<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[ X ] AMENDMENT TO 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
<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.
_________________________________________________________________
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report for the year ended
December 31, 1993 on Form 10-K as set forth in the pages attached hereto:
PART III
ITEM 10. Directors and Executive Officers of the Registrant
ITEM 11. Executive Compensation
ITEM 12. Security Ownership of certain Beneficial owners and management.
ITEM 13. Certain relationships and related transactions.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
GREY ADVERTISING, INC.
______________________
(Registrant)
Dated: April 29, 1994 BY /s/ STEVEN G. FELSHER
_____________________
Executive Vice President
Secretary and Treasurer
<PAGE> 3
Item 10. Directors and Executive Officers of the Registrant ("Company").
Set forth below is certain information concerning the Company's
directors:
<TABLE>
<CAPTION>
Term
of No. of Shares of Percent of
Office Voting Stock Votes Cast
Director Will Owned by Voting
Name(a) Age Occupation(b) Since Expire Beneficially(c) Shares
------- --- ------------- --------- ------ ------------------ --------
<S> <C> <C> <C> <C> <C> <C>
Mark N. Kaplan ... 64 Partner, Skadden, 1973 1996 2,200(e) -(f)
Arps, Slate,
Meagher Flom,
law firm (d)
Edward H. Meyer.... 67 Chairman of the 1961 1994 584,840(g) 69.0%
Board, President
and Chief
Executive Officer
Richard R. Shinn... 76 Retired Chairman 1990 -(h) 1,000(i) -(f)
of Metropolitan
Life Insurance
Company
John Shannon... 57 President, 1991 1995 1,000(j) -(f)
Grey-International
</TABLE>
(a) There is no family relationship between any director and any
other director or executive officer of the Company.
(b) The positions of Messrs. Meyer and Shannon are with the
Company, and each has served the Company for more than the past five years.
Mr. Kaplan also serves on the boards of directors of American
Biltrite Inc., Diagnostic/Retrieval Systems, Inc., The Harvey Group Inc., REFAC
Technology Development Corporation, The Shepaug Corporation and Volt
Information Sciences, Inc.
Mr. Meyer is also a director of Bowne Co., Inc., Ethan Allen
Interiors, Inc., Harman International Industries, Inc. and The May Department
Stores Company. Mr. Meyer also serves as director or trustee of thirty-one
mutual funds advised by Merrill Lynch Asset Management, Inc. or its
wholly-owned subsidiary, Fund Asset Management, Inc.
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(c) Represents beneficial interests in shares of the Company's
Common Stock, Class B Stock, and Series I, II and III Preferred Stock. (See
"Voting Securities" above.) Information is as of the record date.
(d) Skadden, Arps, Slate, Meagher & Flom, a law firm in which Mr.
Kaplan is a partner, has provided certain legal services to the Company in 1993
and 1994.
(e) Mr. Kaplan owns 1,100 shares of each of Common Stock and Class
B Stock.
(f) Represents less than 1.0% of the votes entitled to be cast.
(g) Mr. Meyer beneficially owns 105,953 shares of Common Stock and
110,053 shares of Class B Stock, as to which he, as the Voting Trustee under
the Voting Trust Agreement, exercises voting power, and 20,000 shares of the
Series I Preferred Stock, and 5,000 shares of each of the Series II and of the
Series III Preferred Stock, representing approximately 11.7%, 32.5%, 100%, 100%
and 100% of each class, respectively. Also includes shares held pursuant to
the Voting Trust Agreement, as to which Mr. Meyer, as the Voting Trustee,
exercises voting power, and shares of Common Stock and Class B Stock held in
the Company's Employee Stock Ownership Plan as to which Mr. Meyer exercises
shared voting power by virtue of his membership on the committee charged with
its administration. Also includes shares of Common Stock (2.8%) and Class B
Stock (7.5%) issuable on conversion of the Company's 8-1/2% Convertible
Subordinated Debentures owned by Mr. Meyer after giving effect to the assumed
conversion thereof. Does not separately include 7,500 shares of each of the
Common Stock and the Class B Stock held in trust for Mr. Meyer's children, as
to which Mr. Meyer, as the Voting Trustee under the Voting Trust Agreement,
exercises voting power.
(h) Mr. Shinn had been elected by the holders of the Series 1
Preferred Stock and serves until the election of his successor.
(i) Mr. Shinn owns 1,000 shares of Common Stock.
(j) Mr. Shannon holds options to purchase 1,000 shares of Common
Stock.
Information concerning the Company's executive officers is included
in Part 1 of this report.
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Item 11. Executive Compensation.
