315 2,471 (2,038) 953 (1,515)
Prolam (Chile).................. 30% 3,106 968 2,656 262 2,851 825
Eco S.A. (Guatemala)............ 40% 1,864 372 2,134 26 2,206 96
Cresswell, Munsell, Fultz &
Zirbel........................ 33% 1,245 524 1,635 624 1,922 508
National Public Relations
(Canada)...................... 22% 414 333 607 204 647 98
ViceVersa (Uruguay)............. 35% 652 401 883 224 -- --
Other........................... 50% or less 8,618 750 1,879 42 304 (2,257)
------- ------ ------- ------- ------- -------
$37,365 $5,197 $25,219 $(9,837) $26,393 $ 342
======= ====== ======= ======= ======= =======
</TABLE>

The summarized financial information below represents an aggregation of the
Company's unconsolidated companies.

FINANCIAL INFORMATION

<TABLE>
<CAPTION>
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
EARNINGS DATA
Revenues................................................. $234,891 $238,810 $207,668
Income from operations................................... 29,398 22,132 13,768
Net income (loss)........................................ 14,984 (16,097) 4,347
Company's equity in net earnings (loss).................. $ 5,197 $ (9,837) $ 342
======== ======== ========
BALANCE SHEET DATA
Current assets........................................... $361,451 $348,325 $321,372
Noncurrent assets........................................ 54,954 33,996 40,147
Current liabilities...................................... 335,490 323,406 287,101
Noncurrent liabilities................................... 18,902 11,683 13,215
Equity................................................... 62,013 47,232 61,203
Company's equity in net assets........................... $ 37,365 $ 25,219 $ 26,393
======== ======== ========
</TABLE>

NOTE 6 -- ACQUISITIONS, DISPOSITIONS AND OTHER OPERATING CHARGES:

In 1995, the Predecessor Company increased its ownership interests in
advertising agencies in Holland (from 49% to 70%) and Spain (from 49% to 77%),
as well as a public relations firm in Belgium (from 40% to 85%). In addition,
the Predecessor Company acquired the remaining 40% interest in an advertising
agency in the Czech Republic, the remaining 25% interest in an agency in
Hungary, the remaining 20% interest in a direct marketing operation in South
Africa and the remaining 10% interest in an advertising agency, also in South
Africa. The purchase price of these investments was $5.4 million. Other regional
investment activity

F-11
<PAGE> 95
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

took place in Latin America in 1995, with increased ownership interests in
advertising agencies in Guatemala (from 25% to 40%) and Uruguay (from 20% to
35%).

In 1995, the D,Y&R Partnerships also acquired a 40% interest in an
advertising agency in India (Y&R's effective ownership is 20%). The cost of this
investment to Y&R was $2.2 million.

A wholly owned public relations subsidiary in Canada was merged in 1995
with another Canadian public relations firm. The Company has a 22% interest in
the merged operation.

In 1995, the Predecessor Company approved a productivity improvement plan
which resulted in the elimination of 500 positions throughout its worldwide
operations. The Predecessor Company recorded a charge in 1995 of $24.4 million
to cover the expected severance, benefits and social law costs which were paid
during 1996 relating to this staff reduction.

Also in 1995, losses of $7.1 million were recorded primarily to cancel a
long-term agreement with a service provider as well as to dispose of certain
non-strategic European agencies. The aforementioned charges are included in
other operating charges in the accompanying Consolidated Statement of
Operations.

In 1996, the Predecessor Company acquired substantially all of the assets
of one advertising agency and one media buying agency in the United States and
acquired the remaining 28% equity interest in an advertising agency in
Switzerland. In addition, the Predecessor Company increased its ownership
interests in three advertising agencies in Europe. Other regional activity took
place in Korea where the Company acquired a 25% equity interest in a public
relations agency. The purchase price of these investments was $26.8 million.

In 1996, a $17.2 million charge was recorded for asset impairment
writedowns principally related to certain operations in Europe and Latin
America.

In 1997, the Company acquired the remaining 60% equity interest in an
advertising agency in France and a 51% equity interest in an advertising agency
in Brazil. In addition, the Company increased its ownership interests in one
advertising agency in Latin America and one agency in Europe. The Company also
acquired substantially all of the assets of one public relations agency and
acquired a 70% equity interest in a German public relations agency and the
remaining 49% equity interest in a Japanese public relations agency. The
purchase price of these investments was $14.7 million.

Effective January 1, 1997, the Company acquired an additional 37.5% equity
interest in the former Australian and New Zealand joint ventures with Dentsu. In
consideration for this additional equity interest, the Company contributed to
Dentsu, 12.5% of its equity interest in its advertising and direct marketing
agencies in Australia and New Zealand.

In 1997, an $11.9 million charge was recorded for asset impairment
writedowns principally related to certain operations in the U.S., Africa, Latin
America and Europe.

NOTE 7 -- PROPERTY AND EQUIPMENT:

Property and equipment are recorded at cost and are comprised of the
following:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
USEFUL LIVES 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Land and buildings............ 20-40 years $ 31,901 $ 29,716
Furniture, fixtures and
equipment................... 3-10 years 220,728 235,836
Leasehold improvements........ Shorter of 10 years or life of lease 78,414 77,804
Automobiles................... 3-5 years 6,315 6,609
-------- --------
337,358 349,965
-------- --------
Less -- Accumulated
depreciation and
amortization................ 208,270 224,951
-------- --------
$129,088 $125,014
======== ========
</TABLE>

F-12
<PAGE> 96
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During 1995, 1996 and 1997, depreciation expense amounted to $38.2 million,
$42.0 million and $47.6 million, respectively.

NOTE 8 -- CERTAIN LIABILITIES:

Accrued expenses and other liabilities include $71.3 million and $41.0
million of bank overdrafts as of December 31, 1996 and 1997, respectively.

