<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1993
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-7898
GREY ADVERTISING INC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-0802840
- --------------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
777 Third Avenue, New York, New York 10017
- ------------------------------------ -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, 212-546-2000
including area code ------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
- ------------------- -----------------------------------------
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1 per share
------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to the filing
requirements for the past 90 days.
Yes X No
--------- ---------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Yes X No
--------- ---------
1
<PAGE> 2
The aggregate market value of the voting stock held by non-affiliates of
registrant was $136,030,470 as at March 1, 1994.
The registrant had 901,983 shares of its Common Stock, par value $1 per share,
and 338,844 shares of its Limited Duration Class B Common Stock, par value $1
per share, outstanding as at March 1, 1994.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual proxy statement to be furnished in connection with the
registrant's 1994 annual meeting of stockholders are incorporated by reference
into Part III.
2
<PAGE> 3
PART I.
ITEM 1. Business.
Registrant ("Grey") and its subsidiaries
(collectively with Grey, the "Company") have been engaged in the planning,
creation, supervision and placing of advertising since the Company's formation
in 1917. Grey was incorporated in New York in 1925 and changed its state of
incorporation to Delaware in 1974.
The Company's principal business activity consists of
providing a full range of advertising services to its clients. Typically, this
involves developing an advertising and/or marketing plan after study of a
client's business, the distribution or utilization of the client's products or
services and the use of various media (e.g., television, radio, newspapers,
magazines, direct mail, outdoor billboards) by which desired market performance
can best be achieved. The Company then creates advertising, prepares media
recommendations and places advertising in the media. The Company's business
also involves it in allied areas such as marketing consultation, audio-visual
production, cooperative advertising programs, direct marketing, research,
product publicity, public relations and sales promotion.
3
<PAGE> 4
The Company is not engaged in more than one industry
segment, and no separate class of similar services contributed 10% or more of
the Company's gross income or net income during 1993, 1992 or 1991.
The Company serves a diversified client roster in the
apparel, automobile, beverage, chemical, community service, computer,
corporate, electrical appliance, entertainment, food product, home furnishing,
houseware, office product, packaged goods, publishing, restaurant, retailing,
toy and travel sectors.
Advertising is a highly competitive business in which
agencies of all sizes strive to attract new clients or additional assignments
from existing clients. Competition for new business, however, is restricted
from time to time because large agencies (such as the Company) often are
precluded from providing advertising services for products or services that may
be viewed as being competitive with those of an existing client. Generally,
since advertising agencies charge clients substantially equivalent rates for
their services, competitive efforts principally focus on the skills of the
competing agencies.
Published reports indicate that there are over 500
advertising agencies of all sizes in the United States. In 1993, the Company
was the 6th largest United States advertising agency in terms of domestic gross
income according to statistics published in Adweek, a trade publication.
4
<PAGE> 5
Approximately 54% of the Grey's present domestic
advertising clients, representing a significant majority of the Company's 1993
domestic gross income, have been with the Company since 1989. The agreements
between the Company and most of its clients are generally terminable by either
the Company or the client on 90 days' notice as is the custom in the industry.
During 1993, one client (The Procter & Gamble Company)
represented more than 10% of the Company's consolidated income from commissions
and fees. No other client represented more than 5% of the Company's total
consolidated commissions and fees. The loss of such client or other large
clients of the Company may be expected to have an adverse effect on net income.
Losses of important clients in past years, however, have not had a long-term
effect upon the Company's financial condition or its competitive position.
On December 31, 1993, Grey and its consolidated
subsidiaries employed approximately 5,038 persons, of whom nine were executive
officers of Grey.
5
<PAGE> 6
As is generally the case in the advertising industry, the
Company's business traditionally has been seasonal, with greater revenues
generated in the second and fourth quarters of each year. This reflects, in
large degree, the media placement patterns of the Company's clients.
Advertising programs created by the Company are placed
principally in media distributed within the United States and overseas through
offices in the United States and a number of foreign countries. While the
Company operates on a worldwide basis, for the purposes of presenting certain
financial information in accordance with Securities and Exchange Commission
rules, its operations are deemed to be conducted in three geographic areas.
Commissions and fees, and operating profit by each such geographic area for the
years ended December 31, 1993, 1992 and 1991, and related identifiable assets
at December 31 of each of the years, are summarized in Note N of the Notes to
Consolidated Financial Statements, which is hereby incorporated herein by
reference.
While the Company has no reason to believe that its
foreign operations as a whole are presently jeopardized in any material
respect, there are certain risks of operating which do not affect domestic
operations but which may affect the Company's foreign operations from time to
time. Such risks include the possibility of limitations on repatriation of
capital or dividends, political instability, currency devaluation and
restrictions on the percentage of permitted foreign ownership.
6
<PAGE> 7
Executive Officers of the Registrant
as of March 1, 1994
<TABLE>
<CAPTION>
Year first
became Execu-
Executive Officers (a) Position Age tive Officer
- ---------------------- -------- --- ------------
<S> <C> <C> <C>
Robert L. Berenson President - Grey, N.Y. 54 1978
Barbara S. Feigin Exec. Vice President 56 1983
Steven G. Felsher Exec. Vice President
Finance - Worldwide,
Secretary & Treasurer 44 1989
William P. Garvey Exec. Vice President,
Chief Financial Officer
- United States 56 1970
John A. Gerster Exec. Vice President 46 1983
Edward H. Meyer Chairman of the Board,
President & Chief
Executive Officer 67 1959
Stephen A. Novick Exec. Vice President 53 1984
O. John C. Shannon President - Grey Int'l. 57 1993
Miles J. Turpin Exec. Vice President 63 1987
</TABLE>
(a) All executive officers are elected annually by the Board of Directors
of Grey. Each executive officer has been with Grey for a period more
than five years. There exists no family relationship between any of
Grey's directors or executive officers and any other director or
executive officer or person nominated or chosen to become a director
or executive officer.
7
<PAGE> 8
ITEM 2. Properties.
Substantially all offices of the Company are located in
leased premises. The Company's principal office is at 777 Third Avenue, New
York, New York, where it now occupies total floor space of approximately
357,000 square feet. The main lease covering the bulk of this space expires in
1999. The Company also has significant leases covering other offices in New
York, Los Angeles, San Francisco, Amsterdam, Brussels, Copenhagen, Dusseldorf,
Hong Kong, London, Madrid, Milan, Paris, Stockholm, Sydney and Toronto.
The Company considers all space leased by it to be
adequate for the operation of its business and does not foresee any significant
difficulty in meeting its space requirements.
ITEM 3. Legal Proceedings.
The Company is not involved in any material pending legal
proceedings, not covered by insurance or by adequate indemnification, or which,
if decided adversely, would have a material effect on the operations,
liquidity or financial position of the Company.
ITEM 4. Submission of Matters to a Vote of Security Holders.
Inapplicable.
8
<PAGE> 9
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The Common Stock of Grey is traded on The Nasdaq Stock
Market under the symbol GREY and quoted on the National Market System of
NASDAQ.
As of March 1, 1994, there were 544 holders of record of
the Common Stock and 322 holders of record of the Limited Duration Class B
Common Stock.
The following table sets forth certain information about
dividends paid, and the bid and asked prices in the over-the-counter market
during the periods indicated (as published in the Wall Street Journal), with
respect to the Common Stock:
<TABLE>
<CAPTION>
Bid Prices* Asked Prices*
----------- -------------
High Low High Low Dividends
---- --- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
1992 First Quarter 128 110 135 118 .75
Second Quarter 138 125 145 130 .75
Third Quarter 137 126 137 131 .75
Fourth Quarter 140 129 140 135 .775
1993 First Quarter 157 132 158 136 .775
Second Quarter 165 143 169 150 .775
Third Quarter 189 166 191 170 .775
Fourth Quarter 187 174 188 181 .8125
</TABLE>
* Such over-the-counter market quotations reflect interdealer prices,
without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.
9
<PAGE> 10
PART II
ITEM 6. Selected Financial Data.
<TABLE>
<CAPTION>
1989 1990 1991(c) 1992(c) 1993
<S> <C> <C> <C> <C> <C>
Commissions and fees... $411,083,000 $481,282,000 $528,299,000 $564,468,000 $567,243,000
Expenses...... 383,659,000 449,719,000 490,570,000 522,510,000 526,455,000
Restructuring charges (a) 23,850,000
Income before taxes on
income of consolidated
companies 32,614,000 33,575,000 13,277,000 42,588,000 42,705,000
Taxes on income.... 16,808,000 17,417,000 5,057,000 19,975,000 22,487,000
Net income..... 13,920,000 14,558,000 3,807,000 15,904,000 17,681,000
Net income per common
share (b)
Primary... 10.44 10.97 3.09 12.68 13.46
Fully Diluted...... 10.05 10.64 3.08 12.25 13.00
Weighted average number
of common shares out-
standing......
Primary..... 1,250,546 1,208,093 1,196,908 1,205,241 1,263,900
Fully Diluted...... 1,314,504 1,259,599 1,248,815 1,258,799 1,319,349
Working capital...... 4,855,000 5,918,000 8,364,000 12,588,000 25,001,000
Total assets...... 527,413,000 626,522,000 735,831,000 752,364,000 820,633,000
Long-term debt.... 3,025,000 3,025,000 3,025,000 3,025,000 33,025,000
Redeemable Preferred
Stock at Redemption
Value...... 5,036,000 6,145,000 6,053,000 6,468,000 6,590,000
Common Stockholders'
equity..... 89,523,000 104,000,000 105,153,000 118,741,000 129,077,000
Cash dividend per share
of Common Stock and Limited
Duration Class B
Common Stock 2.60 2.83 2.93 3.025 3.1375
</TABLE>
(a) During 1991, the Company recognized one-time
restructuring charges primarily related to the
absorption of the Company's subsidiary, Levine
Huntley Vick & Beaver, Inc.
(b) After giving effect to amounts attributable to
redeemable preferred stock, the assumed
exercise of dilutive stock options and, for
fully diluted net income per common share, the
assumed conversion of 8-1/2% Convertible
Subordinated Debentures issued December 1983.
(c) After restatement for adoption of FAS 109,
Accounting for Income Taxes.
10
<PAGE> 11
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS
Income from commissions and fees ("gross income")
increased 0.5% in 1993 and 6.8% in 1992 when compared to the respective prior
years. Absent exchange rate fluctuations, gross income increased 5.9% in 1993
and 5.8% in 1992 as compared to the respective prior years. The increase in
revenue in both years, primarily resulted from expanded activities from
existing clients, and the continued growth of the Company's general agency and
specialized operations.
Salaries and employee related expenses increased less
than 1% in 1993 and 9.3% in 1992 when compared to the respective prior years.
Office and general expenses have increased 1.4% in 1993 and 1.5% in 1992 versus
prior years. These increases are generally in line with the increase in gross
income shown for such years.
Inflation did not have a material effect on either
revenue or expenses during 1991, 1992 or 1993.
11
<PAGE> 12
During the fourth quarter of 1991, the Company absorbed
the operations of its Levine Huntley Vick & Beaver, Inc. ("LHV&B") subsidiary.
In connection therewith, the Company recognized pre-tax charges of
approximately $23,850,000 ($11,000,000 after tax) related predominately to the
disposal of LHV&B's real estate obligations and leasehold assets, the write off
of certain fixed assets and goodwill, and other costs, primarily severance, in
connection with the restructuring. The Company also reflected modest similar
charges with respect to a small number of related operations. A substantial
portion of the lease obligation settlement payments and severance were paid in
the fourth quarter of 1991, and the fixed asset and goodwill write offs were
charged against the restructuring reserve in 1991. These charges represented a
majority of the costs incurred with respect to the restructuring. During 1992
and 1993, most of the remaining costs included in the restructuring charge were
settled, and at December 31, 1993 less than 10% of the original restructuring
reserve remains on the Company's balance sheet to cover any unsettled
obligations.
The effective tax rate is 52.7% in 1993, and was 46.9% in
1992, as restated (see next page) and 38.1% in 1991. The increase in the
effective tax rate in each year is primarily related to increases in the state
and local tax provisions reflecting utilization of the tax benefit associated
with the restructuring charge and due to an increased proportion of the income
before taxes being derived from higher tax jurisdictions. In addition, the
1993 effective tax rate increased because the U.S. income tax statutory rate
rose to 35% from 34%.
12
<PAGE> 13
Minority interest decreased $3,104,000 in 1993 and
increased $3,064,000 in 1992 as compared to the respective prior years. The
decrease in 1993 and increase in 1992 were primarily due to changes in the
level of profits of majority-owned companies.
Equity in earnings of nonconsolidated companies increased
$1,068,000 in 1993 and $268,000 in 1992 as compared to the respective prior
years. These increases are due primarily to an increase in equity holdings and
an increase in the profit attributable to levels of the nonconsolidated
companies.
Net income for 1993 increased 11.2% when compared to net
income in 1992; net income for 1992, as restated (see below), increased 7.4%
over net income in 1991 excluding restructuring costs. After giving effect to
the restructuring charges, net income, as restated (see below), for 1992
increased 317.8% when compared to 1991.
Primary net income per share increased 6.2% in 1993 and,
excluding the restructuring charge, 8.1% in 1992 as compared to the respective
prior periods.
In the first quarter of 1993, the Company adopted FAS
109, Accounting for Income Taxes, as of January 1, 1993 and, as permitted,
elected to restate prior years financial statements. The effect of the
restatement was to increase the tax provision in 1992 by $600,000, reduce 1992
net income by the same amount and reduce 1991 net income by $500,000 by
recognizing a cumulative effect of the accounting change adjustment.
13
<PAGE> 14
For purposes of computing primary net income per common
share, the Company's net income was (i) reduced by dividends paid on the
Company's Preferred Stock and (ii) reduced or increased by the increase or
decrease, respectively, in redemption value of the Preferred Stock.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents on December 31, 1993 was
$181,267,000 up from $92,755,000 at the end of the prior year; the Company's
working capital at year-end increased during 1993 by $12,413,000 to
$25,001,000. These increases are largely attributable to enhanced collection
and disbursement management, and the effect of the long-term borrowing
described below. In addition, the Company invested in long-term, marketable,
highly liquid securities during the second half of 1993. At December 31, 1993,
the Company's investment in such marketable securities, principally United
States Treasury obligations with maturities between two and seven years, was
valued at $22,425,000.
Domestically, the Company maintains committed bank lines
of credit totalling $40,000,000. These lines of credit were partially utilized
during both 1993 and 1992 to secure obligations of selected foreign
subsidiaries in the respective year-end amounts of $11,100,000 and $13,331,000.
14
<PAGE> 15
The Company also maintains domestic uncommitted lines of
credit. These facilities, which are available at the discretion of the
offering banks, were not utilized during the period. There were no amounts
outstanding under these arrangements at December 31, 1993 or 1992.
Other lines of credit are available to the Company in
foreign countries in connection with short-term borrowings and bank overdrafts
used in the normal course of business. There were $34,751,000 and $27,464,000
outstanding under such facilities at December 31, 1993 and 1992, respectively.
Historically, funds from operations and short-term bank
borrowings have been sufficient to meet the Company's dividend, capital
expenditure and working capital needs. While the Company has not had to
utilize long-term borrowing to fund its operating needs, in January 1993,
taking advantage of favorable terms offered, it borrowed $30,000,000, at a
fixed interest rate of 7.68%, repayable in equal installments in January 1998,
1999 and 2000. The Company does not anticipate any material increased
requirement for capital or other expenditures which will adversely affect its
liquidity.
The Company's business generally has been seasonal with
greater commissions and fees earned in the second and fourth quarters,
particularly the fourth quarter. As a result, cash, accounts receivable,
accounts payable and accrued expenses are typically higher on the Company's
year-end balance sheet than at the end of any of the preceding three quarters.
15
<PAGE> 16
ITEM 8. Financial Statements and Supplementary Data.
--------------------------------------------
The information required by this Item is presented
elsewhere in this report.
ITEM 9. Changes in and Disagreements with Accountants on
------------------------------------------------
Accounting and Financial Disclosure.
None.
PART III.
ITEM 10. Directors and Executive Officers of the Registrant.
---------------------------------------------------
This information is to be included in the Company's Proxy
Statement to be sent to its stockholders in connection with its 1994 annual
meeting under the caption "Election of Directors", and is hereby incorporated
herein by reference.
ITEM 11. Executive Compensation.
-----------------------
This information is to be included in the Company's Proxy
Statement to be sent to its stockholders in connection with its 1994 annual
meeting under the caption "Management Remuneration and Other Transactions", and
is hereby incorporated herein by reference.
16
<PAGE> 17
ITEM 12. Security Ownership of Certain Beneficial Owners and
---------------------------------------------------
Management.
-----------
This information is to be included in the Company's Proxy
Statement to be sent to its stockholders in connection with its 1994 annual
meeting under the captions "Voting Securities" and "Election of Directors", and
is hereby incorporated herein by reference.
ITEM 13. Certain Relationships and Related Transactions.
-----------------------------------------------
This information is to be included in the Company's Proxy
Statement to be sent to its stockholders in connection with its 1994 annual
meeting under the captions "Election of Directors" and "Voting Securities", and
is hereby incorporated herein by reference.
PART IV.
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on
-------------------------------------------------------
Form 8-K.
---------
(a) (1) (2)The information required
by this subsection of this Item
is presented elsewhere in this
report.
(b) Reports on Form 8-K: Registrant
-------------------
filed no reports on Form 8-K
during the last quarter of 1993.
(c) Exhibits: Reference is made to
--------
the Index of Exhibits annexed
hereto and made part hereof.
(d) Schedules: The information
---------
required by this subsection of
this Item is presented elsewhere
in this report.
17
<PAGE> 18
The undersigned Registrant hereby undertakes as follows,
which undertaking shall be incorporated by reference into Registrant's
Registration Statements on Form S-8, filed with the SEC pursuant to Section
6(a) of the '33 Act:
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by Registrant of expenses incurred or paid by a director, officer
or controlling person of Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
GREY ADVERTISING INC.