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of its Chief
Executive Officer and each of the four other most highly compensated executives
officers of the Company with respect to the three most recently completed
fiscal years of the Company, except as indicated below:
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
All
Name and Rest. Stock Other
Position Year Salary Bonus Stock($) (1) Option (#) Comp. (2) (3)
- - -------- ---- ------ ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Edward H. Meyer 1993 $1,700,000 $300,000 -0- -0- $ 928,487
Chairman, 1992 1,700,000 200,000 -0- -0- 1,009,578
President 1991 1,700,000 100,000 -0- -0- ---
and Chief
Executive
Officer
Robert L. Berenson 1993 $442,500 $150,000 -0- -0- $ 336,530
President 1992 400,000 135,000 -0- -0- 113,271
Grey-N.Y. 1991 400,000 125,000 -0- -0- ---
Barbara S. Feigin 1993 $331,000 $125,000 -0- -0- $ 260,006
Executive 1992 297,667 120,000 -0- -0- 87,162
Vice President 1991 281,000 112,000 -0- -0- ---
Stephen A. Novick 1993 $635,000 $85,000 -0- -0- $ 411,530
Executive 1992 570,000 75,000 -0- -0- 333,001
Vice President 1991 483,333 75,000 445,000 5,000 ---
John Shannon 1993 $407,000 $165,000 -0- -0- $ 52,139
President 1992 390,000 135,000 -0- -0- 41,199
Grey-International 1991 370,000 127,500 -0- -0- ---
</TABLE>
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<PAGE> 6
(1) As at December 31, 1993, Messrs. Berenson and Novick owned,
respectively, 500 shares and 5,500 shares issued under the Company's Restricted
Stock Plan as to which the restrictions thereon had not lapsed, having
respective aggregate net values of $63,500 and $758,500 on such date. All
shares of restricted stock are entitled to dividends on the same basis as other
shares of Common Stock or Class B Stock. (See "Employment Agreements and Other
Transactions".)
(2) Consistent with transitional provisions applicable to the revised
rules on executive officers' and directors' compensation disclosure adopted by
the Securities and Exchange Commission, amounts of All Other Compensation are
excluded for 1991.
(3) All Other Compensation includes: (i) contributions of $26,963
and $25,492 in 1992 and 1993, respectively, to the Company's qualified defined
contribution plans on behalf of the named executives other than Mr. Shannon,
who, as a United Kingdom resident, participated in local pension programs to
which he contributed funds out of his salary compensation; (ii) amounts shown
for Mr. Shannon representing deferred compensation pursuant to a
subsidiary-sponsored program for United Kingdom executives; (iii) respective
premium expense coverage or reimbursement of $54,949 and $54,787, $16,308 and
$16,038, $6,452 and $6,038, and $15,199 and $99,046, in 1992 and 1993,
respectively, for Messrs. Meyer, Berenson and Novick, and Ms. Feigin, of which
amount for Ms. Feigin included in 1993 the total premiums due under a long-term
supplemental insurance policy; (iv) accruals in the respective amounts of
$203,766 and $161,058 for Mr. Meyer in 1992 and 1993, and $10,468 for Ms.
Feigin in 1993 in respect of amounts which would have been allocated to Mr.
Meyer's and Ms. Feigin's accounts under the Company's qualified defined
contribution programs for such years but for certain limitations determined
under the federal tax laws; (v) respective allocations under the Company's
Senior Management Incentive Plan ("SMIP") in respect of 1992 and 1993,
respectively, for Messrs. Berenson, Meyer and Novick, and Ms. Feigin of
$125,000 and $140,000, $723,900 and $687,150, $130,000 and $150,000, and
$80,000 and $90,000, such 1993 amounts further include $55,000, $30,000 and
$35,000 for Messrs. Berenson and Novick, and Ms. Feigin, respectively, accrued
in 1992 as an advance to the five year SMIP begun in 1993; and (vi) $100,000
for 1993 and $200,000 for each of 1992 and 1993 of loan forgiveness in respect
of Messrs. Berenson's and Novick's indebtedness to the Company. Does not
include payments in 1992 (in 1993 for Mr. Berenson) in respect of SMIP
allocations made in prior years and which generally vested on December 31, 1992
in the respective amounts of $350,000, $1,491,124, $375,060 and $265,997 for
Messrs. Berenson, Meyer and Novick, and Ms. Feigin.
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<PAGE> 7
Aggregated Option Exercises in 1993 and Stock Option Value as at
December 31, 1993(1)
<TABLE>
<CAPTION>
Value of
Number of Unexercised
Unexercised In-the-Money
Options Options
December 31, 1993 December 31, 1993
----------------- -----------------
Shares
Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized(2) Unexercisable Unexercisable
- - ----- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Robert L. Berenson -- -- 666/334 $62,604/$31,396
Barbara S. Feigin 333 28,305 0/334 0/31,396
Edward H. Meyer -- -- 0/0 0/0
Stephen A. Novick -- -- 2,332/3,668 138,407/183,093
John Shannon -- -- 666/334 62,604/31,396
</TABLE>
________________________________________________________________________
(1) All options relate to shares of Common Stock.
(2) "Value Realized" represents the market price of the Common Stock on
the date of exercise less the exercise price payable.