Accrued payroll and bonuses are comprised of the following:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1996 1997
(IN THOUSANDS)
<S> <C> <C>
Accrued costs -- Recapitalization........................... $161,700 $ --
Accrued payroll and bonuses................................. 90,787 65,458
-------- -------
$252,487 $65,458
======== =======
</TABLE>

NOTE 9 -- INCOME TAXES:

The components of income (loss) before income taxes are as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Domestic........................................... $(22,957) $(242,578) $12,304
Foreign............................................ 30,862 (8,039) 24,000
-------- --------- -------
Total.............................................. $ 7,905 $(250,617) $36,304
======== ========= =======
</TABLE>

The following summarizes the provision (benefit) for income taxes:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
CURRENT:
Federal.......................................... $ 1,295 $ 16,993 $ 18,195
State and local.................................. 2,138 3,921 4,220
Foreign.......................................... 20,563 18,146 36,259
-------- -------- --------
23,996 39,060 58,674
-------- -------- --------
DEFERRED:
Federal.......................................... (7,548) (51,363) 7,547
State and local.................................. (2,811) (22,111) 2,472
Foreign.......................................... (4,507) 13,803 (10,403)
-------- -------- --------
(14,866) (59,671) (384)
-------- -------- --------
Provision (benefit) for income taxes............... $ 9,130 $(20,611) $ 58,290
======== ======== ========
</TABLE>

F-13
<PAGE> 97
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The reconciliation of the United States statutory rate to the effective
rate is as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------
PERCENT OF INCOME (LOSS) BEFORE TAXES 1995 1996 1997
<S> <C> <C> <C>
United States statutory rate................................ 35.0% (35.0)% 35.0%
Federal tax savings attributable to limited partnership
structure................................................. (27.6) -- --
State and local income taxes, net of federal tax effect..... (7.1) (4.5) 17.1
Foreign income taxed greater than the United States
statutory rate............................................ 64.2 15.2 107.2
Change in valuation allowance and related components........ 11.5 5.9 (13.1)
Amortization of goodwill.................................... 14.3 2.1 8.5
Travel, entertainment and other non-deductible expenses..... 19.7 8.4 6.2
Other, net.................................................. 5.5 (0.3) (0.3)
----- ----- -----
Consolidated effective rate................................. 115.5% (8.2)% 160.6%
===== ===== =====
</TABLE>

The Company's share of the undistributed earnings of foreign subsidiaries
not included in its consolidated Federal income tax return that could be subject
to additional income taxes if remitted, was approximately $49.5 million at
December 31, 1997. No provision has been recorded for the U.S. or foreign taxes
that could result from the remittance of such undistributed earnings since the
earnings are permanently reinvested outside the U.S. and it is not practicable
to estimate the amount of such taxes. Withholding taxes of approximately $6.4
million would be payable upon remittance of all previously unremitted earnings
at December 31, 1997.

The components of the Company's net deferred income tax assets are:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1996 1997
(IN THOUSANDS)
<S> <C> <C>
Bad debt reserve............................................ $ 1,785 $ 3,118
Accrued expenses and other.................................. 5,195 --
Net operating loss carryforwards............................ 7,377 32,797
Deferred compensation....................................... 76,170 1,172
-------- --------
90,527 37,087
Valuation allowance......................................... (11,795) (4,255)
-------- --------
Current portion............................................. 78,732 32,832
-------- --------
Deferred compensation....................................... 42,646 40,650
Depreciable and amortizable assets.......................... 26,671 30,561
Long-term leases............................................ 7,351 7,436
Postretirement benefits..................................... 3,570 3,654
Other non-current items..................................... 810 11,989
Net operating loss carryforwards............................ 10,259 42,338
Tax credit carryforwards.................................... -- 3,658
-------- --------
91,307 140,286
Valuation allowance......................................... (11,896) (16,094)
-------- --------
Non-current portion......................................... 79,411 124,192
-------- --------
Net deferred income tax assets.............................. $158,143 $157,024
======== ========
</TABLE>

The Company's net deferred income tax assets arise from temporary
differences which represent the cumulative deductible or taxable amounts
recorded in the financial statements in different years than

F-14
<PAGE> 98
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

recognized in the tax returns. The majority of the temporary differences result
from expenses accrued for financial reporting purposes which are not deductible
for tax purposes until actually paid and net operating losses.

The net operating loss ("NOL") carryforwards represent the benefit recorded
for U.S., state and local, and foreign NOLs. At December 31, 1997, the Company
had approximately $140.4 million of NOL carryforwards for U.S. tax purposes
which expire in the year 2012 and approximately $69.2 million of NOL
carryforwards for foreign tax purposes with carryforward periods ranging from
one year to an indefinite time. The Company had approximately $3.2 million of
alternative minimum tax credits which are not subject to expiration and $0.4
million of foreign tax credits which expire in the year 2001.

The Company is required to provide a valuation allowance against deferred
income tax assets when it is more likely than not that some or all of the
deferred tax assets will not be realized. A valuation allowance of $13.5 million
was recorded at December 31, 1994. The valuation allowance increased $0.9
million to $14.4 million at December 31, 1995, increased $9.3 million to $23.7
million at December 31, 1996 and decreased $3.3 million to $20.4 million at
December 31, 1997. The valuation allowances represent a provision for
uncertainty as to the realization of certain deferred tax assets, including net
operating loss carryforwards in certain jurisdictions. The Company has
concluded, that based upon expected future results, it is more likely than not
that the net deferred tax asset balance will be realized.

NOTE 10 -- WORLDWIDE OPERATIONS:

Financial information by geographic area is as follows:

<TABLE>
<CAPTION>
UNITED STATES EUROPE OTHER TOTAL
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1995
Revenues............................ $ 492,265 $411,283 $181,946 $1,085,494
(Loss) income from operations....... (7,695) 14,899 18,276 25,480
Identifiable assets................. 511,779 499,335 215,467 1,226,581
1996
Revenues............................ $ 571,155 $444,644 $206,340 $1,222,139
(Loss) income from operations....... (239,201) (3,627) 10,526 (232,302)
Identifiable assets................. 819,828 533,318 245,666 1,598,812
1997
Revenues............................ $ 661,367 $472,225 249,148 $1,382,740
(Loss) income from operations....... 42,816 29,527 (1,614) 70,729
Identifiable assets................. 687,462 582,424 258,133 1,528,019
</TABLE>

Foreign currency transactions and remeasurement losses resulting from
operations in highly inflationary economies are included in general and
administrative expenses. These amounts were comprised of the following:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
(IN THOUSANDS)
<S> <C> <C> <C>
Foreign currency transaction losses...................... $1,101 $ 887 $1,344
Remeasurement losses resulting from operations in highly
inflationary economies................................. 1,156 1,653 2,603
------ ------ ------
$2,257 $2,540 $3,947
====== ====== ======
</TABLE>

F-15
<PAGE> 99
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 -- EMPLOYEE BENEFITS:

The Company has a defined benefit pension plan ("the Plan") that covers all
full-time U.S. employees upon commencement of employment. Contributions to the
Plan are based upon current costs and prior service costs. Both costs are
actuarially computed and the latter are amortized over the average remaining
service period. Effective July 1, 1996, the Predecessor Company amended the
Plan. Benefits credited to each employee's account under the Plan are based on
3.2% of the employee's annual compensation up to $150,000. The Plan also credits
each employee's account with interest equal to the average one year U.S.
Treasury Bill interest rate multiplied by the account balance at the beginning
of the year. Subject to certain limitations, most vested retirement benefits
available under the Plan are insured by the Pension Benefit Guaranty Corporation
("PBGC"). The Company is in compliance with the minimum funding standards
required by the Employee Retirement Income Security Act of 1974 ("ERISA").