By:/s/ Edward H. Meyer
------------------------
Edward H. Meyer,
Chairman, Chief Executive
Officer & President
Dated: March 30, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Mark N. Kaplan Dated: March 30, 1994
- ---------------------------------------
Mark N. Kaplan, Director
/s/ Edward H. Meyer Dated: March 30, 1994
- --------------------------------------
Edward H. Meyer, Director;
Principal Executive Officer
/s/ O. John C. Shannon Dated: March 30, 1994
- --------------------------------------
O. John C. Shannon, Director;
President - Grey International
/s/ Richard R. Shinn Dated: March 30, 1994
- ------------------------------------
Richard R. Shinn, Director
/s/ Steven G. Felsher Dated: March 30, 1994
- ----------------------------------------
Steven G. Felsher,
Principal Financial Officer
/s/ William P. Garvey Dated: March 30, 1994
- ---------------------------------------
William P. Garvey,
Principal Accounting Officer
- 19 -
<PAGE> 20
Annual Report on Form 10-K
Item 8, Item 14(a)(1) and (2) and Item 14(d)
Financial Statements and Supplementary Data
List of Financial Statements and
Financial Statement Schedules
Year ended December 31, 1993
Grey Advertising Inc.
New York, New York
<PAGE> 21
Form 10-K-Item 8, Item 14(a)(1) and (2)
Grey Advertising Inc. and Consolidated Subsidiary Companies
Index to Financial Statements and Financial Statement Schedules
The following consolidated financial statements of Grey Advertising Inc. and
consolidated subsidiary companies are included in Item 8:
<TABLE>
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets--December 31, 1993 and 1992 . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Income--Years Ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Common Stockholders' Equity--
Years Ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows--
Years Ended December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . F-7
Notes to Consolidated Financial Statements--
December 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9
</TABLE>
The following consolidated financial statement schedules of Grey Advertising
Inc. and consolidated subsidiary companies are included in Item 14(d):
<TABLE>
<S> <C>
Schedule I--Marketable Securities Other Investments . . . . . . . . . . . . . . . . . . F-24
Schedule II--Amounts Receivable From Related Parties and
Underwriters, Promoters, and Employees Other Than
Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25
Schedule IX--Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . F-28
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
Summarized financial information and financial statements for nonconsolidated
foreign investee companies accounted for by the equity method have been omitted
because such companies, considered individually or in the aggregate, do not
constitute a significant subsidiary.
<PAGE> 22
Report of Independent Auditors
Board of Directors
Grey Advertising Inc.
We have audited the accompanying consolidated balance sheets of Grey
Advertising Inc. and consolidated subsidiary companies as of December 31, 1993
and 1992, and the related consolidated statements of income, common
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1993. Our audits also included the financial statement
schedules listed in the index at Item 14(a). These financial statements and
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Grey
Advertising Inc. and consolidated subsidiary companies at December 31, 1993 and
1992, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1993 in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
As discussed in Note A to the financial statements, in 1993 the Company changed
its method of accounting for income taxes.
ERNST & YOUNG
February 11, 1994
F-1
<PAGE> 23
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1993 1992
----------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $181,267,000 $ 92,755,000
Accounts receivable 363,105,000 370,223,000
Expenditures billable to clients 22,581,000 26,205,000
Other current assets 69,116,000 92,125,000
------------ ------------
Total current assets 636,069,000 581,308,000
Investments in and advances to nonconsolidated
affiliated companies (Notes B and C) 16,104,000 11,160,000
Fixed assets--net (Note D) 57,724,000 62,974,000
Marketable securities (Notes A and E) 22,425,000
Intangibles and other assets-including loans to officers
of $4,947,000 in 1993 and $5,194,000 in 1992 (Notes A,
F, G, I and L(1)) 88,311,000 96,922,000
------------ ------------
TOTAL ASSETS $820,633,000 $752,364,000
============ ============
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 24
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
DECEMBER 31
1993 1992
----------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $469,227,000 $429,071,000
Notes payable to banks (Note F) 45,851,000 40,795,000
Accrued expenses and other 88,099,000 92,455,000
Income taxes payable 7,891,000 6,399,000
------------ ------------
Total current liabilities 611,068,000 568,720,000
Other liabilities, including deferred compensation of $15,342,000
and $15,891,000 (Note L(1)) 31,820,000 45,180,000
Long-term debt (Note F) 33,025,000 3,025,000
Minority interest 9,053,000 10,230,000
Redeemable preferred stock-at redemption value; par value $1 per
share; authorized 500,000 shares; issued and outstanding 32,000
shares in 1993 and 34,000 shares in 1992(Note G) 6,590,000 6,468,000
Common stockholders' equity:
Common Stock-par value $1 per share; authorized 10,000,000 shares;
issued 1,062,046 in 1993 and 1,030,892 in 1992 1,062,000 1,031,000
Limited Duration Class B Common Stock-par value $1 per share;
authorized 2,000,000 shares; issued 369,738 shares in 1993 and
400,892 shares in 1992 370,000 401,000
Paid-in additional capital 27,329,000 23,635,000
Retained earnings 131,835,000 118,737,000
Cumulative translation adjustment (3,573,000) 2,779,000
Unrealized loss on marketable securities (Notes A and E) (147,000)
Loans to officer used to purchase Common Stock and Limited
Duration Class B Common Stock (Note I) (4,726,000) (4,726,000)
------------ ------------
152,150,000 141,857,000
Less-cost of 164,372 and 163,830 shares of Common Stock and 26,851
and 30,551 shares of Limited Duration Class B Common Stock held
in treasury at December 31, 1993 and 1992, respectively 23,073,000 23,116,000
------------ ------------
Total common stockholders' equity 129,077,000 118,741,000
Retirement plans, leases and contingencies (Note L)
------------ ------------
Total liabilities and stockholders' equity $820,633,000 $752,364,000
============ ============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 25
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
--------------------------------------------------------
<S> <C> <C> <C>
Commissions and fees $567,243,000 $564,468,000 $528,299,000
Expenses:
Salaries and employee related expenses (Note L(1)) 348,462,000 346,933,000 317,531,000
Office and general expenses (Note L(2)) 177,993,000 175,577,000 173,039,000
Restructuring costs (Note M) 23,850,000
------------ ------------ ------------
526,455,000 522,510,000 514,420,000
------------ ------------ ------------
40,788,000 41,958,000 13,879,000
Other income (expense)-net (Note C) 1,917,000 630,000 (602,000)
------------ ------------ ------------
Income before taxes on income of consolidated
companies 42,705,000 42,588,000 13,277,000
Provision for taxes on income (Note K) 22,487,000 19,975,000 5,057,000
------------ ------------ ------------
Net income of consolidated companies before
cumulative effect of accounting change 20,218,000 22,613,000 8,220,000
Minority interest applicable to consolidated
companies (4,508,000) (7,612,000) (4,548,000)
Equity in nonconsolidated affiliated companies 1,971,000 903,000 635,000
------------ ------------ ------------
Net income before cumulative effect of
accounting change 17,681,000 15,904,000 4,307,000
Cumulative effect of accounting change (500,000)
------------ ------------ ------------
Net income $17,681,000 $15,904,000 $3,807,000
============ ============ ============
Earnings per Common Share (Note J):
Primary
Before cumulative effect of accounting
change $13.46 $12.68 $3.51
Cumulative effect of accounting change .42
----------- ----------- -----------
Net income $13.46 $12.68 $3.09
=========== =========== ===========
Fully diluted
Before cumulative effect of accounting
change $13.00 $12.25 $3.48
Cumulative effect of accounting change .40
----------- ----------- -----------
Net income $13.00 $12.25 $3.08
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 26
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Statements of Common Stockholders' Equity
Years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
PAID-IN
COMMON ADDITIONAL RETAINED
STOCK CAPITAL EARNINGS
-----------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1990 $1,432,000 $18,092,000 $106,608,000
Net income 3,807,000
Cash dividends-Common Shares-$2.93 per share (3,335,000)
Cash dividends-Redeemable Preferred Stock-$5.85 per share (199,000)
Common Shares acquired-at cost
Decrease in redemption value of Redeemable Preferred
Stock (Note G) 92,000
Restricted Stock Plan activity (Note H) 433,000
Tax benefit from restricted stock (Note H) 937,000
Common Shares issued upon exercise of stock options 568,000
Translation adjustment
---------- ----------- ------------
Balance at December 31, 1991 1,432,000 20,030,000 106,973,000
Net income 15,904,000
Cash dividends-Common Shares-$3.025 (3,519,000)
Cash dividends-Redeemable Preferred Stock-$6.05 (206,000)
Common Shares acquired-at cost
Increase in redemption value of Redeemable Preferred
Stock (Note G) (415,000)
Restricted Stock Plan activity (Note H) 252,000
Tax benefit from restricted stock (Note H) 119,000
Common Shares issued upon exercise of stock options 498,000
Tax benefit from exercise of stock options 1,556,000
Deferred compensation used to purchase Common Shares 20,000
Senior Management Incentive Plan activity (Note L) 1,160,000
Notes receivable from senior executive related to exercise of
stock options (Note I)
Translation adjustment
---------- ----------- ------------
Balance at December 31, 1992 1,432,000 23,635,000 118,737,000
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK
HELD IN TREASURY OTHER
-------------------------- EQUITY
SHARES AMOUNT ACCOUNTS TOTAL
----------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1990 301,390 $(28,156,000) $6,024,000 $104,000,000
Net income 3,807,000
Cash dividends-Common Shares-$2.93 per share (3,335,000)
Cash dividends-Redeemable Preferred Stock-$5.85 per share (199,000)
Common Shares acquired-at cost 3,211 (361,000) (361,000)
Decrease in redemption value of Redeemable Preferred
Stock (Note G) 92,000
Restricted Stock Plan activity (Note H) (5,000) 288,000 721,000
Tax benefit from restricted stock (Note H) 937,000
Common Shares issued upon exercise of stock options (23,786) 759,000 1,327,000
Translation adjustment (1,836,000) (1,836,000)
------- ------------ ---------- ------------
Balance at December 31, 1991 275,815 (27,470,000) 4,188,000 105,153,000
Net income 15,904,000
Cash dividends-Common Shares-$3.025 (3,519,000)
Cash dividends-Redeemable Preferred Stock-$6.05 (206,000)
Common Shares acquired-at cost 7,375 (891,000) (891,000)
Increase in redemption value of Redeemable Preferred
Stock (Note G) (415,000)
Restricted Stock Plan activity (Note H) 252,000
Tax benefit from restricted stock (Note H) 119,000
Common Shares issued upon exercise of stock options (70,999) 4,112,000 4,610,000
Tax benefit from exercise of stock options 1,556,000
Deferred compensation used to purchase Common Shares (17,810) 1,133,000 1,153,000
Senior Management Incentive Plan activity (Note L) 1,160,000
Notes receivable from senior executive related to exercise of
stock options (Note I) (4,726,000) (4,726,000)
Translation adjustment (1,409,000) (1,409,000)
------- ------------ ---------- ------------
Balance at December 31, 1992 194,381 (23,116,000) (1,947,000) 118,741,000
</TABLE>
F-5
<PAGE> 27
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Statements of Common Stockholders' Equity (continued)
Years ended December 31, 1993, 1992 and 1991
<TABLE>
<CAPTION>
PAID-IN
COMMON ADDITIONAL RETAINED
STOCK CAPITAL EARNINGS
-----------------------------------------------
<S> <C> <C> <C>
Net income $17,681,000
Cash dividends-Common Shares-$3.1375 per share (3,911,000)
Cash dividends-Redeemable Preferred Stock-$6.275 per share (204,000)
Common Shares acquired-at cost
Increase in redemption value of Redeemable Preferred
Stock (Note G) (468,000)
Restricted Stock Plan activity (Note H) $256,000
Tax benefit from restricted stock (Note H) 66,000
Common Shares issued upon exercise of stock options (44,000)
Tax benefit from exercise of stock options 46,000
Senior Management Incentive Plan activity (Note L) 3,370,000
Translation adjustment
Unrealized loss on marketable securities (Notes A and E)
---------- ----------- ------------
Balance at December 31, 1993 $1,432,000 $27,329,000 $131,835,000
========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK
HELD IN TREASURY OTHER
-------------------------- EQUITY
SHARES AMOUNT ACCOUNTS TOTAL
------------------------------------------------------------
<C> <C> <C> <C>
Net income $ 17,681,000
Cash dividends-Common Shares-$3.1375 per share (3,911,000)
Cash dividends-Redeemable Preferred Stock-$6.275 per share (204,000)
Common Shares acquired-at cost 5,426 $ (787,000) (787,000)
Increase in redemption value of Redeemable Preferred
Stock (Note G) (468,000)
Restricted Stock Plan activity (Note H) 256,000
Tax benefit from restricted stock (Note H) 66,000
Common Shares issued upon exercise of stock options (8,584) 830,000 786,000
Tax benefit from exercise of stock options 46,000
Senior Management Incentive Plan activity (Note L) 3,370,000
Translation adjustment $(6,352,000) (6,352,000)
Unrealized loss on marketable securities (Notes A and E) (147,000) (147,000)
------- ------------ ----------- ------------
Balance at December 31, 1993 191,223 $(23,073,000) $(8,446,000) $129,077,000
======= ============ =========== ============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 28
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
-------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $17,681,000 $15,904,000 $ 3,807,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of fixed assets 13,591,000 13,171,000 13,612,000
Amortization of intangibles 5,486,000 7,682,000 5,104,000
Deferred compensation 6,379,000 8,572,000 9,718,000
Equity in earnings of nonconsolidated
affiliated companies, net of dividends
received of $1,336,000, $595,000 and $440,000 (635,000) (308,000) (195,000)
Minority interest applicable to consolidated
companies 4,508,000 7,612,000 4,548,000
Writedown of investments in affiliates 1,344,000
Amortization of restricted stock expense 256,000 280,000 527,000
Cumulative effect of accounting change 500,000
Deferred income taxes (3,271,000) 5,351,000 (10,981,000)
Asset writeoffs related to restructuring (Note M) 6,997,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (29,082,000) 27,633,000 (49,044,000)
Decrease (increase) in expenditures billable
to clients 555,000 (4,014,000) (3,056,000)
Decrease (increase) in other current assets 28,454,000 (11,434,000) (25,660,000)
(Increase) decrease in other assets (2,202,000) (4,592,000) 5,714,000
Increase in accounts payable 76,731,000 769,000 97,569,000
(Decrease) increase in accrued expenses and
other (5,580,000) 8,976,000 12,594,000
Increase (decrease) in income taxes payable 2,385,000 478,000 (2,822,000)
(Decrease) in other liabilities (7,298,000) (26,160,000) (4,502,000)
----------- ----------- -----------
Net cash provided by operating activities 107,958,000 49,920,000 65,774,000
INVESTING ACTIVITIES
Purchases of fixed assets (13,421,000) (11,904,000) (14,664,000)
Increase in investments in and advances to
nonconsolidated affiliated companies (4,849,000) (1,731,000) (402,000)
Purchases of marketable securities (22,572,000)
Increase in intangibles, primarily goodwill (6,770,000) (1,780,000) (18,212,000)
----------- ----------- -----------
Net cash used in investing activities (47,612,000) (15,415,000) (33,278,000)
</TABLE>
F-7
<PAGE> 29
Grey Advertising Inc. and Consolidated Subsidiary Companies
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1993 1992 1991
--------------------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Common Shares issued under Restricted Stock Plan $ 240,000
Net proceeds from (repayments of) short-term
borrowings $ 9,762,000 $(11,331,000) 12,307,000
Common Shares acquired for treasury (787,000) (492,000) (361,000)
Cash dividends paid on Common Shares (3,884,000) (3,519,000) (3,335,000)
Cash dividends paid on Redeemable Preferred Stock (204,000) (206,000) (199,000)
Proceeds from exercise of stock options 786,000 1,041,000 1,327,000
Proceeds from the redemption of Redeemable
Preferred Stock (300,000)
Proceeds from long-term debt 30,000,000
------------ ------------ -----------
Net cash provided by (used in) financing activities 35,373,000 (14,507,000) 9,979,000
Effect of exchange rate changes on cash (7,207,000) 1,231,000 (2,112,000)
------------ ------------ -----------
Increase in cash and cash equivalents 88,512,000 21,229,000 40,363,000
Cash and cash equivalents at beginning of year 92,755,000 71,526,000 31,163,000
------------ ------------ -----------
Cash and cash equivalents at end of year $181,267,000 $ 92,755,000 $71,526,000
============ ============ ===========
</TABLE>
SUPPLEMENTAL INFORMATION REGARDING NON-CASH FINANCING ACTIVITIES.
In 1992, the Company granted a loan of $3,170,000 in partial payment for the
purchase of common stock (see Note I).
See notes to consolidated financial statements.
F-8
<PAGE> 30
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements
December 31, 1993
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
its majority owned subsidiaries. Material intercompany balances and
transactions have been eliminated in consolidation.
Certain amounts for years prior to 1993 have been reclassified to conform with
the current year classification.
COMMISSIONS AND FEES
Income derived from advertising placed with media is generally recognized based
upon the publication or broadcast dates. Income resulting from expenditures
billable to clients is generally recognized when billed. Payroll costs are
expensed as incurred.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents. The carrying amount of
cash equivalents approximates fair value because of the short maturities of
those instruments.
INVESTMENTS IN AND ADVANCES TO NONCONSOLIDATED AFFILIATED COMPANIES
The Company carries its investments in nonconsolidated affiliated companies on
the equity method. The Company is amortizing the excess ($6,995,000 in 1993 and
$3,669,000 in 1992) of the cost of its investments in certain of these
companies over the related net equity at the date of acquisition over periods
of up to 20 years. Certain investments which are not material in the aggregate
are carried on the cost method.