In connection with the Recapitalization transaction, the Company
contributed an additional $12.5 million to the Plan on December 23, 1996,
pursuant to an agreement with the PBGC. Total contributions made in 1996 and
1997 were $18.9 million and $6.6 million, respectively.

The Company also agreed to make future contributions to the Plan in an
amount required to cause the credit balance at the end of each Plan year to be
at least equal to the required credit balance of $12.5 million plus interest.
The Company is not required to make any payment that would not be deductible
under Internal Revenue Code section 404. The Company's credit balance
maintenance requirement terminates when the Company's debt obtains specified
rating levels (or, if there are no such ratings from certain major ratings
agencies, when the Company meets a fixed charge coverage ratio test), but in no
event earlier than December 31, 2001. In addition, such credit balance
maintenance requirements terminate if the Plan's unfunded benefit liabilities
are zero at the end of two consecutive Plan years.

The Company also contributes to government mandated plans and maintains
various noncontributory retirement plans at certain foreign subsidiaries, some
of which are considered to be defined benefit plans for accounting purposes.

A summary of the components of net periodic pension cost for the defined
benefit plans is as follows:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------------------------
1995 1996 1997
------------------------------ ------------------------------ ------------------------------
U.S. NON-U.S. TOTAL U.S. NON-U.S. TOTAL U.S. NON-U.S. TOTAL
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service costs for benefits
earned during the
period.................. $ 2,774 $ 717 $ 3,491 $ 2,834 $ 674 $ 3,508 $ 2,671 $ 550 $ 3,221
Interest costs on
projected benefit
obligation.............. 8,074 946 9,020 8,488 893 9,381 8,804 789 9,593
Actual return on plan
assets.................. (15,960) -- (15,960) (11,070) -- (11,070) (15,558) -- (15,558)
Net amortization and
deferral................ 9,390 182 9,572 5,668 188 5,856 6,862 150 7,012
-------- ------ -------- -------- ------ -------- -------- ------ --------
Net periodic pension cost
of the plans............ $ 4,278 $1,845 $ 6,123 $ 5,920 $1,755 $ 7,675 $ 2,779 1,489 4,268
======== ====== ======== ======== ====== ======== ======== ====== ========
</TABLE>

F-16
<PAGE> 100
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The funded status of the defined benefit plans is summarized as follows:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------
1996 1997
------------------------------ ------------------------------
U.S. NON-U.S. TOTAL U.S. NON-U.S. TOTAL
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of accumulated benefit
obligation including vested benefits of
$119,093 and $134,491 at December 31, 1996
and 1997, respectively...................... $111,921 $ 10,350 $122,271 $126,975 $ 9,557 $136,532
-------- -------- -------- -------- -------- --------
Projected benefit obligation.................. 114,710 12,198 126,908 130,036 10,753 140,789
Plan assets at fair value, primarily fixed
income and equity securities................ 114,264 -- 114,264 129,421 -- 129,421
-------- -------- -------- -------- -------- --------
Projected benefit obligation in excess of plan
assets...................................... (446) (12,198) (12,644) (615) (10,753) (11,368)
Unrecognized net transition (asset)
obligation.................................. (225) 644 419 (164) 471 307
Unrecognized prior service benefit............ (2,953) -- (2,953) (2,542) -- (2,542)
Unrecognized net loss......................... 12,811 1,813 14,624 16,352 1,260 17,612
Additional liability.......................... -- (719) (719) -- (706) (706)
-------- -------- -------- -------- -------- --------
(Accrued) prepaid pension costs for defined
benefit plans............................... $ 9,187 $(10,460) $ (1,273) $ 13,031 $ (9,728) $ 3,303
======== ======== ======== ======== ======== ========
</TABLE>

Assumptions used were:

<TABLE>
<CAPTION>
1995 1996 1997
---------------- ---------------- ----------------
U.S. NON-U.S. U.S. NON-U.S. U.S. NON-U.S.
<S> <C> <C> <C> <C> <C> <C>
Discount and settlement rate........................ 7.5% 6.5%-8.5% 8.0% 7.0%-8.0% 7.25% 6.5%-7.0%
Rate of increase in compensation levels............. 7.0% 3.5%-5.5% 5.5% 3.5%-5.0% 5.0% 3.5%-5.0%
Expected long-term rate of return on assets......... 9.0% N/A 9.0% N/A 9.0% N/A
</TABLE>

In 1996 and 1997, the Company recorded liabilities of $0.7 million for the
portion of its unfunded pension liabilities that had not been recognized as
expense and an adjustment to equity of $0.7 million.

Contributions to other foreign defined contribution plans were $5.9
million, $6.2 million and $7.5 million in 1995, 1996 and 1997, respectively.

The Company also has an employee savings plan that qualifies as a deferred
salary arrangement under section 401(k) of the Internal Revenue Code. Under the
plan, participating U.S. employees may defer a portion of their pre-tax earnings
up to the Internal Revenue Service annual contribution limit. The Company
currently matches 100% of each employee's contribution up to a maximum of 5% of
the employee's earnings up to $150,000. Amounts expensed by the Company for its
contributions to the plan were $6.4 million, $7.0 million and $7.8 million in
1995, 1996 and 1997, respectively. Prior to the Recapitalization, the Company's
contribution was made through the issuance of the Company's common stock. All of
the shares of common stock held in the Plan were purchased by Holdings as part
of the Recapitalization. Subsequent to the Recapitalization, matching
contributions are satisfied in cash.

NOTE 12 -- DEFERRED COMPENSATION:

The Predecessor Company maintained a non-qualified deferred compensation
plan for its key executives, the Growth Participation Plan. Participation in the
plan was at the discretion of management. Awards of growth participation units
("GPUs") granted under the plan generally vested at the rate of 20% per year. As
a result of the Recapitalization, all GPUs (whether fully or partially vested)
were canceled for cash consideration of $115 per unit (see Note 4).

F-17
<PAGE> 101
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company maintains other deferred cash incentive plans which are either
tied to operating performance or contractual deferred compensation agreements.
The costs of these compensation plans are expensed currently. At December 31,
1996 and 1997, included in other non-current liabilities were deferred
compensation liabilities of $17.9 million and $31.1 million, respectively.

NOTE 13 -- INSTALLMENT PAYMENT OBLIGATIONS:

Prior to 1997, the Company issued installment notes payable to former
equityholders of the Predecessor Company which arose out of the repurchase of
Common Stock and LPUs upon termination of employment. Installment notes were
paid in five annual installments, the first of which was payable 90 days
following termination of employment. In connection with the Recapitalization,
all foreign installment notes outstanding at December 12, 1996 were assumed and
repaid. The remaining current installment notes of $24.9 million at December 31,
1996 were repaid in the first quarter of 1997.