FIXED ASSETS
Depreciation of furniture, fixtures and equipment is provided for over their
estimated useful lives ranging from three to ten years and has been computed
principally by the straight-line method. Amortization of leaseholds and
leasehold improvements is provided for principally over the terms of the
related leases, which are not in excess of the lives of the assets.
F-9
<PAGE> 31
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION
Primarily all balance sheet accounts of the Company's foreign operations are
translated at the exchange rate in effect at each year end and income statement
accounts are translated at the average exchange rates prevailing during the
year. Resulting translation adjustments are made directly to a separate
component of stockholders' equity. Foreign currency transaction gains and
losses are reported in income. During 1993, 1992 and 1991, foreign currency
transaction gains and losses were not material.
INTANGIBLES
The excess ($63,965,000 in 1993 and $63,895,000 in 1992) of purchase price over
underlying net equity of certain consolidated subsidiaries at the date of
acquisition is being amortized by the straight-line method over periods of up
to 20 years.
INCOME TAXES
Effective January 1, 1993, the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by FAS
109, Accounting for Income Taxes. As permitted under the new rules, the
Company has restated its 1992 and 1991 financial statements (see Note K). The
Company provides appropriate foreign withholding taxes on unremitted earnings
of consolidated and nonconsolidated foreign companies.
MARKETABLE SECURITIES
Effective December 31, 1993, the Company has adopted FAS 115, Accounting for
Certain Investments in Debt and Equity Securities. The Company has classified
its investments in marketable securities as available-for-sale at the time of
purchase and re-evaluates such designation as of each balance sheet date.
Available-for-sale securities are carried at fair value, based on publicly
quoted market prices, with unrealized gains and losses reported as a separate
component of stockholders' equity.
POSTRETIREMENT BENEFITS
During 1992, the Company adopted FAS 106, Accounting for Postretirement
Benefits Other Than Pensions. The costs incurred resulting from the adoption of
this pronouncement were not material.
F-10
<PAGE> 32
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
B. FOREIGN OPERATIONS
The following financial data is applicable to consolidated foreign
subsidiaries:
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------------
<S> <C> <C> <C>
Current assets $357,391,000 $369,342,000 $369,022,000
Current liabilities 363,948,000 372,391,000 363,792,000
Other assets--net of
other liabilities 45,889,000 61,205,000 56,842,000
Net income 2,584,000 4,473,000 6,827,000
</TABLE>
Consolidated retained earnings at December 31, 1993 includes equity in
unremitted earnings of nonconsolidated foreign companies of approximately
$2,937,000.
C. OTHER INCOME (EXPENSE)-NET
<TABLE>
<CAPTION>
1993 1992 1991
--------------------------------------------
<S> <C> <C> <C>
Interest income $7,307,000 $6,565,000 $5,964,000
Interest expense (7,558,000) (7,170,000) (6,125,000)
Dividends from affiliates 674,000 198,000 351,000
Writedown of investments (1,344,000)
Other--net 1,494,000 1,037,000 552,000
---------- ---------- ----------
$1,917,000 $ 630,000 $(602,000)
========== ========== ==========
</TABLE>
D. FIXED ASSETS
Components of fixed assets-at cost are:
<TABLE>
<CAPTION>
1993 1992
--------------------------------
<S> <C> <C>
Furniture, fixtures and equipment $90,304,000 $91,950,000
Leaseholds and leasehold improvements 42,091,000 41,711,000
----------- -----------
132,395,000 133,661,000
Less accumulated depreciation and
amortization 74,671,000 70,687,000
----------- -----------
$57,724,000 $62,974,000
----------- -----------
</TABLE>
F-11
<PAGE> 33
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
E. MARKETABLE SECURITIES
At December 31, 1993, the Company's investments in marketable securities
consist of U.S. Treasury obligations with maturities of 2 to 7 years and a
market value of $22,425,000. At December 31, 1993, the Company has recorded
unrealized losses of $147,000 related to these investments.
F. CREDIT ARRANGEMENTS AND LONG-TERM DEBT
The Company maintains committed lines of credit of $40,000,000 with various
banks and may draw against the lines on unsecured demand notes at rates below
the applicable bank's prime interest rate. These lines of credit were partially
utilized during both 1993 and 1992 to secure obligations of selected foreign
subsidiaries in the respective year-end amounts of $11,100,000 and $13,331,000.
The Company had $34,751,000 and $27,464,000 outstanding under other uncommitted
lines of credit at December 31, 1993 and 1992, respectively. The carrying
amount of the debt outstanding under both the committed and uncommitted lines
of credit approximates fair value because of the short maturities of the
underlying notes.
In January 1993, the Company borrowed $30,000,000 from the Prudential Insurance
Company at a fixed interest rate of 7.68% repayable in equal installments of
$10,000,000 in January 1998, 1999 and 2000. The terms of the loan agreement
require, inter alia, that the Company maintain specified levels of net worth,
meet certain cash flow requirements and limit its incurrence of additional
indebtedness to certain specified amounts. At December 31, 1993, the Company
was in compliance with all of these covenants. The fair value of the
Prudential debt is estimated to be $31,400,000 at December 31, 1993. This
estimate was determined using a discounted cash flow analysis using current
interest rates for debt having the similar terms and remaining maturities.
The remaining balance of long-term debt consists of 8-1/2% Convertible
Subordinated Debentures due December 10, 1996 which are currently convertible
into 8.43 shares of Common Stock and an equal amount of Limited Duration Class
B Common Stock, subject to certain adjustments, for each $1,000 principal
amount of such Debentures. The debt was issued in exchange for cash and a
$3,000,000, 9% promissory note, payable December 10, 1997, from an officer of
the Company and is included in other assets at
F-12
<PAGE> 34
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
F. CREDIT ARRANGEMENTS AND LONG-TERM DEBT (CONTINUED)
December 31, 1993 and 1992. During 1991, the Company extended the maturity
dates of the debt and related promissory note to the dates indicated above.
During each of the years 1993, 1992 and 1991, the Company paid to the officer
interest of $257,000 pursuant to the terms of the 8 1/2% Convertible
Subordinated Debenture. During each of the years 1993, 1992 and 1991, the
officer paid to the Company interest of $270,000 pursuant to the terms of the
9% promissory note.
For the years 1993, 1992 and 1991, the Company made interest payments of
$6,529,000, $7,242,000 and $6,118,000, respectively.
G. REDEEMABLE PREFERRED STOCK
The Company has outstanding at December 31, 1993 and 1992, 22,000 and 24,000
shares, respectively, of its Series 1 Preferred Stock and 5,000 shares each of
its Series 2 and Series 3 Preferred Stock, which are held by current and former
senior employees of the Company including one executive officer. The shares
were issued at a price equal to the book value of the Common Stock at the time
of issuance less a fixed amount. One dollar per share was paid in cash and the
balance was represented by full recourse promissory notes, payable in May 1996,
bearing interest at 9% per annum. In April 1993, the Company, at the option of
one holder, after attainment of age 65, redeemed 2,000 shares of Series 1
Preferred Stock at a price of $347,000. The Company discharged its obligation
by payment of cash of $300,000 and forgiveness of the holder's promissory note
of $47,000. The amount of the full recourse promissory notes included in other
assets at December 31, 1993 and 1992 was $763,000 and $810,000, respectively.
The interest paid to the senior employees in 1993, 1992 and 1991, pursuant to
the terms of these notes was $70,000, $77,000, and $77,000, respectively.
The redemption price per share for the Preferred Stock is the combined book
value per share of the Common Stock and Limited Duration Class B Common Stock
as adjusted in accordance with the terms of the respective Certificates of
Designation and Terms of each series of Preferred Stock upon redemption less a
fixed discount. Holders of the Preferred Stock may have their shares redeemed
upon termination of employment prior to age 65. The Company is obligated to
redeem such shares following the holder's retirement after age 65.
F-13
<PAGE> 35
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
G. REDEEMABLE PREFERRED STOCK (CONTINUED)
Following the distribution of the new class of Common Stock designated Limited
Duration Class B Common Stock, the holders of the Preferred Stock became
entitled to eleven votes per share on all matters submitted to the vote of
stockholders. The holders of the Series 1 Preferred Stock are entitled, as
well, to vote as a single class to elect or remove one-quarter of the Board of
Directors, to approve the merger or consolidation of the Company or the sale by
it of all or substantially all of its assets, and to approve the authorization
or issuance of any other class of Preferred Stock having equivalent voting
rights.
The holders of the Preferred Stock are entitled to receive cumulative
preferential dividends at the annual rate of $.25 per share, and to participate
in dividends on the Common Stock and Limited Duration Class B Common Stock to
the extent such dividends, on a per share basis, exceed the preferential
dividends.
In the event of the liquidation of the Company, holders of Preferred Stock are
entitled to a preferential liquidation distribution of $1.00 per share in
addition to all accrued and unpaid preferential dividends.
The total carrying value of the Series 1, 2 and 3 Preferred Stock (applicable
to those shares outstanding at each respective year end) increased by $468,000
and $415,000 in 1993 and 1992, respectively, and decreased by $92,000 in 1991,
which represents the change in redemption value during those periods. This
change is referred to as "Additional Capital Applicable to Redeemable Preferred
Stock" in the Certificates of Designation and Terms of the Series 1, 2 and 3
Preferred Stock.
H. COMMON STOCK
The Company has authorized and outstanding two classes of common stock, Common
Stock and Limited Duration Class B Common Stock (Class B Common Stock), both $1
par value per share.
The Class B Common Stock has the same dividend and liquidation rights as the
Common Stock and a holder of each share of Class B Common Stock is entitled to
ten votes on all matters submitted to stockholders. The shares of Class B
Common Stock are restricted as to transferability and upon transfer, except to
specified limited classes of transferees, will convert into shares of Common
Stock which have one vote per share. The Class B Common Stock will
automatically convert to Common Stock on April 30, 1996.
F-14
<PAGE> 36
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
H. COMMON STOCK (CONTINUED)
Shares which have been issued and are now outstanding under the provisions of
the Company's Restricted Stock Plan are subject to restrictions as to
transferability expiring generally five or six years from the date of issue. In
1990, an additional 100,000 shares of Common Stock were authorized under this
Plan. During 1993, the restriction lapsed on 1,400 shares of Common Stock and
no shares of Class B Common Stock. At December 31, 1993 and 1992, there were
125,000 and 124,800 shares of Common Stock and 49,900 and 49,900 shares of
Class B Common Stock, respectively, reserved by the Company and available for
issuance under this Plan. Compensation to employees under the Plan of $214,000
representing the unamortized excess of the market value of restricted stock
over any cash consideration received, is carried as a reduction of Paid-In
Additional Capital and is charged to income ($256,000 in 1993, $252,000 in 1992
and $481,000 in 1991) over the related required period of service of the
respective employees.
The tax benefit, resulting from the difference between compensation expense
deducted for tax purposes and compensation expense charged to income, is
recorded as an increase to Paid-In Additional Capital.
I. STOCK OPTION PLANS
EXECUTIVE GROWTH PLAN
Under the terms of the Company's qualified stock option plan (Executive Growth
Plan), options may be granted to officers and key employees at prices not less
than 100% of the fair market value of the shares on the date of grant. At
December 31, 1993 and 1992, there were no options outstanding and no options
exercisable and at December 31, 1991 and 1990, there were 25,000 options of
Class B Common Stock and 25,000 options of Common Stock outstanding and
exercisable under this plan. During 1992, these options were exercised at a
total option price of $3,237,000, and were paid for with cash of $67,000 and a
note from an officer of the Company in the amount of $3,170,000 due and payable
in December 2001 at a fixed interest rate of 6.06%. At December 31, 1993,
142,847 shares of Common Stock and 142,847 shares of Class B Common Stock were
reserved by the Company for issuance with respect to the Plan. In addition, the
holder of the options was entitled to receive an additional amount representing
the dividends which would have been paid if the options had been exercised on
the date of grant. The holder used this additional amount ($1,153,000) to
purchase an additional 8,905 shares of both Common Stock and Class B Common
Stock. The additional amount was reflected as compensation expense in 1992 and
in years prior to the exercise.
F-15
<PAGE> 37
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
I. STOCK OPTION PLANS (CONTINUED)
In addition, and in accordance with the terms of the option agreement, the
holder of the options issued to the Company a promissory note in the principal
amount of $2,340,000 bearing interest at the rate of 6.06%, payable in December
2001, to settle his obligation to provide the Company with funds necessary to
pay the required withholding taxes due upon the exercise of the options. The
Company received a tax benefit of $1,556,000 upon the exercise of the options.
A portion of this note equal to the tax benefit and the full amount of the note
for $3,170,000 are reflected in a separate component of stockholders' equity at
December 31, 1993 and 1992.
The interest paid to the Company by the holder pursuant to the terms of the two
notes issued in connection with the option exercise was $334,000 in 1993. No
interest payments were made in 1992.
INCENTIVE STOCK OPTION PLAN
In 1982, the Company adopted an Incentive Stock Option Plan. Under this plan in
which options were available to be granted through May 1992, options were
granted to key employees, including officers, at a price not less than 100% of
the fair market value of the shares on the date of grant. A Committee of the
Board of Directors determined the terms and conditions under which options may
be granted or exercised. However, options (i) may not be exercised within
twelve months from the date of grant, (ii) may not be granted to Committee
members, (iii) expire within ten years from the date of grant and (iv) must be
exercised in the order of grant.
Transactions involving outstanding stock options under this Plan were:
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------------------
CLASS B
COMMON COMMON TOTAL
STOCK STOCK OPTION PRICE
-------------------------------------------
<S> <C> <C> <C>
Outstanding, December 31, 1990 26,992 31,992 $3,995,000
Cancelled (266) (266) (35,000)
Exercised (11,893) (11,893) (1,325,000)
------- ------- ----------
Outstanding, December 31, 1991 14,833 19,833 2,635,000
Cancelled (500) (500) (65,000)
Exercised (10,233) (10,233) (1,323,000)
------- ------- ----------
Outstanding, December 31, 1992 4,100 9,100 1,247,000
Cancelled (300) (300) (58,000)
Exercised (3,700) (3,700) (676,000)
------- ------- ----------
Outstanding, December 31, 1993 100 5,100 $513,000
======= ======= ==========
</TABLE>
F-16
<PAGE> 38
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
I. STOCK OPTION PLANS (CONTINUED)
As of December 31, 1993, options to acquire 2,242 shares of Common Stock and
100 shares of Class B Common Stock were exercisable. The Company has reserved
29,684 shares of Common Stock and 29,684 shares of Class B Common Stock for
issuance with respect to this plan.
NONQUALIFIED STOCK OPTION PLAN
On December 2, 1987, the Company adopted a Nonqualified Stock Option Plan,
whereby 100,000 shares of Common Stock were reserved for issuance. In 1990, the
number of shares of Common Stock authorized for issuance under this Plan was
increased to 200,000. At the discretion of a Committee of the Board of
Directors, nonqualified stock options are granted to employees eligible to
receive options at prices not less than 100% of the fair market value of the
shares on the date of grant, and options must be exercised within 10 years of
grant and for only specified limited periods beyond termination of employment.
Transactions involving outstanding stock options under this Plan were:
<TABLE>
<CAPTION>
NUMBER TOTAL
OF SHARES OPTION PRICE
--------------------------------
<S> <C> <C>
Outstanding, December 31, 1990 35,750 $3,558,000
Cancelled (1,100) (120,000)
Issued 6,200 869,000
--------- ----------
Outstanding, December 31, 1991 40,850 4,307,000
Cancelled (2,200) (257,000)
Issued 1,000 131,000
Exercised (533) (50,000)
--------- ----------
Outstanding, December 31, 1992 39,117 4,131,000
Cancelled (567) (58,000)
Exercised (1,184) (110,000)
--------- ----------
Outstanding, December 31, 1993 37,366 $3,963,000
========= ==========
Available for future grants 160,917
=========
</TABLE>
As of December 31, 1993 and 1992, 19,668 and 8,051 of the outstanding options,
respectively, were exercisable.
F-17
<PAGE> 39
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
J. COMPUTATION OF NET INCOME PER COMMON SHARE
The computation of net income per common share is based on the weighted average
number of common shares outstanding, including adjustments for the effect of
the assumed exercise of dilutive stock options and shares issuable pursuant to
the Company's Senior Management Incentive Plan (see Note L(1)) (1,263,900 in
1993, 1,205,241 in 1992 and 1,196,908 in 1991) and, for fully diluted net
income per common share, the assumed conversion of the 8-1/2% Convertible
Subordinated Debentures issued in December 1983. Also, for the purpose of
computing net income per common share, the Company's net income is reduced by
dividends on the Preferred Stock and is reduced or increased to the extent of
an increase or decrease, respectively, in redemption value of the Preferred
Stock. Primary net income per common share is computed as if stock options
were exercised at the beginning of the period and the funds obtained thereby
used to purchase common shares at the average market price during the period.
In computing fully diluted net income per common share, the market price at the
close of the period or the average market price, whichever is higher, is used
to determine the number of shares which are assumed to be repurchased.
The effects of the Preferred Stock dividend requirements and the change in
redemption values amounted to $.53, $.52 and $.09 per share in 1993, 1992 and
1991, respectively.