Effective in 1997 and pursuant to the Stockholders' Agreement, the Company
may, at its election, pay for shares purchased from Management Investors
pursuant to a call or put at the applicable call price or the applicable put
price in up to four equal installments. The first such installment is payable in
cash upon the applicable payment date (generally the June 30 or December 31
closest in time following termination of employment) and the remaining
installments are evidenced by a non-negotiable obligation from the Company to
the Management Investor. At December 31, 1997, current and non-current
installment notes of $3.2 million and $6.5 million, respectively, were payable
to former Management Investors.

Interest accrues and is payable annually with each installment payment at a
rate equal to the applicable federal rate in effect as published by the Internal
Revenue Service, compounded semi-annually. For 1997, the interest rate ranged
from 5.68% to 6.14%.

NOTE 14 -- LOANS PAYABLE:

Short Term: The Company's short term loans payable are primarily advances
under bank lines of credit and generally bear interest at prevailing market
rates. The Company's current loans payable of $36.3 million and $10.8 million
include the short-term portion of long-term loans payable of $14.7 million and
$1.2 million at December 31, 1996 and 1997 respectively.

Long-term loans payable are comprised of the following at December 31:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------
1996 1997
(IN THOUSANDS)
<S> <C> <C>
Senior Secured Credit Facilities............................ $219,282 $330,552
Capital lease obligations................................... 611 404
Other borrowings............................................ 859 818
-------- --------
220,752 331,774
Less -- Current portion..................................... 14,670 1,222
-------- --------
$206,082 $330,552
======== ========
</TABLE>

In connection with the Recapitalization, in December 1996, the Company
entered into Senior Secured Credit Facilities (the "Credit Facilities")
amounting to $700 million with a group of banks arranged by Bank of America,
with The Bank of New York, Citibank N.A., Credit Lyonnais and Wachovia Bank as
managing agents. The Credit Facilities consist of a six and one-half year $400
million term loan and a six and one-half year $300 million revolving credit
facility. The term loan is available in two drawings of $200 million each: the

F-18
<PAGE> 102
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

first drawdown occurred in December 1996, while the second drawdown occurred on
March 18, 1997. The Company's obligations under the Credit Facilities are
secured by a security interest in certain domestic assets, including its
headquarters building in New York, all of the capital stock of the direct and
indirect domestic subsidiaries of the Company and 66.7% of the capital stock of
the Company's first-tier non-U.S. subsidiaries. The Company pays a commitment
fee ranging from 0.20% to 0.50% on the unused portion of the total Credit
Facilities. The Credit Facilities include several credit sensitive pricing
options (LIBOR, Base Rate Loans, Fronted Loans and Swing Line Loans), letter of
credit issuances and a $175 million multi-currency subfacility. The applicable
interest rate was 6.915% and 6.875% at December 31, 1996 and 1997, respectively.

The Credit Facilities contain various covenants which contain interest,
fixed charge, and debt coverage ratios, the maintenance of minimum net worth and
limitations on the amount of debt, liens, asset sales, dividends and
acquisitions. Deferred financing costs of $9.2 million were capitalized and are
being amortized over the six and one-half year term of the Credit Facilities.

The Company is required to enter into interest rate protection agreements
with respect to $100 million of the initial drawdown and $100 million of the
second drawdown.

In December 1996, the Company entered into a two year $50 million notional
principal amount interest rate floored-swap, and pays, on a quarterly basis,
fixed interest equal to 6.00% and receives interest based on floating
three-month LIBOR. If LIBOR is less than 5.00%, the Company receives the
difference between 5.00% and the three-month LIBOR. This agreement expires
December 29, 1998.

In January 1997, the Company entered into a one year $50 million notional
principal amount interest rate cap. The interest rate cap resulted in the
Company receiving quarterly, the difference between the amount that three-month
LIBOR exceeded the cap rate of 6.25%. This agreement expired January 27, 1998.

In February 1997, the Company entered into a four year $50 million notional
principal amount interest rate swap. The interest rate swap will result in the
Company paying, on a quarterly basis, fixed interest equal to 6.11% and
receiving interest based on floating three month LIBOR. This four year interest
rate swap agreement expires February 20, 2001.

In March 1997, the Company entered into a two year $50 million notional
principal amount interest rate floored-swap, and pays, on a quarterly basis,
fixed interest equal to 6.36% and receives interest based on floating
three-month LIBOR. If LIBOR is less than 5.00%, the Company receives the
difference between 5.00% and the three-month LIBOR. This agreement expires March
24, 1999.

In April 1997, the Company entered into a one year $50 million notional
principal amount interest rate cap. The interest rate cap will result in the
Company receiving quarterly, the difference between the amount that three-month
LIBOR exceeds the cap rate of 6.50%. This agreement expires May 1, 1998.

In June 1997, the Company entered into a four year $25 million notional
principal amount interest rate swap. The interest rate swap will result in the
Company paying, on a quarterly basis, fixed interest equal to 6.365% and
receiving interest based on floating three-month LIBOR. This four year interest
rate swap agreement expires June 18, 2001.

In February 1996, the Predecessor Company entered into a 10-year, $100
million, 7.01% Senior Note transaction with a group of insurance companies. The
proceeds were used to reduce the Revolving Credit Agreement borrowings. This
note was repaid by proceeds from the Credit Facilities. A prepayment penalty of
$1.8 million was paid in 1996 and is included as a component of interest
expense.

In June 1996, the Predecessor Company entered into a $150 million, five
year Revolving Credit Agreement. The Company paid a facility fee ranging from
0.125% to 0.30% on the full amount of the committed facility. This agreement
included several pricing options (LIBOR, Bid Loans and Swing Line

F-19
<PAGE> 103
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Loans), letter of credit issuances and multi-currency borrowing options. This
Revolving Credit Agreement was repaid by proceeds from the Credit Facilities.

In June 1994, the Predecessor Company entered into a $225 million, three
year Revolving Credit Agreement. The Company paid a facility fee ranging from
0.20% to 0.375% on the full amount of the committed facility. This revolving
credit agreement included several pricing options (LIBOR, Bid Loans and Swing
Line Loans), letter of credit issuances and multicurrency borrowing options. The
Revolving Credit Agreement was replaced by the five year Revolving Credit
Agreement entered into in June 1996.

In October 1991, the Predecessor Company arranged a seven year $40 million,
8.75% Senior Note transaction with the Prudential Insurance Company. This note
was repaid by proceeds from the Credit Facilities. A prepayment penalty of $1.1
million was paid in 1996 and is included as a component of interest expense.

In January 1991, the Predecessor Company entered into a five year, $20
million notional principal amount interest rate swap. The Predecessor Company
paid, on a semi-annual basis, fixed interest rate equal to 8.485% and received
interest based on floating six-month LIBOR. This agreement expired January 22,
1996.