K. INCOME TAXES
Effective January 1, 1993, the Company adopted FAS 109 (see Note A). As
permitted under the new rules, the Company restated its 1992 and 1991 financial
statements. The effect of adoption of FAS 109 was to reduce net income in 1992
by $600,000 or $0.50 per share, through an increase to the deferred provision
for income taxes. The cumulative effect of adoption as of January 1, 1991 was
to reduce net income by $500,000.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes. At December 31, 1993, and
at December 31, 1992 and 1991, as restated, the Company had deferred tax assets
of $16,282,000, $15,334,000 and $21,928,000 and deferred tax liabilities of
$12,194,000, $14,517,000 and $15,760,000, respectively, detailed as follows:
F-18
<PAGE> 40
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
K. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
DEFERRED TAX ASSETS (LIABILITIES)
1993 1992 1991
-------------------------------------------
<S> <C> <C> <C>
Restructuring costs and related future tax benefits $3,531,000 $5,767,000 $7,411,000
Deferred compensation 5,730,000 4,220,000 8,792,000
Accrued expenses 7,021,000 5,347,000 5,725,000
Safe harbor lease and depreciation (9,228,000) (10,772,000) (12,267,000)
Tax on unremitted foreign earnings and other (2,966,000) (3,745,000) (3,493,000)
---------- ----------- -----------
4,088,000 817,000 6,168,000
Valuation allowance for deferred tax assets
---------- ----------- -----------
Net deferred tax assets $4,088,000 $817,000 $6,168,000
========== =========== ===========
</TABLE>
The components of income before taxes on income are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
----------------------------------------
<S> <C> <C> <C>
Domestic $28,646,000 $20,440,000 $(6,648,000)
Foreign 14,059,000 22,148,000 19,925,000
------------- ----------- -----------
$42,705,000 $42,588,000 $13,277,000
============= =========== ===========
</TABLE>
Provisions (benefits) for Federal, foreign, state and local income taxes
consisted of the following:
<TABLE>
<CAPTION>
1993 1992 1991
------------------------ ------------------------- -------------------------
CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Federal $12,106,000 $(2,448,000) $1,649,000 $3,752,000 $2,867,000 $(3,981,000)
Foreign 8,580,000 (1,578,000) 11,727,000 8,447,000
State and
local 5,072,000 755,000 1,248,000 1,599,000 4,724,000 (7,000,000)
----------- ----------- ----------- ---------- ----------- ------------
$25,758,000 $(3,271,000) $14,624,000 $5,351,000 $16,038,000 $(10,981,000)
=========== =========== =========== ========== =========== ============
</TABLE>
The effective tax rate varied from the statutory Federal income tax rate as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------------------------------------
<S> <C> <C> <C>
Statutory Federal tax rate 35.0% 34.0% 34.0%
State and local income taxes (benefits), net of Federal
income tax 8.9 4.4 (11.3)
Difference in foreign tax rates 8.4 11.2 14.7
Withholding tax on unremitted foreign earnings 1.2 1.0 3.2
Adjustment of prior years' provisions (2.2) (4.9)
Other--net 1.4 1.2 (2.5)
------- ------- ------
52.7% 46.9% 38.1%
======= ======= ======
</TABLE>
During the years 1993, 1992 and 1991, the Company made income tax payments of
$18,748,000, $14,435,000 and $13,905,000, respectively.
F-19
<PAGE> 41
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
L. RETIREMENT PLANS, DEFERRED COMPENSATION, LEASES AND CONTINGENCIES
1. The Company's Profit Sharing Plan is available to all employees of the
Company and qualifying subsidiaries meeting certain eligibility
requirements. The Plan provides for contributions by the Company at the
discretion of the Board of Directors, subject to maximum limitations. The
Company also operates a noncontributory Employee Stock Ownership Plan
covering eligible employees of the Company and qualifying subsidiaries,
under which the Company may make contributions (in stock or cash) to an
Employee Stock Ownership Trust ("ESOT") in amounts each year as determined
at the discretion of the Board of Directors. The Company made no stock
contributions to the Plan in 1993, 1992 and 1991. The Company and the ESOT
have certain rights to purchase shares from participants whose employment
has terminated. In addition to the two plans noted above, various
subsidiaries maintain separate profit sharing and retirement arrangements.
Furthermore, the Company also provides additional retirement and deferred
compensation benefits to certain officers and employees.
The Company maintains a Senior Management Incentive Plan ("SMIP") in which
deferred compensation is granted to senior executive or management
employees deemed essential to the continued success of the Company. The
amount recorded as an expense related to this Plan amounted to $4,581,000,
$4,340,000 and $4,529,000 in 1993, 1992 and 1991, respectively.
Approximately $3,343,000 and $1,160,000 of Plan expense incurred in 1993
and 1992, respectively, will be payable in Company stock in accordance with
the terms of the Plan. These awards convert into 18,461 and 8,624
equivalent shares of Common Stock in 1993 and 1992, respectively. The
future obligation related to the stock award has been reflected as an
increase to Paid-In Additional Capital.
Expenses related to the foregoing plans and benefits aggregated $21,057,000
in 1993, $25,002,000 in 1992, and $20,300,000 in 1991.
In December 1990, the Company amended its employment agreement with its
Chairman and Chief Executive Officer, which extended the term of that
agreement through December 31, 1997. Concurrently, the Company also
discharged this individual's pension obligation which had been established
pursuant to the terms of his long-standing employment agreement. This
obligation was partially satisfied with a distribution of approximately
$19.8 million from a trust fund previously established by the Company for
this purpose. The remainder of the amount necessary to discharge this
obligation (approximately $9.5 million) was distributed from general
F-20
<PAGE> 42
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
L. RETIREMENT PLANS, DEFERRED COMPENSATION, LEASES AND CONTINGENCIES
(CONTINUED)
corporate funds. Included in other assets at December 31, 1993 and 1992 is
approximately $9.5 and $11.9 million, respectively, related to this
arrangement which is being amortized to expense over the remaining term of
the related employment agreement.
Pursuant to an employment agreement, dated December 21, 1990, an executive
officer of the Company borrowed $1,000,000 from the Company repayable at
December 31, 1995, except that one-fifth of the principal of the loan is
forgiven by the Company each December 31, beginning with December 31, 1991,
provided that the officer continues to be employed by the Company on those
dates. In 1993, 1992 and 1991, the Company has included in each year
$200,000 of compensation expense, representing the amount of loan forgiven
each year. As of December 31, 1993 and 1992, the remaining loan balance
was $400,000 and $600,000, respectively (the long term portion of the loan,
$200,000 in 1993 and $400,000 in 1992, is included in other assets).
2. Rental expense amounted to approximately $32,725,000 in 1993, $33,741,000
in 1992 and $29,106,000 in 1991 which is net of sub-lease rental income of
$2,016,000 in 1993, $3,343,000 in 1992, and $3,483,000 in 1991. Approximate
minimum rental commitments, excluding escalations, under noncancellable
operating leases are as follows:
<TABLE>
<CAPTION>
SUB-LEASE
OFFICE SPACE COMMITMENTS TOTAL
-------------------------------------------------------------
<S> <C> <C> <C>
1994 $27,007,000 $(807,000) $26,200,000
1995 24,467,000 (392,000) 24,075,000
1996 24,085,000 (373,000) 23,712,000
1997 21,256,000 (341,000) 20,915,000
1998 19,626,000 (324,000) 19,302,000
Beyond 1998 43,925,000 (335,000) 43,590,000
------------- ------------ -------------
$160,366,000 $(2,572,000) $157,794,000
============= ============ =============
</TABLE>
3. The Company is not involved in any pending legal proceedings not covered by
insurance or by adequate indemnification or which, if decided adversely,
would have a material effect on either the results of operations,
liquidity or financial position of the Company.
F-21
<PAGE> 43
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
M. RESTRUCTURING COSTS
In November 1991, the Company recorded a charge for restructuring costs of
$23,850,000 primarily in connection with the absorption of a former subsidiary.
These charges related predominantly to the disposal of the subsidiary's real
estate obligations and leasehold assets, the write-off of certain of its fixed
assets, goodwill and other costs, primarily severance, in connection with the
integration. The restructuring costs also included similar modest charges with
respect to a small number of related operations. The components of the
restructuring charge as recorded in the fourth quarter of 1991 were as follows:
<TABLE>
<S> <C>
Lease termination-payments and other lease related costs $12,200,000
Write-off of fixed assets and leasehold improvements 4,400,000
Write-off of goodwill of former subsidiaries 2,500,000
Severance payments 2,300,000
Other costs 2,450,000
------------
$23,850,000
============
</TABLE>
The amount provided in 1991 was for liabilities which existed as of the fourth
quarter of 1991 and was not for any events anticipated to happen after December
31, 1991. Most personnel reduction related to the absorption of the former
subsidiaries occurred during the fourth quarter of 1991 and the severance
accrual was adequate to cover those liabilities. Of the deferred tax benefits
totaling $7,411,000, related to the restructuring charge that was recorded in
1991, $1,644,000 was realized in 1992 and $2,236,000 realized in 1993 (see Note
K). The remaining deferred tax balance is expected to be realized over the
next couple of years.
F-22
<PAGE> 44
Grey Advertising Inc. and Consolidated Subsidiary Companies
Notes to Consolidated Financial Statements (continued)
N. INDUSTRY SEGMENT AND RELATED INFORMATION
Commissions and fees and operating profit by geographic area for the years
ended December 31, 1993, 1992 and 1991, and related identifiable assets at
December 31, 1993, 1992 and 1991 are summarized below (000s omitted):
<TABLE>
<CAPTION>
UNITED STATES WESTERN EUROPE
-------------------------------- ---------------------------------
1993 1992 1991 1993 1992 1991
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMISSIONS AND FEES $ 267,964 $ 241,279 $ 248,322 $ 260,005 $ 281,632 $ 242,644
-------------------------------------------------------------------
OPERATING PROFIT (LOSS) $ 28,809 $ 20,023 $ (8,239) $ 11,415 $ 16,594 $ 17,866
-------------------------------------------------------------------
OTHER INCOME ( EXPENSE)--NET
INCOME BEFORE TAXES ON INCOME OF
CONSOLIDATED COMPANIES
IDENTIFIABLE ASSETS $ 353,532 $ 260,849 $ 246,990 $ 389,723 $ 427,728 $ 421,656
-------------------------------------------------------------------
INVESTMENTS IN AND ADVANCES TO
NONCONSOLIDATED AFFILIATED
COMPANIES
TOTAL ASSETS
</TABLE>
<TABLE>
<CAPTION>
OTHER CONSOLIDATED
--------------------------------- -----------------------------------
1993 1992 1991 1993 1992 1991
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMISSIONS AND FEES $ 39,274 $ 41,557 $ 37,333 $ 567,243 $ 564,468 $ 528,299
----------------------------------------------------------------------
OPERATING PROFIT (LOSS) 564 $ 5,341 $ 4,252 $ 40,788 $ 41,958 $ 13,879
---------------------------------
OTHER INCOME (EXPENSE)--NET 1,917 630 (602)
-----------------------------------
INCOME BEFORE TAXES ON INCOME OF
CONSOLIDATED COMPANIES $ 42,705 $ 42,588 $ 13,277
===================================
IDENTIFIABLE ASSETS $ 61,274 $ 52,627 $ 56,714 $ 804,529 $ 741,204 $ 725,360
---------------------------------
INVESTMENTS IN AND ADVANCES TO
NONCONSOLIDATED AFFILIATED
COMPANIES 16,104 11,160 10,471
-----------------------------------
TOTAL ASSETS $ 820,633 $ 752,364 $ 735,831
===================================
</TABLE>
COMMISSIONS AND FEES FROM ONE CLIENT AMOUNTED TO 13.0%, 13.4% AND 10.6% OF THE
CONSOLIDATED TOTAL IN 1993, 1992 AND 1991, RESPECTIVELY.
F-23
<PAGE> 45
SCHEDULE I -- MARKETABLE SECURITIES -- OTHER INVESTMENTS
GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES
YEAR ENDED DECEMBER 31, 1993
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C
- ---------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES
OR UNITS -- PRINCIPAL
NAME OF ISSUER AND AMOUNTS OF BONDS COST OF
TITLE OF EACH SHARE AND NOTES EACH ISSUE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SECURITIES AVAILABLE-FOR-SALE (1)
U. S. GOVERNMENT OBLIGATIONS $22,050,000 $22,572,000
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
COL. A COL. D COL. E
- ---------------------------------------------------------------------------------------------------------------------------
AMOUNT AT WHICH EACH
PORTFOLIO OF EQUITY
SECURITY ISSUES AND
MARKET VALUE OF EACH OTHER SECURITY ISSUE
NAME OF ISSUER AND EACH ISSUE AT CARRIED IN THE BALANCE
TITLE OF EACH SHARE BALANCE SHEET DATE SHEET
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SECURITIES AVAILABLE-FOR-SALE (1)
U. S. GOVERNMENT OBLIGATIONS $22,425,000 $22,425,000
</TABLE>
(1) SECURITIES AVAILABLE-FOR-SALE ARE CARRIED AT FAIR VALUE WITH UNREALIZED
GAINS AND LOSSES INCLUDED AS A SEPARATE COMPONENT OF STOCKHOLDERS'
EQUITY.
F-24
<PAGE> 46
Schedule II-Amounts Receivable from Related Parties and Underwriters,
Promoters,
and Employees Other Than Related Parties
GREY ADVERTISING INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Col. A Col. B Col. C
- ---------------------------------------------------------------------------------------------------------------
Balance at
Name of Debtor Beginning of Period Additions
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Year ended December 31, 1993:
E. Meyer, 6.06% interest bearing note receivable,
due December 2001 $3,170,000
E. Meyer, 6.06% interest bearing note receivable,
due December 2001 2,340,000
E. Meyer, 9% interest bearing note receivable,
due December 1997 3,000,000
E. Meyer, 9% interest bearing note receivable,
due May 1996 763,000
S. Novick, 7.5% interest bearing loan receivable,
due December 1995 (1) 600,000
Vasoft Pty. Ltd., noninterest bearing loan receivable,
due September 30, 1996 (2) 130,000 $7,000
Promaton Pty. Ltd., noninterest bearing loan receivable,
due September 30, 1995 (3) 130,000 7,000
I. Herdman, noninterest bearing loan receivable,
due February 1993 137,000
Khun Han Pty. Ltd., 9.25% interest bearing loan
receivable, due September 30, 1994 (4) 360,000
C. Preisler, noninterest bearing note receivable,
due January 1993 190,000
Thomas Gad, noninterest bearing notes receivable,
due between 1994 and 1997 382,000 238,000
-----------------------------------
$11,202,000 $252,000
===================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Col. A Col. D Col. E
-------------------------------------------------------------------------
Deductions Balance at End of Period
- ------------------------------------------------------------------------------------------------------------------------------------
(1) (2) (1) (2)
Name of Debtor Amounts Collected Amounts Written Off Current Not Current
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1993:
E. Meyer, 6.06% interest bearing note receivable,
due December 2001 $3,170,000
E. Meyer, 6.06% interest bearing note receivable,
due December 2001 2,340,000
E. Meyer, 9% interest bearing note receivable,
due December 1997 3,000,000
E. Meyer, 9% interest bearing note receivable,
due May 1996 763,000
S. Novick, 7.5% interest bearing loan receivable,
due December 1995 (1) $200,000 $200,000 200,000
Vasoft Pty. Ltd., noninterest bearing loan receivable,
due September 30, 1996 (2) 137,000
Promaton Pty. Ltd., noninterest bearing loan receivable,
due September 30, 1995 (3) 137,000
I. Herdman, noninterest bearing loan receivable,
due February 1993 137,000
Khun Han Pty. Ltd., 9.25% interest bearing loan
receivable, due September 30, 1994 (4) 263,000 97,000
C. Preisler, noninterest bearing note receivable,
due January 1993 190,000
Thomas Gad, noninterest bearing notes receivable,
due between 1994 and 1997 403,000 135,000 82,000
---------------------------------------------------------------------
$1,193,000 $432,000 $9,829,000
=====================================================================
</TABLE>
(1)--The amount reflected in Column D (1) represents the amount of the loan
forgiven in 1993.
(2)--Vasoft Pty. Ltd. is a company controlled by James Allan, a director of Grey
Advertising (NSW) Pty. Limited.
(3)--Promaton Pty. Ltd. is a company controlled by Garry Murphie, a director of
Grey Advertising (NSW) Pty. Limited.
(4)--Khun Han Pty. Ltd. is a company controlled by Greg Harper, a director of
Grey Advertising (Victoria) Pty. Ltd.
F-25
<PAGE> 47
Schedule II--Amounts Receivable from Related Parties and Underwriters,
Promoters,
and Employees Other Than Related Parties
GREY ADVERTISING INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
Col. A Col. B Col. C
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Name of Debtor Balance at
Beginning of Period Additions
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Year ended December 31, 1992:
E. Meyer, 6.06% interest bearing note receivable,
due December 2001 $3,170,000
E. Meyer, 6.06% interest bearing note receivable,
due December 2001 2,340,000
E. Meyer, 9% interest bearing note receivable,
due December 1997 $3,000,000
E. Meyer, 9% interest bearing note receivable,
due May 1996 763,000
S. Novick, 7.5% interest bearing loan receivable,
due December 1995 (1) 800,000
Vasoft Pty. Ltd., noninterest bearing loan
receivable, 130,000
due September 30, 1996 (2)
Promaton Pty. Ltd., noninterest bearing loan
receivable, 130,000
due September 30, 1995 (3)
I. Herdman, noninterest bearing loan receivable,
due February 1993 137,000
Khun Han Pty. Ltd., 9.25% interest bearing loan
receivable, due September 30, 1994 (4) 509,000
C. Preisler, noninterest bearing note receivable,
due January 1993 190,000
Thomas Gad, noninterest bearing notes receivable,
due between 1994 and 1997 460,000
--------------------------------
$4,563,000 $7,066,000
================================
</TABLE>
<TABLE>
<CAPTION>
Col. A Col. D Col. E
- ------------------------------------------------------------------------------------------------------------------------------------
Deductions Balance at End of Period
- ------------------------------------------------------------------------------------------------------------------------------------
Name of Debtor (1) (2) (1) (2)
Amounts Collected Amounts Written Off Current Not Current
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1992:
E. Meyer, 6.06% interest bearing note receivable,
due December 2001 $3,170,000
E. Meyer, 6.06% interest bearing note receivable,
due December 2001 2,340,000
E. Meyer, 9% interest bearing note receivable,
due December 1997 3,000,000
E. Meyer, 9% interest bearing note receivable,
due May 1996 763,000
S. Novick, 7.5% interest bearing loan receivable,
due December 1995 (1) $200,000 $200,000 400,000
Vasoft Pty. Ltd., noninterest bearing loan
receivable, 130,000
due September 30, 1996 (2)
Promaton Pty. Ltd., noninterest bearing loan
receivable, 130,000
due September 30, 1995 (3)
I. Herdman, noninterest bearing loan receivable,
due February 1993 137,000
Khun Han Pty. Ltd., 9.25% interest bearing loan
receivable, due September 30, 1994 (4) 149,000 217,000 143,000
C. Preisler, noninterest bearing note receivable,
due January 1993 190,000
Thomas Gad, noninterest bearing notes receivable,
due between 1994 and 1997 78,000 382,000
--------------------------------------------------------------------
$427,000 $744,000 $10,458,000
====================================================================
</TABLE>
(1)--The amount reflected in Column (D)(1) represents the amount of loan
forgiven in 1992.