At December 31, 1997, the Company had $690 million in availability under
its commercial lines of credit ($449 million in the U.S. and $241 million
outside the U.S.). Unused commercial lines of credit at December 31, 1997 were
$349 million. The Company paid commitment fees of approximately $0.9 million on
the unused portion of the U.S. credit lines and varying fees on the foreign
credit lines. At December 31, 1996, the Company had $802 million in availability
under its commercial lines of credit ($540 million in the U.S. and $262 million
outside the U.S.). Unused commercial lines of credit at December 31, 1996 were
$560 million. The Company paid commitment fees of approximately $0.1 million on
the unused portion of the U.S. credit lines and varying fees on the foreign
credit lines.

Repayment requirements on long-term loans existing at December 31, 1997 are
as follows:

<TABLE>
<CAPTION>
TOTAL
(IN THOUSANDS)
<S> <C>
1998........................................................ $ 1,222
1999........................................................ 50,250
2000........................................................ 68,750
2001........................................................ 71,250
2002........................................................ 84,583
Thereafter.................................................. 55,719
--------
$331,774
========
</TABLE>

F-20
<PAGE> 104
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 15 -- EQUITY:

The following schedule summarizes the changes in the number of outstanding
shares of preferred stock, common stock, LPUs and treasury stock:

<TABLE>
<CAPTION>
VOTING LIMITED
PREFERRED COMMON NON-VOTING PARTNERSHIP COMMON STOCK
STOCK STOCK COMMON STOCK UNITS IN TREASURY
<S> <C> <C> <C> <C> <C>
BALANCE 12/31/94............ 1,252 -- 16,000,000 2,465,729 13,190,263
------ ---------- ----------- ---------- -----------
Issued...................... 563 -- -- 43,000 (289,970)
Repurchased................. (491) -- -- (476,719) 365,779
------ ---------- ----------- ---------- -----------
BALANCE 12/31/95............ 1,324 -- 16,000,000 2,032,010 13,266,072
------ ---------- ----------- ---------- -----------
Issued...................... 67 -- -- 83,993 (215,907)
Repurchased................. -- -- -- (246,321) 491,733
Recapitalization............ (1,391) 58,469,280 (16,000,000) (1,869,682) (13,541,898)
------ ---------- ----------- ---------- -----------
BALANCE 12/31/96............ -- 58,469,280 -- -- --
------ ---------- ----------- ---------- -----------
Issued...................... -- 4,391,010 -- -- --
Repurchased................. -- (1,115,160) -- -- 1,115,160
------ ---------- ----------- ---------- -----------
BALANCE 12/31/97............ -- 61,745,130 -- -- 1,115,160
====== ========== =========== ========== ===========
</TABLE>

The preferred stock of the Predecessor Company was owned by members of the
Predecessor Company's Board of Directors. The Predecessor Company had the right
to reacquire the preferred stock when the holder ceased to be a member of the
Board of Directors.

On December 12, 1996, all outstanding Predecessor Company equity was
purchased for cash or exchanged for Company common stock pursuant to the
Recapitalization. In addition, all outstanding Predecessor Company options were
canceled for cash consideration or the award of Company options and all
outstanding GPUs were canceled for cash consideration (see Note 4). In addition,
all treasury shares were retired.

In connection with the consummation of the Recapitalization in December
1996, the Company created a class of preferred stock designated as Money Market
Preferred Stock (the "Money Market Preferred"). The Money Market Preferred
carries a variable rate dividend and is redeemable at the Company's election for
$115.00 per share following the fifth anniversary of the issuance thereof. At
December 31, 1996 and 1997, 50,000 shares of Money Market Preferred were
authorized. 87 shares of Money Market Preferred were issued and outstanding at
December 31, 1996 and 1997.

In connection with the Recapitalization, the Company also issued 11,086,950
shares of common stock ("Restricted Shares") to a trust ("Restricted Stock
Trust"). All Restricted Shares held in the Restricted Stock Trust are deposited
in the Management Voting Trust. Any employee awarded Restricted Shares under the
plan will become vested in the Restricted Shares on the earlier of (i) a change
of control event (as defined); (ii) the consummation of an initial public
offering or the six month anniversary following an initial public offering if,
in connection with the offering, the holders are unable to sell such Restricted
Shares; and (iii) upon any other event as determined by the Compensation
Committee of the Board of Directors with the written consent of the HFCP
Investors, if prior to an initial public offering, and the Management Voting
Trust. The Company has recorded unearned compensation of $85 million and $136.7
million, representing the fair value of the Restricted Shares at December 31,
1996 and 1997, respectively. Compensation expense will be recognized when
vesting becomes probable and will be equal to the fair value of the common stock
at the time that the Restricted Shares become vested. At December 31, 1996 and
1997, a total of 11,086,950 shares were outstanding and held in the Restricted
Stock Trust.

F-21
<PAGE> 105
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 16 -- MANDATORILY REDEEMABLE EQUITY SECURITIES:

Concurrent with the Recapitalization, the Company entered into a
Stockholders' agreement which includes both put rights and calls on the
Company's common stock. The Company has the right to purchase shares and the
stockholder has the right to cause the Company to purchase such shares at
certain times and subject to certain conditions. The put provision becomes
enforceable upon termination of employment for Management Investors if the
Company has not previously exercised its call right and upon the six-year
anniversary of the Recapitalization for HFCP. The carrying value of the
mandatorily redeemable equity securities held by the Management Investors is
equivalent to the redemption value of $7.67 and $12.33 at December 31, 1996 and
1997, respectively. The carrying value of the Mandatorily Redeemable Equity
Securities for common shares held by HFCP is being accreted to redemption value
over the six year period from the date of the Recapitalization. Accordingly, the
carrying value of Mandatorily Redeemable Equity Securities held by HFCP was
$7.67 and $8.47 at December 31, 1996 and 1997, respectively.

The accretion from carrying value to redemption value for the respective
periods is reflected as a charge to capital surplus. Both the calls and puts
terminate upon the earlier to occur of an initial public offering or such time
as the Common Stock is listed for trading on a national securities exchange.

NOTE 17 -- OPTIONS:

Under the Company's 1992 Stock Option Plan, options to purchase an
aggregate of 8,000,000 shares of common stock, at a price not less than the
prior year-end book value, as defined, could be granted to key employees. The
Predecessor Company also had an LPU Option Plan with substantially the same
terms as the common stock option plan. In accordance with the Recapitalization
(as discussed below), all prior option plans were terminated.

In connection with the Recapitalization, the shareholders approved a stock
option plan (the "Stock Option Plan") which allowed the Board of Directors to
grant to employees of the Company options to purchase up to 33,173,565 shares of
Company common stock. The Stock Option Plan governs both the Rollover Options
and certain other executive options (the "Executive Options").

At the closing of the Recapitalization (see Note 4), the Board of Directors
granted the Rollover Options which were immediately vested and exercisable. Each
Rollover Option has an exercise price of $1.92 per share, with certain limited
exceptions outside of the U.S. Of the Rollover Options, 50% have a term of five
years and the remaining 50% have a term of seven years. In connection with the
issuance of the Rollover Options, the Company recognized compensation expense of
$96.7 million (see Note 4).

At the closing of the Recapitalization, the Board of Directors granted to
employees 5,200,590 options to purchase shares of Company common stock at $7.67
per share (the "Closing Options"). The Closing Options vest as follows: 40% on
the grant date, 30% on the third anniversary of the grant date and 30% on the
fifth anniversary of the grant date.

Pursuant to the Stock Option Plan, the Board of Directors had the right to
grant additional options (the "Additional Options") to purchase up to 2,974,410
shares of Company common stock plus any shares that became available through the
cancellation of unexercised Executive Options. Through December 31, 1997,
Additional Options to purchase 1,891,200 shares of Company common stock had been
granted, each at $7.67 per share. As a result, during 1997 the Company
recognized a compensation charge of $1.3 million representing the difference
between the estimated fair market value of Company common stock and the exercise
price of $7.67 on date of grant in accordance with the applicable vesting
provisions of the Additional Options.

F-22
<PAGE> 106
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Additionally, at the closing of the Recapitalization, the Company issued
options to HFCP (see Note 4) to purchase 2,598,105 shares of Company common
stock at $7.67 per share which were exercisable immediately and expire on the
seventh anniversary of the closing. The HFCP Options are not governed under the
Stock Option Plan.

In December 1997, the Company adopted the Young & Rubicam Inc. 1997
Incentive Compensation Plan (the "Incentive Compensation Plan" or "ICP"). The
ICP superseded the Stock Option Plan and amended and restated the Restricted
Stock Plan (the Stock Option Plan and the Restricted Stock Plan (prior to such
amendment and restatement) (the "Preexisting Plans"), although all awards
granted prior to the adoption of the ICP, and any grants of Restricted Stock
made after such adoption but on or prior to March 31, 1998, will remain
outstanding in accordance with their terms and will be subject to the terms of
the Preexisting Plans.

The ICP provides for grants of stock options, stock appreciation rights
("SARS"), Restricted Stock, deferred stock, other stock-related awards, and
performance or annual incentive awards that may be settled in cash, stock or
other property ("Awards"). Under the ICP, the total number of shares of Company
common stock reserved and available for delivery to participants in connection
with Awards is 19,125,000, plus the number of shares of Company common stock
subject to awards under the Preexisting Plans that become available (generally
due to cancellation or forfeiture) after the effective date of the ICP;
provided, however that the total number of shares of Company common stock with
respect to which incentive stock options ("ISO") may be granted shall not exceed
15,000,000. Any shares of Company common stock delivered under the ICP may
consist of authorized and unissued shares or treasury shares.

The Board of Directors is authorized to grant stock options, including both
incentive stock options, non-qualified stock options, and SARS entitling the
participant to receive the excess of the fair market value of a share of common
stock on the date of exercise over the grant price of the SAR. The exercise
price per share subject to an option and the grant price of a SAR is determined
by the Board of Directors, but must not be less than the fair market value of a
share of common stock on the date of grant. The maximum term of each option or
SAR, the times at which each option or SAR will be exercisable, and provisions
requiring forfeiture of unexercised options or SARS at or following termination
of employment generally is fixed by the Board of Directors, except no option or
SAR may have a term exceeding ten years.

The Board of Directors may, at its discretion, accelerate the
exercisability, the lapsing of restrictions, or the expiration of deferral or
vesting periods of any award, and such accelerated exercisability, lapse,
expiration and vesting shall occur automatically in the case of a "change in
control" of the Company except to the extent otherwise provided in the award
agreement. In addition, the Board of Directors may provide that the performance
goals relating to any performance-based awards will be deemed to have been met
upon the occurrence of any change in control.

In December 1997, the Company granted options to employees to purchase an
aggregate of 9,577,950 shares of Company common stock at $12.33 per share, the
fair market value of such common stock as of the date of grant. Each such option
will expire if not exercised ten years after the date of grant and will be fully
exercisable on the fifth anniversary of the date of grant if the recipient
remains an employee of the Company or an affiliate as of such date; provided,
however, that in the event that the Company completes an initial public offering
of its common stock prior to December 31, 1999, the exercisability of 33 1/3% of
the shares subject to any such option will accelerate to December 31, 2000, if
the recipient remains an employee of the Company or an affiliate as of December
31, 2000, and an additional 33 1/3% of the shares subject to any such option
will accelerate to December 31, 2001, if the recipient remains an employee of
the Company or an affiliate as of December 31, 2001. Of the 9,577,950 options
granted in December 1997, options to purchase 1,152,150 shares of common stock
will not become exercisable until nine years and nine months from the date

F-23
<PAGE> 107
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of grant, unless certain 1998 operating targets are met, in which case the
vesting schedule described above will apply.

The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", ("SFAS 123"). In accordance with the provisions of SFAS 123, the
Company applies APB Opinion No. 25, and related interpretations in accounting
for its plans. If the Company had elected to recognize compensation expense
based upon the fair value at the grant date for awards under its plans
consistent with the methodology prescribed by SFAS 123, the Company's SFAS 123
net loss would be increased by $1.3 million and $9.4 million for 1995 and 1996
and the net loss and net loss per common share would be increased by $6.3
million and $.13, respectively, for 1997.

These SFAS 123 pro forma amounts may not be representative of future
disclosures since the estimated fair value of stock options is amortized to
expense over the vesting period, and additional options may be granted in future
years. The fair value for these options was estimated at the date of grant using
the Black-Scholes option-pricing model with the following assumptions for the
period ended December 31, 1995, 1996 and 1997, respectively:

ADDITIONAL OPTIONS

<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Expected term.......................... 2-10 years 5-10 years 10 years
Risk-free rate......................... 5.41%-7.22% 5.92%-6.61% 5.59%-7.12%
Dividend yield......................... 0% 0% 0%
Expected volatility.................... 0% 0% 0%
</TABLE>

The weighted-average fair value and weighted average exercise price of
options granted prior to the Recapitalization for which the exercise price
equals the fair value of Company common stock on the grant date was $11.23 and
$44.65 in 1995, respectively, and $13.28 and $47.14, in 1996, respectively. The
weighted-average fair value and weighted-average exercise price of options
granted on and subsequent to the Recapitalization for which the exercise price
equals the fair value of Company common stock on the grant date was $3.69 and
$7.67 in 1996, respectively, and $5.28 and $12.33 in 1997, respectively.

The weighted-average fair value and weighted-average exercise price of
options granted for which the exercise price was less than the fair value of
Company common stock on the grant date was $6.30 and $1.97 in 1996, respectively
and $6.76 and $7.67 in 1997, respectively. There were no option issuances prior
to the Recapitalization for which the exercise price was less than the estimated
fair value of Company common stock on the date of grant.