(2)--Vasoft Pty. Ltd. is a company controlled by James Allan, a director of
Grey Advertising (NSW) Pty. Limited.
(3)--Promaton Pty. Ltd. is a company controlled by Garry Murphie, a director of
Grey Advertising (NSW) Pty. Limited.
(4)--Khun Han Pty. Ltd. is a company controlled by Greg Harper, a director of
Grey Advertising (Victoria) Pty. Ltd.
F-26
<PAGE> 48
Schedule II--Amounts Receivable from Related Parties and Underwriters,
Promoters,
and Employees Other Than Related Parties (continued)
GREY ADVERTISING INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Col. A Col. B Col. C
- --------------------------------------------------------------------------------------------------
Name of Debtor Balance at
Beginning of Period Additions
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Year ended December 31, 1991:
E. Meyer, 9% interest bearing note receivable,
due December 1997 $3,000,000
E. Meyer, 9% interest bearing note receivable,
due May 1996 763,000
S. Novick, 7.5% interest bearing loan receivable,
due December 1995 (1) $1,000,000
-----------------------------------
$3,763,000 $1,000,000
===================================
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Col. A Col. D Col. E
Deductions Balance at End of Period
- ------------------------------------------------------------------------------------------------------------------------------------
Name of Debtor (1) (2) (1) (2)
Amounts Collected Amounts Written Off Current Not Current
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1991:
E. Meyer, 9% interest bearing note receivable,
due December 1997 $3,000,000
E. Meyer, 9% interest bearing note receivable,
due May 1996 763,000
S. Novick, 7.5% interest bearing loan receivable,
due December 1995 (1) $200,000 $200,000 600,000
--------------------------------------------------------------------
$200,000 $200,000 $4,363,000
====================================================================
</TABLE>
(1) The amount reflected in Column (D) (1) represents the amount of loan
forgiven in 1991.
F-27
<PAGE> 49
SCHEDULE IX--SHORT-TERM BORROWINGS
GREY ADVERTISING INC.
AND CONSOLIDATED SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D
- -----------------------------------------------------------------------------------------------------------------------------
Maximum
Weighted Amount
Balance Average Outstanding
Category of Aggregate at End of Interest During the
Short-Term Borrowings Period Rate Period
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Year ended December 31, 1993:
Notes payable to banks (a) $11,100,000 7.7% $13,759,000
Notes payable to banks (b) 34,751,000 10.9% 39,638,000
Year ended December 31, 1992:
Notes payable to banks (a) $13,331,000 10.5% $14,257,000
Notes payable to banks (b) 27,464,000 11.9% 45,852,000
Year ended December 31, 1991:
Notes payable to banks (b) $50,470,000 11.6% $53,115,000
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Col. A Col. E Col. F
- -----------------------------------------------------------------------------------
Average Weighted
Amount Average
Outstanding Interest Rate
Category of Aggregate During the During the
Short-Term Borrowings Period Period
- -----------------------------------------------------------------------------------
<S> <C> <C>
Year ended December 31, 1993:
Notes payable to banks (a) $12,400,000 (c) 7.7% (d)
Notes payable to banks (b) 31,427,000 11.1% (d)
Year ended December 31, 1992:
Notes payable to banks (a) $13,522,000 (c) 10.2% (d)
Notes payable to banks (b) 35,922,000 12.0% (d)
Year ended December 31, 1991:
Notes payable to banks (b) $38,092,000 (c) 11.8% (d)
</TABLE>
(a)--Notes payable to banks represent borrowings under lines of credit
arrangements which are subject to termination at a specified date.
(b)--Notes payable to banks represent promissory notes under credit
arrangements.
(c)--The average amount outstanding during the period is the weighted monthly
outstanding balance.
(d)--The weighted average interest rate during the period was computed by
dividing the actual interest expense by the weighted average outstanding
amount.
F-28
<PAGE> 50
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Assigned
to Exhibit (i.e. 601
of Regulation S-K) Description of Exhibits
------------------ -----------------------
<S> <C>
3.01 Restated Certificate of Incorporation
of Grey Advertising Inc. ("Grey").
(Incorporated herein by reference to
Exhibit 4.01 to Grey's Registration
Statement on Form S-8, dated January
9, 1987, filed with the Securities
and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C., 20549
("SEC"), pursuant to Section 6(a)
of the Securities Act of 1933 (" '33 Act"),
under Commission File No. 33-11253.)
3.02 By-Laws of Grey as amended.
(Incorporated herein by reference to
Exhibit 3.02 to Grey's Annual Report
on Form 10-K for the fiscal year
ended December 31, 1988.)
3.03 Designation and Terms
of Series 1 Preferred Stock of Grey.
(Incorporated herein by reference
to Article Fourth, Section
A(III) of Exhibit 4.01 to Grey's
Registration Statement on Form S-8
filed with the SEC pursuant to
Section 6(a) of the '33 Act.)
3.04 Designation and Terms
of Series 2 Preferred Stock of Grey.
(Incorporated herein by reference
to Article Fourth, Section A(IV)
of Exhibit 4.01 to Grey's
Registration Statement on Form S-8
filed with the SEC pursuant to
Section 6(a) of the '33 Act.)
3.05 Designation and Terms
of Series 3 Preferred Stock of Grey.
(Incorporated herein by reference
to Article Fourth, Section A(V)
of Exhibit 4.01 to Grey's
Registration Statement on Form S-8
filed with the SEC pursuant to
Section 6(a) of the '33 Act.)
</TABLE>
<PAGE> 51
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Assigned
to Exhibit (i.e. 601
of Regulation S-K) Description of Exhibits
------------------ ---------------------------
<S> <C>
3.06 Purchase Agreement, dated as of
December 10, 1983, between Grey
and Edward H. Meyer relating
to the sale to Mr. Meyer of Grey's
8-1/2% Convertible Debentures, of
even date therewith ("Convertible
Debenture"). (Incorporated herein by
reference to Exhibit 3.08 to Grey's
Annual Report on Form 10-K for the
fiscal year ended December 31, 1983.)
3.07 Extension Agreements, dated as of
November 19, 1991 between Grey and
Edward H. Meyer relating to the
extension of the maturity dates of
the Convertible Debenture and
related Promissory Note. (Incorporated
herein by reference to Exhibit 3.07 to
Grey's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991.)
3.08 Form of Convertible Debenture.
(Incorporated herein by reference to
Exhibit 3.09 to Grey's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1983.)
9.01 Form of Voting Trust Agreement, dated
as of February 24, 1986, among certain
Beneficiaries, Grey, Edward H. Meyer and
Ronald A. Nicholson. (Incorporated herein
by reference to Exhibit 9.02
to Grey's Annual Report
on Form 10-K for the fiscal year
ended December 31, 1985.)
9.02 Form of Amended and Restated Voting Trust
Agreement, dated as of August 31, 1987,
among certain Beneficiaries, Grey and
Edward H. Meyer. (Incorporated herein by
reference to Exhibit 10.01 to Grey's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1987.)
</TABLE>
<PAGE> 52
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Assigned
to Exhibit (i.e. 601
of Regulation S-K) Description of Exhibits
------------------ -----------------------
<S> <C>
9.03 Form of Voting Trust Agreement, dated
as of December 1, 1989, among certain
Beneficiaries, Grey and Edward H. Meyer.
(Incorporated herein by reference to
Exhibit 9.03 to Grey's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1989.)
9.04 Form of Amended and Restated Voting
Trust Agreement, dated as of March
21, 1994, among certain Beneficiaries,
Grey and Edward H. Meyer.
10.01 Employment Agreement, dated as of
February 9, 1984, between Grey and
Edward H. Meyer ("Meyer Employment
Agreement"). (Incorporated herein
by reference to Exhibit 10.01 to Grey's
Annual Report on Form 10-K for the
fiscal year ended December 31, 1983.)
10.02 Amendments Two through Seven to Meyer
Employment Agreement. (Incorporated
herein by reference to Exhibit 10.02
to Grey's Annual Report on Form 10-K
for the fiscal year ended December 31,
1985, Exhibit 10.03 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1987,
Exhibit 1 to Grey's Current Report on
Form 8-K, dated May 9, 1988, filed with
the SEC pursuant to Section 13 of the
1934 Act, Exhibit 2 to Grey's current
Report on Form 8-K, dated May 9, 1988,
filed with the SEC pursuant to Section
13 of the 1934 Act. Exhibit I to Grey's
Current Report on Form 8-K, dated
June 9, 1989, filed with the SEC
pursuant to Section 13 of the 1934 Act
and Exhibit 10.07 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1990 respectively.)
</TABLE>
<PAGE> 53
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Assigned
to Exhibit (i.e. 601
of Regulation S-K) Description of Exhibits
------------------ ------------------------
<S> <C>
10.03 Pension Agreement, dated as of
May 9, 1988, between Grey and Meyer.
(Incorporated herein by reference to
Exhibit 3 to Grey's Current Report
on Form 8-K, dated May 9, 1988
filed with the SEC pursuant to
Section 13 of the 1934 Act.)
10.04 Employment Agreement, dated as of
December 21, 1990, by and between
Grey and Stephen A. Novick.
(Incorporated herein by reference
to Exhibit 10.11 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1990.)
10.05 Employment Agreement, dated as of
December 1, 1992, by and between
Grey and Robert L. Berenson. (Incor-
porated herein by reference to
Exhibit 10.05 to Grey's Annual Report
on Form 10-K for the fiscal year
ended December 31, 1992.)
10.06 Employment Agreement, dated as of
January 1, 1993 by and between Grey and
Barbara S. Feigin.
10.07 Grey Advertising Inc. Book Value Pre-
ferred Stock Plan, as amended. (In-
corporated herein by reference to
Exhibit 4.1 to Grey's Current Report on
Form 8-K, dated June 14, 1983, filed
with the SEC pursuant to Section 13 of
the 1934 Act.)
10.08 Grey Advertising Inc. Amended and Re-
stated Senior Executive Officer Pension
Plan. (Incorporated herein by reference
to Exhibit 10.08 to Grey's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1984.)
</TABLE>
<PAGE> 54
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Assigned
to Exhibit (i.e. 601
of Regulation S-K) Description of Exhibits
------------------ -----------------------
<S> <C>
10.9 Grey Advertising Inc. Amended and Re-
stated 1988 Senior Management Incentive
Plan. (Incorporated herein by reference
to Exhibit 10.17 to Grey's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1988.)
10.10 Grey Advertising Inc. Restricted Stock
Plan, as amended and restated as of
April 3, 1986. (Incorporated herein by
reference to Exhibit 4.03 to Grey's
Registration Statement on Form S-8, filed
with the SEC pursuant to Section 6(a) of
the '33 Act.)
10.11 Form of Restricted Stock Purchase Agree-
ment under Grey Advertising Inc. Re-
stricted Stock Plan. (Incorporated
herein by reference to Exhibit 4.04 to
Grey's Registration Statement on Form S-8,
filed with the SEC pursuant to Section
6(a) of the '33 Act.)
10.12 Grey Advertising Inc. Executive
Growth Plan, as amended and
restated. (Incorporated herein by
reference to Exhibit 10.14 to Grey's
Annual Report on Form 10-K for the
fiscal year ended December 31, 1985.)
10.13 Stock Option Agreement, dated as
of October 13, 1984, by and between
Grey and Edward H. Meyer ("Meyer Option
Agreement"). (Incorporated
herein by reference to Exhibit 10.15 to
Grey's Annual Report on Form 10-K for
the fiscal year ended December 31, 1985.)
</TABLE>
<PAGE> 55
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Assigned
to Exhibit (i.e. 601
of Regulation S-K) Description of Exhibits
------------------ -----------------------
<S> <C>
10.14 Extension Agreement, dated as of
March 27, 1992, by and between Grey and
Edward H. Meyer, relating to the Meyer
Option Agreement. (Incorporated herein
by reference to Exhibit 10.13 to Grey's
Annual Report on Form 10-K for the fiscal
year ended December 31, 1992.)
10.15 Amendment One to Meyer Option Agreement,
dated as of December 29, 1992. (Incor-
porated herein by reference to
Exhibit 10.14 to Grey's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1992.)
10.16 Notice of Exercise, dated
December 29, 1992, from Edward H. Meyer
to Grey pursuant to the Meyer Option Agreement.
(Incorporated herein by reference to Exhibit 10.15
to Grey's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992.)
10.17 Promissory Notes I and II, dated as of December 29,
1992, from Edward H. Meyer to Grey, delivered
pursuant to the Meyer Option Agreement.
(Incorporated herein by reference to
Exhibit 10.16 to Grey's Annual Report on Form
10-K for the fiscal year ended December 31, 1992.)
10.18 Grey Advertising Inc. Incentive Stock
Option Plan, as amended and restated
as of April 3, 1986. (Incorporated
herein by reference to Exhibit 4.04
to Grey's Registration Statement on
Form S-8 filed with the SEC pursuant
to Section 6(a) of the '33 Act.)
</TABLE>
<PAGE> 56
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Assigned
to Exhibit (i.e. 601
of Regulation S-K) Description of Exhibits
------------------ -----------------------
<S> <C>
10.19 Form of Incentive Stock Option Agree-
ment under Grey Advertising Inc.
Incentive Stock Option Plan. (In-
corporated herein by reference to
Exhibit 4.05 to Grey's Registration
Statement on Form S-8, filed with the
SEC pursuant to Section 6(a) of the
'33 Act.)
10.20 Grey Advertising Inc. 1987 Stock
Option Plan. (Incorporated herein by
reference to Exhibit 10.24 to Grey's
Annual Report on Form 10-K for the
fiscal year ended December 31, 1988.)
10.21 Form of Stock Option Agreement under
Grey Advertising Inc. Stock Option
Plan. (Incorporated herein by
reference to Grey's Annual Report on
Form 10-K for the fiscal year ended
December 31, 1988.)
10.22 Note Agreement, dated as of
January 19, 1993, by and between Grey
and The Prudential Insurance Company
of America. (Incorporated herein by
reference to Exhibit 10.21 to Grey's
Annual Report on Form 10-K for the fiscal
year ended December 31, 1992.)
10.23 Bonuses - Grey has paid bonuses to
certain of its executive officers
(including those who are directors)
and employees in prior years includ-
ing 1993, and may do so in future
years. Bonuses have been and may
be in the form of cash, shares of
stock or both although Grey pre-
sently does not have any plans to
pay stock bonuses. Bonuses are not
granted pursuant to any formal plan.
</TABLE>
<PAGE> 57
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Assigned
to Exhibit (i.e. 601
of Regulation S-K) Description of Exhibits
------------------ -----------------------
<S> <C>
10.24 Directors' Fees - It is the policy of
Grey to pay each of its non-employee
directors a fee of $4,500 per fiscal
quarter and a fee of $3,000 for each
meeting of the Board of Directors
attended. This policy is not embodied
in any written document.
10.25 Deferred Compensation Agreement,
dated December 23, 1981, between
Grey and Mark N. Kaplan, regarding
deferral of payment of director's
fees to which Mr. Kaplan may become
entitled. (Incorporated herein by
reference to Exhibit 10.18 to Grey's
Annual Report on Form 10-K for the
fiscal year ended December 31, 1982.)
10.26 On March 23, 1978, Grey's Board of
Directors, at a meeting thereof held
on such date, approved an arrangement
whereby Grey is required to accrue for
Edward H. Meyer, the difference between
the amount contributed by Grey on behalf
of Mr. Meyer under the Profit Sharing
Plan and Grey's Employee Stock Owner-
ship Plan, and the amount which would
have been contributed to such plans on his
behalf had such plans not contained maximum
annual limitations on contributions and
credits, as required by the Employee Retire-
ment Income Security Act of 1974. Such
accrual is to be paid to Mr. Meyer as if it
had been contributed to his account under
the Profit Sharing Plan. Such arrangement
is not embodied in any written document.
</TABLE>
<PAGE> 58
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Assigned
to Exhibit (i.e. 601
of Regulation S-K) Description of Exhibits
------------------ -----------------------
<S> <C>
10.27 Lease, dated as of July 1, 1978 by and
between Grey and William Kaufman and
J. D. Weiler, regarding space at 777
Third Avenue, New York, New York
("Main Lease"). (Incorporated herein
by reference to Exhibit 10.21 to
Grey's Annual Report on Form 10-K for the
fiscal year ended December 31, 1982.)
10.28 First Amendment to Main Lease.
(Incorporated herein by reference to
Exhibit 10.22 to Grey's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1982.)
10.29 Second Amendment to Main Lease.
(Incorporated herein by reference
to Exhibit 10.23 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1982.)
10.30 Third Amendment to Main Lease.
(Incorporated herein by reference
to Exhibit 10.24 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1982.)
10.31 Fourth Amendment to Main Lease.
(Incorporated herein by reference
to Exhibit 10.25 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1982.)
</TABLE>
<PAGE> 59
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Assigned
to Exhibit (i.e. 601
of Regulation S-K) Description of Exhibits
------------------ -----------------------
<S> <C>
10.32 Fifth Amendment to Main Lease.
(Incorporated herein by reference
to Exhibit 10.26 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1982.)
10.33 Sixth Amendment to Main Lease.
(Incorporated herein by reference
to Exhibit 10.27 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1982.)
10.34 Seventh Amendment to Main Lease.
(Incorporated herein by reference to
Exhibit 10.28 to Grey's Annual Report
on Form 10-K for the fiscal year
ended December 31, 1982.)
10.35 Eighth Amendment to Main Lease.
(Incorporated herein by reference
to Exhibit 10.29 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1982.)
10.36 Ninth Amendment to Main Lease.
(Incorporated herein by reference
to Exhibit 10.30 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1983.)
10.37 Tenth Amendment to Main Lease.
(Incorporated herein by reference to
Exhibit 10.33 to Grey's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1984.)
</TABLE>
<PAGE> 60
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Assigned
to Exhibit (i.e. 601
of Regulation S-K) Description of Exhibits
------------------ -----------------------
<S> <C>
10.38 Eleventh Amendment to Main Lease.
(Incorporated herein by reference to
Exhibit 10.34 to Grey's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1984.)
10.39 Twelfth Amendment to Main Lease.
(Incorporated herein by reference
to Exhibit 10.35 to Grey's Annual
Report on Form 10-K for the fiscal
year ended December 31, 1985.)
10.40 Thirteenth Amendment to Main Lease.
(Incorporated herein by reference to
Exhibit 10.36 to Grey's Annual Report
on Form 10-K for the fiscal year
ended December 31, 1985.)
10.41 Fourteenth Amendment to Main Lease.
(Incorporated herein by reference to
Exhibit 10.36 to Grey's Annual Report
on Form 10-K for the fiscal year ended
December 31, 1986.)
11.01 Statement re: Computation of Net
Income Per Share.
21.01 Subsidiaries of Grey.
23.01 Consent of Auditors
</TABLE>
10K-Exhibits
<PAGE> 1
EXHIBIT 9.04
1994 AMENDED AND RESTATED VOTING TRUST AGREEMENT
This 1994 Amended and Restated Voting Trust Agreement, dated
as of March 21, 1994 (this "1994 Restated VTA"), among the several persons who,
from time to time, execute this 1994 Restated VTA as beneficiaries (the
"Beneficiaries"); Grey Advertising Inc. ("Grey"); and Edward H. Meyer ("Meyer")
as Trustee under this 1994 Restated VTA.
WHEREAS, a voting trust (the "Trust") was created by the
execution of a certain Voting Trust Agreement, dated as of February 24, 1986
(the "Original VTA"), among certain Beneficiaries therein described; Grey; and
Meyer and Ronald A. Nicholson ("Nicholson") as Trustees;
WHEREAS, the Original VTA was amended and restated by the
execution of an amended and restated voting trust agreement, dated as of August
31, 1987 (the "1987 Restated VTA"), among the Beneficiaries executing the 1987
Restated VTA, Grey and Meyer, as Trustee (Nicholson theretofore having resigned
as a Trustee);
WHEREAS, a voting trust (the "Second Trust") was created by
the execution of a certain Voting Trust Agreement, dated as of December 1, 1989
(the "1989 VTA"),
<PAGE> 2
among the beneficiaries executing the 1989 VTA, Grey and Meyer, as trustee;
WHEREAS, those Beneficiaries executing this 1994 Restated VTA,
Grey and Meyer have determined to amend and restate the 1987 Restated VTA by
this 1994 Restated VTA; and
WHEREAS, the Trust has been created pursuant to Section 218 of
the General Corporation Law of the State of Delaware to ensure the continuity
and stability of the management, policies and client relationships of Grey
which are essential to the business and prospects of Grey;
NOW THEREFORE, in consideration of the foregoing and the
mutual covenants herein contained, the parties agree as follows:
ARTICLE I
APPOINTMENT OF TRUSTEE; ACCEPTANCE
AND DECLARATION OF TRUST
SECTION 1.1. Appointment. The Beneficiaries hereby
appoint Meyer to act as Trustee of the Trust and to hold the Trust Shares for
the benefit of the Beneficiaries, subject to the rights and duties of the
Trustee hereunder. For the purposes of this 1994 Restated VTA, (a) the term
"Trust Shares" has the meaning ascribed to
2
<PAGE> 3
it in the Original VTA, the 1987 Restated VTA and the 1989 VTA, and includes as
well shares of capital stock deposited in trust pursuant to this 1994 Restated
VTA and (b) the term "Beneficiaries" includes all persons who hereafter execute
this 1994 Restated VTA as Beneficiaries.
SECTION 1.2. Acceptance and Declaration of Trust. Meyer
accepts the appointment made in Section 1.1 and declares that he will hold the
Trust Shares in trust, for the benefit of the Beneficiaries, subject to the
rights and duties of the Trustees hereunder.
ARTICLE II
DELIVERY OF COMMON STOCK OF GREY; ISSUANCE
OF VOTING TRUST CERTIFICATES; DELIVERY
OF ADDITIONAL SHARES OF CAPITAL STOCK
SECTION 2.1. Delivery of Common Stock of Grey. Each
Beneficiary severally has transferred or will transfer to the Trustee upon, or
promptly following, his respective execution of the Original VTA, the 1987
Restated VTA, the 1989 VTA or this 1994 Restated VTA, certificates representing
all shares of Grey's Common Stock, par value $1 per share (the "Common Stock")
and all shares of Grey's Limited Duration Class B Common Stock, par value $1
per share ("Class B Common Stock"),
3
<PAGE> 4
which he owns on the date of such execution, duly endorsed in blank or in the
name of the Trustee, or accompanied by stock powers duly executed in blank or
in the name of the Trustee. By execution of this 1994 Restated VTA, each
Beneficiary and Meyer as Trustee irrevocably (i) consents to an amendment to
the 1989 VTA to provide that the first sentence of Section 5.02(a) thereof
shall be amended in entirety to read as follows: "VTC holders may dispose of
Trust Shares in which they hold a beneficial interest only (I) by a transfer
involving a sale in accordance with Sections 5.02(b) or (c) or (II) pursuant to
the transfer of the Trust Shares to the Old Trust in accordance with Section
2.1 of the Amended and Restated Voting Trust Agreement, dated March 21, 1994,
among the Beneficiaries executing such agreements, Grey and Meyer."; and (ii)
upon the effectiveness of the amendment to the 1989 VTA referred to in clause
(i) authorizes the Trustee to effect the transfer of his Trust Shares from the
Second Trust to the Trust without further action or authorization, except as
the Trustee may solely determine. Such shares of Common Stock and Class B
Common Stock, and any shares which shall thereafter be added to the Trust
Shares pursuant to Section 2.4, shall be held
4
<PAGE> 5
and disposed of in accordance with the terms of this 1994 Restated VTA.
SECTION 2.2. Registration in Trustee's Names. The Trustee
shall cause (i) all certificates for the Trust Shares transferred to him
pursuant to this 1994 Restated VTA to be surrendered to the issuer of such
certificates for cancellation, (ii) all Trust Shares represented by such
cancelled certificates to be transferred to the name of the Trustee upon the
stock ledger of such issuer, and (iii) a new certificate or certificates for
such Trust Shares to be issued by such issuer, registered in the name of the
Trustee, "as voting trustee", pursuant to this 1994 Restated VTA. The
newly-issued certificates registered as aforesaid shall bear the following
legend:
"This certificate is issued pursuant to the terms and conditions of a
1994 Amended and Restated Voting Trust Agreement, dated as of March
21, 1994, among the Beneficiaries referred to therein, Grey
Advertising Inc., and the Trustee(s) referred to therein, to the terms
of which Agreement the holder hereof assents."
Such legend may be amended to reflect that the Original VTA has been amended,
restated by the 1987 Restated VTA and the 1994 Restated VTA and to reflect that
the 1989 VTA has been superseded by this 1994 Restated VTA with
5
<PAGE> 6
respect to Beneficiaries executing this 1994 Restated VTA. Such newly-issued
certificates registered as aforesaid shall be registered only in the name of
the Trustee and shall not be required to be transferred or altered solely
because there occurs a change in the number or identity of the Trustee or
Trustees. When registered in the name of the Trustee, as aforesaid, such
newly-issued certificates shall be held by the Trustee under the Trust. The
Trustee shall request that such issuer note on its stock ledger that any
certificates registered in the names of the Trustee are subject to this 1994
Restated VTA.
SECTION 2.3. Issuance of Voting Trust Certificates. Upon
his receipt of certificates representing the Trust Shares, the Trustee shall
cause to be issued to or upon the order of each respective Beneficiary a voting
trust certificate (the "VTC") evidencing the Trust Shares so deposited by such
Beneficiary. The VTC shall be substantially in the form of Exhibit I hereto
but may reflect the execution of this 1994 Restated VTA or amendments hereto.
2.4. Transfer of Additional Shares to Trustee.
(a) The Beneficiaries severally agree that any shares of
Common Stock or other shares of capital stock
6
<PAGE> 7
of Grey carrying the right to vote on corporate actions of Grey which they
shall hereafter acquire (by any means including, without limitation, purchase,
gift, devise, inheritance, distribution from any employee benefit plan or
otherwise) shall promptly be transferred to the Trustee and held subject to the
Trust, as aforesaid.
(b) The Beneficiaries severally agree that if the Trustee
shall receive securities of any corporation (including Grey) carrying any right
to vote on corporate actions of such corporation as a dividend on, or as a
distribution (by way of stock split, reclassification, or otherwise) in respect
of, Trust Shares, such dividend or distribution of securities shall be, and the
Trustee shall retain and hold the securities representing such dividend or
distribution as Trust Shares, subject to the Trust and the terms of this 1994
Restated VTA.
(c) The Trustee (i) shall take, subject to Section
2.4(d), the steps set forth in Section 2.2 to cause the Trust Shares
transferred to it or retained by it pursuant to this Section to be registered
in the Trustee's name, as aforesaid, and (ii) shall issue VTCs as provided in
Section 2.3 to the Beneficiaries representing their respective beneficial
interests in the Trust Shares transferred to, or retained by, the Trustee
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<PAGE> 8
pursuant to this Section. For the purposes of this 1994 Restated VTA, VTCs
issued to Beneficiaries pursuant to the Original VTA, the 1987 Restated VTA or
the 1989 VTA shall be deemed to be VTCs issued pursuant to this 1994 Restated
VTA representing beneficial interests in Trust Shares deposited in Trust
pursuant to this 1994 Restated VTA.
(d) To expedite the registration of Trust Shares in the
name of the Trustee, each Beneficiary authorizes any transfer agent of the
Trust Shares to register, upon the Trustee's request, such capital stock
directly in the name of the Trustee as provided in clause (iii) of the first
sentence of Section 2.2 and to deliver to the order of the Trustee certificates
representing such Trust Shares.
ARTICLE III
VOTING OF TRUST SHARES
SECTION 3.1. Voting of Trust Shares. The Trustee shall
have legal title to the Trust Shares and shall be entitled to exercise all
rights or every kind and nature (other than the right to sell, transfer,
encumber, pledge or otherwise dispose of the Trust Shares) incident to such
title, including the right to
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<PAGE> 9
vote in person or by proxy, with respect to all the Trust Shares, regarding any
corporate action at any time submitted to holders of Trust Shares or upon which
such holders' action is or may be required or deemed advisable. In determining
how to cast votes with respect to the Trust Shares the Trustee shall in the
exercise of his discretion, in all cases (including any case in which there
shall appear to be a conflict between the long- or short-term value of Grey's
stock and the interest of Grey in maintaining the continuity and stability of
the management, policies and client relationships of Grey) give principal
consideration to maintaining the continuity and stability of the management,
policies and client relationships of Grey.
ARTICLE IV
DISTRIBUTION OF DIVIDENDS; LIQUIDATION
SECTION 4.1. Distribution of Dividends. Any dividends or
distributions payable in cash or securities not carrying the right to vote on
corporate actions which may be declared on, or with respect to, the Trust
Shares and received by the Trustee, shall be promptly paid by the Trustee or
his agent to the Beneficiaries in proportion to their respective beneficial
interests in the
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<PAGE> 10
Trust Shares on, or with respect to, which such dividends or distributions have
been received by the Trustee. The Trustee may in his absolute discretion from
time to time, instead of receiving and distributing dividends pursuant to this
Section, authorize the payor to pay such dividends declared on the Trust Shares
directly to the Beneficiaries, and if the payor of such dividends so agrees,
they shall be paid directly to the Beneficiaries in accordance with such
authorization. Any dividends or distributions payable in securities carrying
the right to vote on corporate actions which may be declared on, or with
respect to, the Trust Shares and received by the Trustee shall continue to be
held as Trust Shares by the Trustee subject to the terms of this Trust, as set
forth in Section 2.4(b).
4.2. Liquidation. If, upon any partial or total liquidation
or dissolution of Grey, whether voluntary or involuntary, the Trustees shall
receive any assets to which the Beneficiaries are entitled, they or their agent
shall distribute such assets (except such securities retained and held pursuant
to Section 2.4(b)) to such Beneficiaries in proportion to their respective
beneficial interests in the Trust Shares.
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ARTICLE V
DISPOSITION OF VTCs AND TRUST SHARES
SECTION 5.1. Transfer and Pledge of VTCs. Beneficiaries
may at any time sell, pledge or otherwise dispose of VTCs. VTCs shall be
transferable on the books of the Trustee by the holder of record thereof, in
person or by an attorney duly authorized, upon surrender of such VTC properly
endorsed for transfer, at the office of the Trustee set forth in Section 8.2.
Until so transferred, the Trustee may treat the VTC holder or record, or, in
the case of VTCs presented duly endorsed in blank, the bearers thereof, as the
owners of such VTCs for all purposes. The holders of VTCs shall be entitled at
any time to surrender VTCs for exchange for new VTCs representing an equivalent
interest in the Trust Shares, in such denominations as they all request. Each
holder in whose name a VTC is issued, and every transferee of a VTC shall, by
acceptance of such VTC, become a party hereto with like effect as if a
Beneficiary, and shall be included in the meaning of the term "holder of VTCs"
and "VTC holder" whenever used herein.
SECTION 5.2. Disposition of Trust Shares.
(a) VTC holders may dispose of Trust Shares in which they
hold a beneficial interest only as provided in
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Sections 5.2(b), (c) and (d). Any other disposition of their respective
beneficial interest in Trust Shares may be effected only by transferring the
VTCs representing such beneficial interest, as provided in Section 5.1.
(b) Subject to the provisions of Section 5.2(c), each VTC
holder may, from time to time, dispose of all or any portion of the Trust
Shares in which he holds a beneficial interest by giving the Trustee written
notice of his intent to dispose such Trust Shares and surrendering to the
Trustee for cancellation VTCs representing the Trust Shares proposed to be
disposed. Upon receipt of such notice and such VTCs for cancellation, the
Trustee shall take all necessary action to have the Trust Shares that are to be
disposed from the Trust and (i) delivered to the VTC holder at the closing
schedule to consummate such disposition, or (ii), if requested by the selling
VTC holder, sold by the Trustee in ordinary brokerage transactions. The
Trustee or his agent shall promptly deliver to the selling VTC holder any net
proceeds of the disposition described in clause (ii) of the previous sentence
and a VTC for any unsold Trust Shares represented by the previously
surrendered VTC.
(c) Except for sales, transfers and dispositions pursuant
to Plans (as defined in Section 8.9 hereof)
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and notwithstanding any other provision of this 1994 Restated VTA, unless
otherwise approved by the Board, no VTC holder may (i) until April 3, 1996,
sell, transfer or dispose all or any portion of the Class B Common Stock which
forms part of the Trust Shares in which he holds a beneficial interest, no such
person may convert any such shares of Class B Common Stock into Common Stock
and no such person may withdraw any such shares of Class B Common Stock from
the Trust, and (ii) following April 3, 1996 through the term of the Trust as
set forth in Section 6.1 of this 1994 Restated VTA, or as such may subsequently
be extended, sell, transfer or dispose all or any portion of the Trust Shares
in which he holds a beneficial interest, and no such person may withdraw any
Trust Shares from the Trust, during any of the following periods:
(A) From the announcement by any person other than Grey
of a tender or exchange offer for shares of capital
stock of Grey until 30 days following the termination
of such offer;
(B) From the time when it shall have been publicly
disclosed, or Grey shall have learned, that any
person or "group" (as
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defined in Section 13(d)(3) of the Securities and
Exchange Act of 1934, as such may subsequently
be amended or replaced) shall have acquired, or
proposed to acquire (whether or not any such
proposed acquisition is conditioned on any future
event), more than 20% of any class of Grey's
outstanding capital stock until 30 days following
the announcement that such person or "group" no
longer owns, or has abandoned its intention to
acquire more than such percentage of such stock;
(C) From the time that any new group shall be formed
which beneficially owns or proposes to acquire
(whether or not any such proposed acquisition is
conditioned on any future event) more than 20% of the
beneficial ownership of any class of Grey's capital
stock until 30 days following the announcement that
such group has been abandoned or no longer owns such
percentage of such stock;
(D) From
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<PAGE> 15
(X) the commencement of (I) any contest for the election
or removal, or increase or decrease in the number, of directors of Grey or (II)
any contest concerning the proposed approval by Grey's stockholders of any
proposal for the merger, consolidation, other business combination or
liquidation of Grey or (III) any contest concerning the approval by Grey's
stockholders of any other matter deemed by the Trustee to be material to the
continuity and stability of the management, policies and client relationships
of Grey (regardless of whether such contest involves an annual or special
meeting of stockholders of Grey or the solicitation of consents of such
stockholders for use other than at such a meeting) until
(Y) 30 days following the earlier of (I) the Grey
stockholder vote with respect thereto and (II) any other termination or
abandonment of the contest; provided, however, that the provisions of
sub-section 5.2(c)(B) and sub-section 5.2(c)(C) hereof shall not apply if the
"person" or "group" referred to in either of said sub-sections shall be an
individual or trust who or which, as of the date of this Agreement (the "March
Date"), held of record or beneficially 20% or more of the shares of any class
of Grey's outstanding capital stock; and provided, further, that the provisions
of sub-section 5.2(c)(B) and
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<PAGE> 16
sub-section 5.2(c)(C) shall not apply if the "person" or "group" referred to in
either of said sub-sections shall not have acquired any additional shares or
have been formed following the March Date; and provided further, that Grey's
Common Stock and Class B Common Stock shall be considered different classes of
capital stock for the purposes of this Section 5.2(c).