The Black-Scholes option valuation model was developed for use in
estimating the weighted-average fair value of traded options which have no
vesting restrictions and are fully transferable. Because the Company's employee
stock options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in managements opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
employee stock options.

F-24
<PAGE> 108
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Transactions involving options are summarized as follows:

<TABLE>
<CAPTION>
OPTIONS WEIGHTED-AVERAGE
OUTSTANDING EXERCISE PRICE
<S> <C> <C>
JANUARY 1, 1995............................................. 1,633,110 $40.51
Granted................................................... 1,197,722 44.72
Exercised................................................. (144,400) 34.26
Cancellations............................................. (260,324) 40.17
---------- ------
DECEMBER 31, 1995........................................... 2,426,108 42.99
---------- ------
Granted................................................... 284,773 47.14
Exercised................................................. (252,278) 41.94
Cancellations............................................. (167,940) 42.83
Recapitalization cancellations............................ (2,290,663) 43.64
Recapitalization grants................................... 24,622,260 3.76
---------- ------
DECEMBER 31, 1996........................................... 24,622,260 3.76
---------- ------
Granted................................................... 11,469,150 11.56
Exercised................................................. (4,250,790) 2.19
Cancellations............................................. (827,415) 4.50
---------- ------
DECEMBER 31, 1997........................................... 31,013,205 6.84
========== ======
</TABLE>

The following information is as of December 31, 1997:

<TABLE>
<S> <C> <C> <C>
Number outstanding................................... 12,312,690 9,122,565 9,577,950
------------- ---------- ---------
Weighted-average contractual life, in years.......... 6 10 10
Weighted-average exercise price...................... $ 1.92 $ 7.67 $ 12.33
------------- ---------- ---------
Number exercisable................................... 12,312,690 4,930,305 0
------------- ---------- ---------
Weighted-average exercise price...................... $ 1.92 $ 7.67 $ 12.33
------------- ---------- ---------
</TABLE>

The following information is as of December 31, 1995 and 1996:

<TABLE>
<CAPTION>
1995 1996
<S> <C> <C> <C>
Range of Exercise Prices............................... $35.85-$44.65 $ 1.92 $ 7.67
------------- ---------- ---------
Number outstanding..................................... 2,426,108 16,823,565 7,798,695
------------- ---------- ---------
Weighted-average contractual life, in years............ 5 6 10
Weighted-average exercise price........................ $ 42.96 $ 1.92 $ 7.67
------------- ---------- ---------
Number exercisable..................................... 544,004 16,823,565 4,678,335
------------- ---------- ---------
Weighted-average exercise price........................ $ 40.92 $ 1.92 $ 7.67
------------- ---------- ---------
</TABLE>

NOTE 18 -- LITIGATION, COMMITMENTS AND CONTINGENT LIABILITIES:

The Company has performed, and continues to perform, services for clients
in a wide range of businesses, including tobacco products manufacturers. As a
result, the Company may from time to time be joined as a defendant in litigation
brought against its clients and others by third parties, including its
competitors, governmental and regulatory bodies, or consumers, alleging that
advertising claims made through the

F-25
<PAGE> 109
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company with respect to such clients' products are false, deceptive or
misleading; that such clients products are defective, injurious or pose some
manner of threat to the public generally; or that marketing or communications
materials created for such clients infringe upon the proprietary rights of third
parties. The Company's practice is to attempt to minimize such potential
liabilities through insurance coverage and/or indemnification provisions in its
agreements with clients and others.

Recently, the Company was named as a defendant in an action brought by a
county government against tobacco products manufacturers (including a current
and a former client of the Company) and others alleging that, because the
Company performed advertising and other professional services for such clients,
the Company is liable for damages for health and other claims. While this action
is in its early stages and the allegations against the Company have not been
made with specificity, the Company believes it has meritorious defenses to the
claims and intends to contest them vigorously.

The Company is named as party in litigation matters which arise in the
ordinary course of its business, including claims by former employees for money
damages and other relief based upon the circumstances or consequences of their
separation from employment. The Company believes that it has meritorious
defenses to these claims, and is contesting such claims vigorously. In addition,
the Company is covered by insurance with respect to some of such claims.
Accordingly, the Company does not expect such matters to have a material adverse
effect on its consolidated financial position, results of operations or cash
flows.

Net rental expense was $62.4 million, $62.9 million, and $74.4 million in
1995, 1996 and 1997, respectively. Future minimum rental commitments as of
December 31, 1997 are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1998................................................... $ 62,863
1999................................................... 54,525
2000................................................... 42,924
2001................................................... 40,162
2002................................................... 39,119
Thereafter............................................. 108,437
</TABLE>

Certain leases contain renewal options calling for increased rentals.
Others contain certain escalation clauses relating to taxes and other operating
expenses.

At December 31, 1996, the Company had outstanding guarantees of $18.6
million in support of credit lines of unconsolidated companies. At December 31,
1997, the Company had outstanding guarantees of $7.6 million in support of
credit lines of unconsolidated companies.

The Company and its corporate affiliates conduct business in various
developing countries in Asia, Africa, Latin America and Eastern Europe, where
the systems and bodies of commercial law and trade practices arising thereunder
are in a continuing state of evolution. Commercial laws in such countries are
often vague, arbitrary, contradictory, inconsistently administered and
retroactively applied. Under such circumstances, it is difficult for the Company
to determine with certainty at all times the exact requirements of such local
laws. Nevertheless, the Company believes that any difficulty in compliance with
local laws in such developing countries will not have a materially adverse
impact on the consolidated financial position, results of operations or cash
flows of the Company.

NOTE 19 -- FAIR VALUE OF FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES:

At December 31, 1996 and 1997, the carrying value of the Company's
financial instruments approximated fair value in all material respects.

F-26
<PAGE> 110
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company entered into interest rate exchange agreements with off-balance
sheet risk in order to reduce its exposure to changes in interest rates on its
variable rate long-term debt. These interest rate exchange agreements included
interest rate swaps, interest rate floors and interest rate caps. At December
31, 1996 and 1997, the notional amount of these agreements was $50 million and
$275 million, respectively (see Note 14). The fair value, which has been
estimated based upon quotations from independent third party banks, approximated
the notional amount at December 31, 1996 and 1997.

The Company enters into forward foreign exchange contracts to hedge certain
assets and liabilities which are recorded in a currency different from that in
which they settle. The purpose of these contracts is almost exclusively to hedge
intercompany transactions. The Company's forward foreign exchange contracts do
not create exchange rate risk because gains and losses on these contracts
generally offset losses and gains on the foreign currency denominated
intercompany transactions. The gains and losses on these positions are deferred
and included in the basis of the transaction upon settlement. The terms of these
contracts are generally a one month maturity. The tables below summarize the
Company's forward foreign exchange contracts outstanding at December 31, 1996
and 1997. The "buy" amounts represent the U.S. dollar equivalent of commitments
to purchase the respective currency, and the "sell" amounts represent the U.S.
dollar equivalent of commitments to sell the respective currency.

<TABLE>
<CAPTION>
1996 COMPANY BUYS COMPANY SELLS
(IN THOUSANDS)
<S> <C> <C>
Canadian Dollar............................................. $ -- $8,399
Italian Lira................................................ 4,524 --
Swiss Franc................................................. 5,934 --
Japanese Yen................................................ 6,199 --
------- ------
$16,657 $8,399
======= ======
</TABLE>

<TABLE>
<CAPTION>
1997 COMPANY BUYS COMPANY SELLS
(IN THOUSANDS)
<S> <C> <C>
German Deutschemark......................................... $ -- $13,318
Italian Lira................................................ -- 3,901
Swedish Krona............................................... -- 1,268
Swiss Franc................................................. 6,849 --
Japanese Yen................................................ 5,975 --
------- -------
$12,824 $18,487
======= =======
</TABLE>

Management believes the risk of incurring losses due to credit risk and
foreign exchange would not have a material adverse impact on the consolidated
financial position, results of operations or cash flows of the Company.

NOTE 20 -- SUBSEQUENT EVENT -- COMMON STOCK DIVIDEND

On April 6, 1998, the Board of Directors declared a stock dividend of 14
shares of common stock payable for each share of common stock outstanding on the
effective date of the Company's planned initial public offering (see note 21).
Common stock and accumulated deficit reflected in the historical balance sheets
at December 31, 1996 and 1997 have been restated to reflect the common stock
dividend. The number of common shares the Company is authorized to issue was
also increased from 10 million to 250 million and the number of authorized
preferred shares, none of which have been issued, was increased from 50,000 to
10 million.

F-27
<PAGE> 111
YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

All references in the consolidated financial statements to shares, share
prices, per share data, including stock option and stock option plan
information, for periods after the 1996 Recapitalization are reflected on a post
dividend basis. All references in the historical financial statements to common
shares and Limited Partnership Units in Predecessor entities including option
and option plan information are reflected on a pre-dividend basis.

NOTE 21 -- PUBLIC OFFERING AND RELATED TRANSACTIONS SUBSEQUENT TO THE DATE OF
THE INDEPENDENT ACCOUNTANTS REPORT (UNAUDITED)

OFFERING: On February 26, 1998, the Company filed a Registration Statement
on Form S-1. Total proceeds to be raised in connection with the public offerings
are estimated at $415 million (assuming no exercise of the Underwriters'
over-allotment option), comprised of approximately $172.8 million raised from
the sale of newly issued common shares and approximately $242.2 million raised
from common shares to be sold from certain selling stockholders. The Company
intends to use the estimated net proceeds from the sale of newly issued common
shares to repay borrowings under the term loan portion of its Credit Facilities.
The Company will not receive any of the net proceeds from the sale of common
stock by the selling stockholders.

NEW DEBT FACILITY: On March 10, 1998, the Company received an executed
commitment letter (the "Commitment") from Citibank N.A. and the Bank of America
National Trust and Savings Association for an aggregate of $150 million of a
$400 million, 5 year multicurrency revolving credit facility (the "Facility").
The Commitment is subject to, among other things, the receipt of commitments
from other lenders to provide not less than $250 million and the consummation of
the initial public offering resulting in not less than $100 million of cash
proceeds to the Company. Under the proposed terms of the Facility, interest
charged on loans will include base rate, Eurodollar and Eurocurrency rates, plus
applicable margins tied to the leverage ratio ranging from 0.04% to 0.05%.

RESTRICTED STOCK: In March 1998, the Company amended the Restricted Stock
Trust agreement which will result in the redemption of 1,855,845 of the
11,086,950 shares of common stock previously held in the Restricted Stock Trust
upon consummation of the initial public offering. Based upon an assumed initial
public offering price of $25, the consummation of the offering will give rise to
a non-recurring, non-cash, pre-tax charge of $230.8 million arising from the
vesting of the aggregate 9,231,105 shares of Restricted Stock.

F-28
<PAGE> 112

[PHOTOGRAPH OF OLD-FASHIONED
HANDWRITING ON HEAVY PAPER
VERY CLOSE-UP PREDOMINANTLY
IN ORANGE AND YELLOW.
NO PARTICULAR WORDS
CAN BE IDENTIFIED.]
<PAGE> 113

======================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE UNDERWRITERS OR ANY OTHER
PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON
MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
AN IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 4
Risk Factors.......................... 10
The Company........................... 17
Use of Proceeds....................... 19
Dividend Policy....................... 19
Capitalization........................ 20
Dilution.............................. 22
Selected Consolidated Financial
Data................................ 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 25
Business.............................. 32
Management............................ 42
Certain Transactions.................. 58
Principal and Selling Stockholders.... 59
Description of Capital Stock.......... 61
Shares Eligible for Future Sale....... 73
Certain U.S. Tax Consequences to Non-
United States Holders............... 75
Underwriting.......................... 76
Legal Matters......................... 81
Experts............................... 81
Available Information................. 81
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

UNTIL JUNE 5, 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

======================================================
======================================================

16,600,000 SHARES

[YOUNG & RUBICAM INC. LOGO]

COMMON STOCK
------------------------
PROSPECTUS
------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

BEAR, STEARNS & CO. INC.
FURMAN SELZ
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
May 11, 1998

======================================================
<PAGE> 114

[INTERNATIONAL BACK COVER PAGE]

======================================================

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Summary.................... 4
Risk Factors.......................... 10
The Company........................... 17
Use of Proceeds....................... 19
Dividend Policy....................... 19
Capitalization........................ 20
Dilution.............................. 22
Selected Consolidated Financial
Data................................ 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 25
Business.............................. 32
Management............................ 42
Certain Transactions.................. 58
Principal and Selling Stockholders.... 59
Description of Capital Stock.......... 61
Shares Eligible for Future Sale....... 73
Certain U.S. Tax Consequences to Non-
United States Holders............... 75
Underwriting.......................... 76
Legal Matters......................... 81
Experts............................... 81
Available Information................. 81
Additional Information................ 82
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>

======================================================
======================================================

16,600,000 SHARES

[YOUNG & RUBICAM INC. LOGO]

COMMON STOCK
------------------------
PROSPECTUS
------------------------
DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL

BEAR, STEARNS INTERNATIONAL LIMITED
FURMAN SELZ
GOLDMAN SACHS INTERNATIONAL
SALOMON SMITH BARNEY INTERNATIONAL
May 11, 1998

======================================================