(d) Notwithstanding any other provision of this 1994
Restated VTA, each VTC holder shall not be restricted, at any time, from
accepting an offer from Grey to sell or transfer to Grey all or any portion of
the Trust Shares in which he holds a beneficial interest.
SECTION 5.3. Compliance with Securities Laws. Each VTC
holder agrees that no VTC held by such person, and no Trust Shares represented
by such VTC, shall be sold, transferred, assigned, pledged or otherwise
transferred or offered for sale unless such VTC and such Trust Shares are
registered pursuant to the Securities Act of 1933, or unless an exemption from
such registration is then available, and that each VTC may contain an
appropriate restrictive legend to such effect. The Trustees may require that
the transfer of any VTC on the books of the Trustee be conditioned on an
opinion of counsel (or other evidence) reasonably satisfactory to the Trustee,
16
<PAGE> 17
as to the availability of an exemption from the registration provisions of the
Act and applicable State Blue Sky laws.
ARTICLE VI
TERM AND TERMINATION
SECTION 6.1. Term. This 1994 Restated VTA shall become
effective as of the date on which the Beneficiaries, the Trustee and Grey have
executed a copy or copies of this 1994 Restated VTA. Thereafter, this 1994
Restated VTA shall in all respects supersede the Original VTA and the 1987
Restated VTA and the Trust (with respect to the Trust Shares of each respective
Beneficiary) shall be governed in all respects by the terms of this 1994
Restated VTA. This 1994 Restated VTA and the Trust shall continue in force
until ten years from the date of this 1994 Restated VTA or such shorter period
as may be required under applicable law, unless further extended as allowed by
law. By execution of this 1994 Restated VTA, the Trustee and the Beneficiaries
hereby consent to the extension of this Restated VTA and the Trust for the term
set forth in the immediately preceding sentence and acknowledge that the
foregoing extension is being made in accordance with Section 218(b) of the
Delaware General
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Corporation Law ("Section 218(b)") within two years prior to the time the 1987
Restated VTA and the Trust are scheduled to terminate. Unless and until
executed by the Beneficiaries and Meyer as Trustee, this 1994 Restated VTA
shall not affect the deposit of the Trust Shares pursuant to the Original VTA,
the 1987 Restated VTA or the 1989 VTA or the rights and responsibilities of the
parties pursuant thereto.
SECTION 6.2. Termination. Promptly upon termination of the
Trust, the Trustee shall deliver to each Beneficiary, certificates for the
Trust Shares representing each such Beneficiary's beneficial interest and any
other property in the possession of the Trustee to which each such Beneficiary
may be entitled.
ARTICLE VII
THE TRUSTEE
SECTION 7.1. (a) Meyer shall (subject to his right to
resign as Trustee) remain in office as Trustee until the earliest of (i) his
death, (ii) his permanent mental disability, (iii) the effectiveness of his
appointment of a successor trustee and (iv) the expiration of (x) two years
following the termination of his employment as chief executive officer of Grey
for Cause (as
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<PAGE> 19
such term is defined in Meyer's Employment Agreement, as amended from time to
time, with Grey) or (y) six years following the termination of his employment
as chief executive officer of Grey for any other reason (the "Two/Six Year
Date"). Meyer may, in his sole discretion, at any time before or after the
Two/Six Year Date, designate a person or persons to serve as an additional
Trustee or Trustees or to serve as successor Trustee or Trustees upon one or
more conditions established by Meyer. Immediately following the Two/Six Year
Date the Chief Executive Officer of Grey shall automatically, ex officio,
become a Trustee if not already so serving, and he shall remain as a Trustee
(subject to his right to resign as a Trustee) so long as he shall continue in
office as Grey's Chief Executive Officer.
(b) At any time, a majority of the Trustees (or the sole
Trustee if there is only one) in office may appoint one or more additional or
successor Trustees. In the event of a deadlock, the decision of the Trustee
longest in office shall govern.
(c) At such time as Meyer shall cease for any reason to be
Trustee in accordance with Section 7.1(a)(i) or (ii), if he shall not have
appointed a successor Trustee, Mark N. Kaplan, provided he is then an officer
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or director of Grey, shall succeed Meyer as Trustee. At such time as Mark N.
Kaplan shall cease for any reason to be a Trustee or if Mark N. Kaplan for any
reason shall not succeed Meyer as Trustee, the Chief Executive Officer of Grey
shall succeed Meyer as Trustee, if Meyer shall not have appointed a successor
Trustee.
(d) Any Trustee may at any time resign by delivering to Grey
and any other Trustee then in office his resignation in writing, and such
resignation shall take effect immediately upon delivery.
(e) If at any time there shall be (i) no Trustee in office
and (ii) no other means of designating a successor Trustee herein, then a
single successor Trustee shall be chosen by Beneficiaries holding a majority of
beneficial interest in the Trust Shares.
SECTION 7.2. Trustees as Beneficiaries. Any Trustee may
be a party to this Agreement as a Beneficiary and shall be entitled in all
respects to the same rights and be subject to the same duties as other
Beneficiaries.
SECTION 7.3. Indemnification of Trustees. In voting on
all matters which may come before any meeting of stockholders of Grey, the
Trustee shall exercise his best judgment; however, no Trustee shall incur any
responsibility or liability by reason of any error of law
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or by any matter or thing done or omitted under the Original VTA, the 1987
Restated VTA, the 1989 VTA or this 1994 Restated VTA except for his own willful
misconduct for his personal gain. Grey, Meyer as Trustee, and each Beneficiary
hereby each severally acknowledge that the Trust is being established for
purposes which on the date hereof are regarded by Grey and the Beneficiaries as
beneficial to each of them. Grey and each Beneficiary each further
acknowledges that the interest of each of them may differ over time and that
each Trustee is hereby instructed to carry out the purposes for which the Trust
is being established on the date hereof. Grey and each Beneficiary also
acknowledge that a Trustee may be an officer and director of, or otherwise be
involved with, Grey and that no such relationship with Grey shall disqualify
any Trustee from acting as such. Grey shall indemnify and hold harmless each
Trustee from and against any all liabilities, costs, claims, suits and
proceedings (including attorneys' fees and any other damages, penalties and
settlement amounts, whether current or threatened, arising in connection with
or otherwise relating to, the performance of his duties under the Original VTA,
the 1987 Restated VTA, the 1989 VTA or this 1994 Restated VTA (except for those
liabilities, costs, claims, suits
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or proceedings arising primarily as a result of his willful misconduct for his
personal gain); provided, however, that Grey shall be obligated to provide
indemnification pursuant to this Section to (i) a Trustee (other than Meyer or
any successor Trustee appointed by Meyer), only if the actions taken by the
Trustee occurred when the Trustee was an officer or director of Grey and (ii)
to Meyer or any successor Trustee appointed by Meyer only if the actions taken
by Meyer or such successor Trustee occurred either when Meyer or the successor
Trustee was an officer or director of Grey or when Meyer and/or his immediate
family and/or his estate owned in the aggregate more than 5% of the capital
stock of Grey.
SECTION 7.4. No Compensation; Expenses. No Trustee shall
be entitled to any compensation for his services as Trustee. Grey shall pay
all costs and expenses reasonably incurred by each Trustee in connection with
administering the Trust and shall reimburse each Trustee for any out-of-pocket
expenses reasonably incurred by him in connection with administering the Trust.
SECTION 7.5. Trustee's Agents. The Trustee shall be
authorized to engage agents to perform administrative tasks (including, without
limitation, effecting payment of dividends on Trust Shares and maintaining a
22
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registry of the VTCs) incident to the operation of the Trust. The costs of
engaging such agents shall be borne by Grey pursuant to Section 7.4.
SECTION 7.6. Decisions Final. The decisions of the
Trustee shall be final and binding upon the Trust and the Benefi- ciaries and
not subject to reversal or amendment by any Beneficiary or group of
Beneficiaries in the absence of willful misconduct by the Trustee.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Inspection of the Agreement. Promptly after
its execution, but no later than the date on which it shall become effective,
the Trustee shall cause copies of this 1994 Restated VTA to be filed at Grey's
registered office in the State of Delaware and at Grey's principal office in
the State of New York and, such copies, and the copy retained by the Trustee at
his address set forth in Section 8.2, shall be open for inspection during
business hours by any stockholder of record and any Beneficiary.
SECTION 8.2. Notices. Any notice or other communication
herein required or permitted to be given shall be in writing and shall be
deemed to have been
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properly given when personally delivered and acknowledged, or, if sent by
registered, certified or courier mail, when received, as follows:
(a) if to Grey, addressed as follows:
Grey Advertising Inc.
777 third Avenue
New York, New York 10017
Attention: Corporate Secretary
(b) if to the Trustees, addressed as follows:
Mr. Edward H. Meyer
(or any successor Trustee)
as Trustee under the Voting
Trust Agreement
c/o Grey Advertising Inc.
777 Third Avenue
New York, New York 10017
(c) if to any Beneficiary, to the address of such
Beneficiary set forth in the registry of VTC holders
maintained by the Trustee,
or to such other address as Grey, the Trustee or any Beneficiary shall have
given notice pursuant hereto.
SECTION 8.3. Binding Effect. This 1994 Restated VTA shall
inure to the benefit of, and be binding upon, the respective heirs and
successors of the parties hereto. No assignment of any right or delegation of
any obligation hereunder may be made by any party without the express written
consent of the Trustee. Nothing in this Section shall be interpreted to
prevent any Trustee from resigning as provided in Section 7.1 and
24
<PAGE> 25
thereby discharging himself from further obligation hereunder.
SECTION 8.4. Amendment. This 1994 Restated VTA may be
amended only by the written consent of Beneficiaries holding a majority of
beneficial interest in the Trust Shares. In addition, to facilitate the
deposit of additional Trust Shares or the admission of new Beneficiaries, the
form of this 1994 Restated VTA may be modified in a manner agreeable to the
Trustee, Grey and the depositor of such Trust Shares or such additional
Beneficiary, as the case may be, but no such amendment shall adversely affect
the rights of any other Beneficiary.
SECTION 8.5. Entire Agreement. The 1994 Restated VTA
contains the entire agreement and understanding of the parties hereto with
respect to the subject hereof, and no prior or contemporaneous
representations, warranties, covenants, conditions, understandings, or
agreements (including the Original VTA, the 1987 Restated VTA and the 1989 VTA)
other than those expressly set forth herein shall be of any force or effect.
SECTION 8.6. Governing Law. This New VTA shall be
governed by, and construed in accordance with, the internal laws of the State
of Delaware without reference to its rules regarding conflicts-of-laws.
25
<PAGE> 26
SECTION 8.7. Counterparts. This 1994 Restated VTA may be
executed in counterparts, each of which shall be deemed an original. This 1994
Restated VTA shall become effective, severally as to each Beneficiary, upon the
respective execution and delivery of a counterpart by the Trustee, Grey and
each such Beneficiary.
SECTION 8.8. Headings. Section and Article headings
herein are for convenience only and shall not affect the meaning or
interpretation hereof.
SECTION 8.9. Right of Repurchase. Notwithstanding the
application of the provisions of Section 5.2(c), the parties hereto recognize
that certain Trust Shares may be subject to the rights of Grey and other
persons, pursuant to Grey's Employee Stock Ownership Plan and Restricted Stock
Plan (collectively, with any agreements thereunder, the "Plans"), to purchase
such Shares upon certain events set forth in the Plans. The parties agree that
(a) the transfer of Trust Shares to the Trust has not constituted and will not
constitute a transfer of the securities giving Grey the right to purchase the
Trust Shares under the Plans; (b) upon an event under the Plans which would
give Grey the right to purchase the Trust Shares from a Beneficiary, Grey's
right to purchase such Shares shall not be limited or affected by the
26
<PAGE> 27
deposit of the Trust Shares in trust hereunder or the holding and retention
thereof by the Trustee hereunder; and (c) the Trustee shall legend the
appropriate VTC reflecting the rights of Grey and other persons to purchase the
Trust Shares underlying such VTC in accordance with the Plans.
SECTION 8.10. Employment with Grey. Each Beneficiary
acknowledges and understands that (a) he shall continue to be bound by this
1994 Restated VTA and (b) the shares of capital stock deposited by him in trust
hereunder shall continue to be subject to the Trust as provided by this 1994
Restated VTA after he ceases to be an employee of Grey or any of it affiliates.
Neither the deposit of Trust Shares nor the execution of this 1994 Restated VTA
shall in any way be deemed an agreement by Grey to retain any person as an
employee for any specific or non-specific period of time.
SECTION 8.11. Lost Certificates. Upon notice to the
Trustee by the holder of record of any VTC of any loss, theft or destruction
thereof, the Trustee may in his discretion cause a new VTC or VTCs to be issued
to such holder representing the same number of Trust Shares represented by the
lost, stolen or destroyed VTC, upon satisfactory proof of loss, theft or
destruction, and, in
27
<PAGE> 28
the Trustee's absolute discretion, upon deposit of a bond or such other
security as the Trustee may require.
28
<PAGE> 29
IN WITNESS WHEREOF, the several parties hereto have hereunder
set their respective hands as of the date first above written.
VOTING TRUSTEE BENEFICIARY
______________________________ _____________________________________
Name: Edward H. Meyer Name:
GREY ADVERTISING INC.
By:__________________________________
Name: Steven G. Felsher
Title: Executive Vice President,
Secretary and Treasurer
29
<PAGE> 1
EXHIBIT 10.06
EMPLOYMENT AGREEMENT
AGREEMENT, made as of January 1, 1993, by and between GREY ADVERTISING
INC. ("Company"), a Delaware corporation having its principal office at 777
Third Avenue, New York, New York 10017, and BARBARA S. FEIGIN ("Executive"),
an individual residing at 535 East 86th Street, New York, New York 10028.
WHEREAS, Executive is presently employed as Executive Vice President
of the Company; and
WHEREAS, Executive has agreed to continue employment with the Company
on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the
respective agreements contained herein, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Term. The term of this Agreement shall commence on
the date hereof and shall end on December 31, 1995 (the "Term"), unless
extended or sooner terminated as hereinafter provided. The Term shall
be extended automatically on January 1, 1994 and on January 1, 1995
for an additional period of each year in the event that the Company
does not give Executive notice of non-extension on or prior to
November 30, 1993 or November 30, 1994, respectively, as the case may
be.
2. Employment. During the Term, the Company shall employ
Executive, and Executive shall serve the Company, as an Executive
Vice President of the Company or in such
<PAGE> 2
other position (but not less senior) of the Company to which Executive
shall be appointed from time to time by the Board of Directors of the
Company (the "Board").
3. Duties. Executive shall perform such services and duties in
the New York City metropolitan area (including reasonable travel
consistent with a person of her position) as shall be reasonably
assigned or delegated to her by the Board and/or the chief
executive officer of the Company (the "Chief Executive Officer"),
which shall, in any event, be consistent with her responsibilities as
a senior executive officer of the Company. During her employment
hereunder, Executive shall devote her full time to the performance of
her duties hereunder.
4. Compensation and Employee Benefits.
(a) Salary. During the Term, the Company shall pay to
Executive a salary at an annual rate of $331,000 per year, or
such greater sum as may from time to time be fixed by the Chief
Executive Officer. Executive shall be entitled to a compensation
review no less frequently than someone of her salary level and
seniority in accordance with the policies of the Company in place at
such time. Payments of salary shall be subject to such payroll
deductions as are required by law or otherwise agreed to by Executive
and the Company and shall be payable in such installments as are
customary from time to time for executive officers of the Company.
(b) Bonus Compensation. The Chief Executive Officer may,
in his sole discretion, award Executive bonus compensation from
time to time during the Term.
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<PAGE> 3
(c) Employee Benefits. During the Term, Executive shall
continue to participate in all of the Company's compensation
and benefit plans and programs, in each instance to the extent such
plans and programs are available generally by their terms to employees
of her seniority, office, nature of responsibilities and length of
service. In addition, during the first twelve years pursuant to which
benefits are payable to Executive in accordance with the terms of the
Company's Senior Executive Officer Pension Plan, Executive shall be
entitled to receive $50,000 per year in addition to the amounts
otherwise payable to Executive pursuant to the terms of such Plan
provided Executive is then entitled to receive a pension thereunder.
(d) Expense Reimbursement. The Company shall reimburse
Executive for ordinary and reasonable business expenses incurred
by Executive on behalf of the Company in accordance with customary
Company policies.
(e) Vacation. Executive shall be entitled to the vacation
time afforded to executive officers of her position and tenure,
in accordance with the Company's general vacation policy.
(f) Health Insurance Benefits. During the Term, and
during any period subsequent thereto while Executive is either
an employee of the Company or a consultant to the Company in
accordance with Sections 1 and 6 hereof, but in no event beyond the
later of (i) the date upon which Executive shall attain 65 years of
age and (ii) the date upon which Executive shall cease to be an
employee of or a consultant to the Company pursuant to Section 6 here-
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<PAGE> 4
of, the Company shall continue to provide Executive and her eligible
dependents with full health insurance benefits under the Company's
group plans on the same basis as are then available generally to
senior executive officers of the Company.
(g) Special Insurances. During the Term, the Company
shall maintain in force at its cost (i) a policy of long-term
disability income insurance on Executive's behalf as described
on Schedule A to this Agreement (the "Disability Insurance Policy")
and (ii) policies of life insurance on Executive's behalf as described
on Schedule B to this Agreement (the "Life Insurance Policy"). The
Disability Insurance Policy and the Life Insurance Policy to be
obtained hereunder shall be in addition to any other insurance which
may be maintained by the Company from time to time under
Company-sponsored insurance benefit programs. The Company shall, in
good faith, review the possibility of extending the Disability
Insurance Policy or implementing a replacement policy upon its
expiration. The review will take into account the cost of such a
replacement policy at the time and other factors then deemed relevant
by the Company or you.
(h) ERISA Make-up. Commencing with respect to calendar
year 1993 and for each completed calendar within the Term, the
Company will accrue for Executive in an unfunded deferred compensation
account, an amount equal to such amount as would have been allocated
for each such year to Executive's account under the Company's Profit
Sharing and Employee Stock Ownership Plans but for the limitation on
contributions to qualified plans currently mandated under the Employee
Retirement Income Security Act
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<PAGE> 5
of 1976, as amended (as such current limitation amount may be adjusted
in the future by reason of increasing the amount of compensatio in
respect of which contributions may be made to qualified plans), less
any amount so allocated to such plans. Allocations under thi paragraph
shall thereafter be credited with a return equal to the return the
contributions for each such year would have earned in the Fixed Income
Fund of the Company's Profit Sharing Plan. Funds so allocated,
credited and deferred shall be paid to you at such time as the funds
in your account under the Company's Profit Sharing Plan are paid to
you
5. Termination. Executive's employment under this Agreement may
be terminated upon the occurrence of any one of the
circumstances described in subsections (a), (b), (c) or (d) of this
Section 5:
(a) Death. This Agreement shall be terminated upon
Executive's death. Upon such termination, the Company shall pay
to the estate of Executive in a lump sum all amounts due to Executive
which were earned pursuant to Section 4 hereof prior to Executive's
death, such amount, to be paid within 30 days of such termination.
(b) Disability. The Company may terminate Executive's
employment hereunder at any time because of Disability and
Executive shall be entitled to benefits under the terms of the
Disability Insurance Policy and the Company's long term disability
policy (if any) in effect from time to time. Upon such termination,
the Company shall also pay to Executive in a lump sum all amounts due
to Executive which were earned pursuant to Section 4
-5-
<PAGE> 6
hereof prior to the termination of Executive's employment
hereunder because of Executive's Disability, such amount to be paid
within 30 days of such termination. As used in this Agreement,
"Disability" shall mean Executive's physical or mental incapacity
which, in the reasonable, good faith determination of the Board,
renders her incapable of carrying out her duties under this Agreement
for a period of 120 calendar days in any six month period.
(c) Cause. The Company may terminate Executive's
employment hereunder for "Cause" in accordance with the
procedure set forth in Subsection (e) of this Section 5. For purposes
of this Agreement, "Cause" shall be defined as follows: (i) the
repeated and willful failure by Executive, after warning,
substantially to perform her duties hereunder (other than any such
failure resulting from Disability), (ii) the willful engaging by
Executive in any other conduct designed to be injurious, in any
material way, to the reputation, business or business relationships of
the Company, (iii) the conviction of Executive for any crime involving
moral turpitude, fraud or misrepresentation, (iv) after notice, (a)
drunkenness which affects Executive's ability to perform her
obligations hereunder, or (b) the illegal use of drugs interfering
with performance of Executive's obligations under this Agreement or
(v) the knowing and willful violation, in any material way, by
Executive of the provisions of Sections 7 or 8 hereof. If Executive's
employment should be terminated by the Company for Cause, the Company
shall have no further obligations to Executive hereunder following the
date of termination; provided, however, that the Company shall pay or
provide all vested or earned rights, payments, benefits and
entitlements then
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<PAGE> 7
due and payable to Executive including, without limitation, all
amounts which were earned pursuant to Section 4 hereof prior to the
date of Executive's termination of employment.
(d) Change in Control. Following the occurrence of a
"change in control of the Company" (as defined herein), if
during the remaining portion of the Term (i) the Company terminates
the employment of Executive other than for death, Disability or Cause
or (ii) Executive terminates her employment within 90 days following a
breach by the Company of any provision of Sections 2, 3 or 4 hereof,
(x) all the unvested portions of any rights or benefits of Executive
under any stock option or restricted stock plan of the Company or the
Company's Senior Management Incentive Plan which Executive has as of
the date of this Agreement (but not any option or restricted stock of
the Company or any awards under the Company's Senior Management
Incentive Plan, in either instance granted or made available after the
date of this Agreement) shall vest; and (y) the Company shall pay
Executive a lump sum an amount equal to three times the sum of (A) her
annual salary in effect immediately prior to such change in control of
the Company and (B) the most recent bonus paid to Executive prior to
such change in control of the Company; provided, however, that if any
portion of the payment under this Subsection (d) would not be
deductible by the Company by reason of sections 280G and 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any
successor provisions thereto, such payment shall be reduced to the
extent necessary so that the entire payment shall be deductible under
said Code sections. Such payment, as shall be reduced or reserved
-7-
<PAGE> 8
against to ensure its deductibility as contemplated above, shall be
made within 30 days of an occurrence set forth in either sub-clause
(i) or sub-clause (ii) in the previous sentence. For purposes of this
Subsection (d), a "change in control of the Company" shall be deemed
to have occurred if, and only if, Edward H. Meyer ("Meyer"), or the
legal representative of Meyer's estate, if Meyer should not then be
living, should sell all or substantially all of his shares of common
stock of the Company to a person other than Executive (and/or related
parties) or to the Company.
(e) Notice of Termination. Any termination by the Company
pursuant to this Section 5 shall be communicated to Executive
by a written notice of termina- tion and, if curable, the action to be
taken by Executive to cure the event or events giving rise to such
termination by the Company and the Executive shall have a reasonable
period of time to cure such event or events, which, except in unusual
circumstances, shall be not more than 10 days. Such notice of
termination shall be effective on the date on which such notice shall
be deemed given in accordance with Section 10 hereof.
6. Consulting Period. Upon Executive's termination of employment
with the Company, other than as a result of death, Disability
or Cause, if Executive (i) shall then have attained 60 years of age or
older and (ii) shall not then have accepted employment with another
employer, then Executive shall immediately commence service as a
consultant to the Company and shall thereafter continue as such a
consultant until the earliest to occur of (A) the date upon which she
shall have attained 65 years of age,
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<PAGE> 9
or (B) the date upon which Executive becomes employed by another
employer or (C) at Executive's election, such date as she determines
to terminate her consulting arrangement with the Company (the
"Consulting Period"). If at the time of Executive's termination of
employment Executive has not satisfied the conditions set forth in
clauses (i) and (ii) of the preceding sentence hereof, she shall not
be entitled to serve as a consultant to the Company. Dur-ing the
Consulting Period, Executive shall be paid an annual retainer of
$10,000, payable in equal monthly installments and subject to such
payroll deductions as are required by law or otherwise agreed to by
Executive and the Company. During the Consulting Period, Executive
shall provide consulting services to the Company on such terms as are
mutually convenient to Executive and the Company.
7. Trade Secrets. Executive acknowledges that from time to time
she will have knowledge of business matters and affairs of the
Company and its affiliates (collectively, the "Grey Group") not
available to others, and that the work to be performed by her shall
place her in a position of trust with respect to the clients and
business operations of the Grey Group. Executive acknowledges that
such information is a valuable trade secret and is the sole property
of the Grey Group. Accordingly, Executive, other than in the course of
performing her duties hereunder, shall not during the term of this
Agreement, or at any time thereafter (unless the same shall have
otherwise become public knowledge), reveal, divulge or otherwise make
known any of said information to any person other than an officer or
employee of the Company or such other person as the Board may
designate.
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<PAGE> 10
8. Non-Competition. So long as Executive is employed by the
Company hereunder and for a perod of two years following Executive's
termination of employment for any reason, Executive shall not:
(a) persuade or attempt to persuade either
directly or indirectly) any client of the Grey Group to
discontinue using any marketing, advertising, pubic
relations or other services rendered by any member of the
Grey Group to any such client;
(b) except in the performance of her normal and
proper job function for the Company, persuade or
attempt to persuade (either directly or indirectly) any
employee of any member of the Grey Group to terminate his or
her employment with such member of the Grey Group;
(c) without the prior written consent of the
Company (which consent shall not be unreasonably
withheld) render (either directly or indirectly), other than
on behalf of the Company or any member of the Grey Group,
any services (of the nature performed or reasonably capable
of being performed by a member of the Grey Group) to or for
any client of a member of the Grey Group or any person, firm
or corporation which had been a client of any member of the
Grey Group at any time during the one-year period prior to
the termination of her employment hereunder;
(d) solicit (either directly or indirectly),
other than on behalf of the Company or any member of
the Grey Group, any business (of the nature carried on or
reasonably capable of being carried on by a member of the
Grey Group) from any client of any member of the Grey Group,
or any person firm or corporation which had been a client of
any such member at any time during the one-year period prior
to the termination of her employment; or
(e) whether as officer, director, employee or
consultant, be engaged in or
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<PAGE> 11
have any financial interest (other than an interest of less
than 1% of the stock of a publicly traded company) in or
affiliation with or render any services to or for any
advertising agency or public relations agency, or any other
person firm or organization which is in competition with any
member of the Grey Group;
provided, however, that the provisions of Subsection (c) shall be
applicable for six months following Executive's termination and of the
provisions of Subsection (e) of this Section 8 shall not be applicable
to Executive if her employment is terminated by the Company without
Cause prior to expiration of the Term or pursuant to the Company
issuing the notice contemplated in the last sentence of Section 2
hereof.
9. Client Conflict Policy. Executive shall respect and abide by
the Grey Group's client conflict policy as it may be in effect
from time to time.
10. Notice. Any notice, advice or accounting to any party to this
Agreement shall be sufficient if in writing and sent by
certified mail, return receipt requested, to such party's respective
address hereinabove provided or to such other address as may be
designated in writing by such party from time to time. A copy of any
notice given to Executive shall also be given to any legal counsel
designated by Executive in writing to receive such a copy. Notice
given in the manner herein provided shall be deemed to be given when
personally delivered or, if mailed, three days after such mailing.
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<PAGE> 12
11. Waiver. No provisions of this Agreement shall be waived,
altered or amended, except in a writing signed by the parties
hereto. Any such waiver shall be limited to the particular instance
and the particular time when and for which it is given.
12. Specific Performance. If Executive should fail to comply with
the terms of Sections 7 or 8 hereof, the Company may enforce
any right it may have by law for damages, and, in addition, shall be
entitled, as a matter of right, to equitable or other injunctive
relief against Executive to prevent her failing to comply with the
provisions of Sections 7 or 8 hereof. Any rights under this Section 12
may be enforced in the appropriate court in the Borough of Manhattan,
City and State of New York.
13. Entire Agreement. This Agreement constitutes the entire
agreement between the Company and Executive with respect to the
subject matter hereof, supersedes any prior agreement(s) between the
parties with respect to the same subject matter, and may be amended,
modified or changed only by an agreement in writing signed by the
parties hereto.
14. Severability. The provisions of this Agreement are severable
and the invalidity of any one provision shall in no event
affect the validity of any other paragraph, clause or provision
whatsoever.
15. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of
New York.
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<PAGE> 13
16. Assignment. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
successors, assigns, heirs and personal representatives; provided,
however, that the services to be rendered by Executive hereunder are
to be performed personally by Executive.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
___________________________
BARBARA S. FEIGIN
GREY ADVERTISING INC.
(SEAL) By_________________________
Edward H. Meyer
Chairman and
Chief Executive Officer
Attest:
By_______________________
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<PAGE> 1
Exhibit 11.01
Grey Advertising Inc. and Consolidated Subsidiary Companies
Exhibit - Statement Re: Computation of Net Income Per Share
<TABLE>
<CAPTION>
For the Year Ended
Restated(2)
December 31 December 31
1993 1992
----------- -----------
<S> <C> <C>
PRIMARY
Average shares outstanding(1) 1,247,711 1,163,232
Net effect of dilutive stock options-
based on the treasury stock method
using average market price 16,189 42,009
----------- -----------
TOTAL 1,263,900 1,205,241
=========== ===========
Net Income $17,681,000 $15,904,000
Less: Effect of dividend requirements
and the increase (decrease) in
redemption value of redeemable
preferred stock (672,000) (621,000)
----------- -----------
NET EARNINGS USED IN COMPUTATION $17,009,000 $15,283,000
=========== ===========
$ 13.46 $ 12.68
=========== ===========
FULLY DILUTED
Average shares outstanding(1) 1,247,711 1,163,232
Net effect of dilutive stock options -
based on the treasury stock method
using the period-end market price, if
higher than the average market price 20,639 44,567
Assumed conversion of 8.5% convertible
subordinated debentures issued
December 1993 50,999 51,000
----------- -----------
TOTAL 1,319,349 1,258,799
=========== ===========
Net Income $17,681,000 $15,904,000
Less: Effect of dividend requirements
and the increase (decrease) in
redemption value of redeemable
preferred stock (672,000) (621,000)
Add: 8.5% covertible subordinated
debentures Interest, net of Income
tax effect 139,000 140,000
----------- -----------
NET EARNINGS USED IN COMPUTATION $17,148,000 $15,423,000
=========== ===========
$ 13.00 $ 12.25
=========== ===========
</TABLE>
(1) Includes 10,237 shares and 259 shares for 1993 and 1992, respectively,
expected to be issued pursuant to the terms of the Senior Management
Incentive Plan
(2) After restatement for the increase in the Provision for Taxes on Income of
$600,000 due to the adoption of FAS109, Accounting for Income Taxes.
<PAGE> 1
EXHIBIT 21.01
EXHIBIT 21.01
SUBSIDIARIES OF GREY
(as of March 1, 1994)
<TABLE>
<CAPTION>
Name Jurisdiction of Organization
---- ----------------------------
<S> <C>
Alonso y Asociados S.A. Mexico
AS Grey Oy Finland
Beaumont-Bennett Inc. New York
CR Grey Advertising Pte. Ltd. Singapore
CSS Grey Cyprus
Cenajans Grey Reklamcilik A.S. Turkey
Creative Collaboration Grey S.A. Switzerland
Crescendo Productions Inc. New York
Dialogic S.A. Belgium
Dorland Grey S.A. Belgium
Dorland Grey S.A. France
Esfera Grey, S.A. Columbia
Fischer-Grey, C.A. Venezuela
Font Vaamonde Inc. Delaware
G2 Advertising Inc. California
GCG Norge A/S Norway
GCG Scandinavia A/S Denmark
GCI Italy S.r.l. Italy
GCI Group Inc. New York
GCI - Ringpress GmbH Germany
GCI Group Ltd. United Kingdom
</TABLE>
- 1 -
<PAGE> 2
<TABLE>
<S> <C>
GEM FC Inc. California
Great Productions Inc. Delaware
Great Spot Films Ltd. Delaware
Grey Advertising (Hong Kong) Ltd. Hong Kong
Grey Advertising (NSW) Pty. Limited Australia
Grey Advertising (New Zealand) Ltd. New Zealand
Grey Advertising de Venezuela, C.A. Venezuela
Grey Advertising (Victoria) Pty. Ltd. Australia
Grey Advertising Inc. Maryland
Grey Advertising Ltd. Canada
Grey Argentina S.A.C. y de P. Argentina
Grey Athens Advertising S.A. Greece
Grey Australia Pty. Limited Australia
Grey Austria GmbH Austria
Grey Chile S.A. Chile
Grey Communications Group A/S Denmark
Grey Communications Group B.V. The Netherlands
Grey Communications Group Ltd. United Kingdom
Grey-Daiko Advertising, Inc. Japan
Grey Denmark A/S Denmark
Grey Diciembre S.A. Uruguay
Grey Direct Inc. Delaware
Grey Direct International GmbH Germany
Grey Directory Marketing Inc. Delaware
Grey Dusseldorf GmbH Co. Kommanditgesellschaft Germany
</TABLE>
- 2 -
<PAGE> 3
<TABLE>
<S> <C>
Grey Entertainment Inc. New York
Grey Espana S.A. Spain
Grey Holding S.A. Belgium
Grey Holdings A.B. Sweden
Grey Holdings Pty. Ltd. South Africa
Grey IFC Inc. Delaware
Grey India Inc. Delaware
Grey Advertising (Malaysia) Sdn. Bhd. Malaysia
Grey Media Connections Inc. New York
Grey Mexico, S.A. de C.V. Mexico
Grey Peru S.A. Peru
Grey Strategic Marketing Inc. Delaware
Grey Thailand Co. Ltd. Thailand
Greycom SARL France
Gross Townsend Frank Hoffman Inc. New York
Hwa Wei Grey Advertising Co. Ltd. Taiwan
Indigo Entertainment Inc. Delaware
JCH Group Ltd. New York
Local Marketing Corporation Ohio
Milano e Grey S.p.A. Italy
National Research Foundation for
Business Statistics, Inc. New York
Principal Communications Inc. Delaware
</TABLE>
- 3 -
<PAGE> 4
<TABLE>
<S> <C>
Preferred Professionals Inc. New York
Rada Communications Inc. Delaware
Rigel Limited Cayman Islands
SEK Grey Ltd. Finland
The Tape Center Inc. Delaware
300 East 42nd Street Promotions, Inc. New York
Trace, S.A. Spain
Triple Seven Concepts Inc. Delaware
Visual Communications Group Inc. New York
W&L/Dialog Grey AG Switzerland
West Indies Grey Advertising Inc. Puerto Rico
Z&G Grey Comunicacao Ltda. Brazil
</TABLE>
- 4 -
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 Nos. 2-98101, 2-97465 and 33-11253) pertaining to the Incentive Stock
Option and Restricted Stock Plans of Grey Advertising Inc. of our report dated
February 11, 1994 on the consolidated financial statements and schedules of
Grey Advertising Inc. and consolidated subsidiary companies included in the
Annual Report (Form 10-K) for the year ended December 31, 1993.
ERNST & YOUNG
New York, New York
March 30, 1994