SENIOR EMPLOYEE PENSION PLAN
The Senior Employee Pension Plan provides that certain qualified officers of
the Company and its subsidiaries will be entitled upon retirement at or after
the age of 60 to a lifetime supplemental pension of a maximum of $50,000 per
year. Persons who are executive vice presidents of the Company, or more
senior, or are designated senior executive officers of certain of the Company's
subsidiaries, and who have met certain age and length of service requirements
are participants under the plan. In addition, a surviving spouse of a
recipient of a pension under the plan is entitled to an annual pension equal to
a maximum of $25,000 for the shorter of such spouse's life and 20 years. Each
of the named executives (other than Mr. Shannon), were participants under the
plan. In addition, the Company has certain understandings whereby certain
additional pension amounts may be paid to Messrs. Berenson, Novick, and Ms.
Feigin.
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<PAGE> 8
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of March 1, 1994, the Company had outstanding 901,983 shares of
Common Stock, and 338,844 shares of Class B Stock. To the knowledge of the
Board of Directors, as of June 1, 1994 no stockholder owned of record or
beneficially more than 5% of the Company's outstanding shares of Common Stock,
Class B Stock or Preferred Stock except as indicated below:
<TABLE>
<CAPTION>
Amount of
Shares and
Nature of
Name and address Beneficial
of Record or or Record Percentage
Title of Class Beneficial Owner Ownership of Class
-------------- ---------------- --------- ----------
<S> <C> <C> <C>
Common Stock........... Edward H. Meyer, as Voting 184,718(a) 20.5
Trustee under a Voting Trust
Agreement, dated as of
February 24, 1986, and as
subsequently amended
("Voting Trust Agreement"),
among the Voting Trustee,
the Company and the
Beneficiaries of the
Voting Trust Agreement
777 Third Avenue
New York, New York 10017
Edward H. Meyer 131,453(b) 14.2
777 Third Avenue
New York, New York 10017
The committee administering 50,850(c) 5.6
the Company's Employee Stock
Ownership Plan
777 Third Avenue
New York, New York 10017
Nicholas Company, Inc. 116,900(d) 13.0
700 North Water Street
Milwaukee, Wisconsin 53202
Southeastern Asset Management, Inc. 58,111(e) 6.4
860 Ridgelake Boulevard
Memphis, Tennessee 38120
Quest Advisory Corp. 69,077(f) 7.7
1414 Avenue of the Americas
New York, New York 10019
T. Rowe Price Associates, Inc. 54,065(g) 6.0
100 E. Pratt Street
Baltimore, Maryland 21202
All executive officers and 278,291(h) 29.6
directors as a group
</TABLE>
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<PAGE> 9
<TABLE>
<S> <C> <C> <C>
Class B Stock.......... Edward H. Meyer, as Voting 197,411(a) 58.3
Trustee under the Voting Trust
Agreement
777 Third Avenue
New York, New York 10017
Edward H. Meyer 135,553(b) 37.2
777 Third Avenue
New York, New York 10017
The committee administering 56,961(c) 16.8
the Company's Employee Stock
Ownership Plan
777 Third Avenue
New York, New York 10017
All executive officers and 282,572(h) 77.5
directors as a group
Series I, Series II
and Series III Edward H. Meyer 30,000(i) 100
Preferred Stock...... 777 Third Avenue
New York, New York 10017
</TABLE>
(a) Represents voting power only and includes certain shares
subject to a voting agreement pursuant to which shares owned by an executive
officer of the Company will be voted in the same manner as the Voting Trustee
votes. Does not include shares issuable upon exercise of options which are
contractually bound to be deposited pursuant to the Voting Trust Agreement. In
general, investment power over the shares deposited in the voting trust
established pursuant to the Voting Trust Agreement is retained by the several
beneficiaries of the Voting Trust Agreement. (See "Employment Agreements and
Other Transactions" below.)
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<PAGE> 10
(b) Includes shares of Common Stock and of Class B Stock, as the
case may be, issuable upon conversion of the Company's 8-1/2% Convertible
Subordinated Debentures owned by Mr. Meyer after giving effect to the assumed
conversion thereof, and Mr. Meyer's beneficial interest in shares of Common
Stock and Class B Stock deposited by him pursuant to the Voting Trust Agreement
as to which he retains investment power. Does not include shares of Common
Stock (5.6% of such class) and Class B Stock (16.8%) held in the Company's
Employee Stock Ownership Plan as to which Mr. Meyer exercises shared voting
power by virtue of his membership on the committee charged with its
administration. Does not include shares of Common Stock and Class B Stock held
in trust for Mr. Meyer's children which have been deposited with the Voting
Trust under the Voting Trust Agreement, or shares of Common Stock or of Class B
Stock as to which Mr. Meyer exercises voting power by virtue of being the
Voting Trustee under the Voting Trust Agreement.
(c) The committee which administers the Company's Employee Stock
Ownership Plan exercises voting power over shares held in such plan, and is
comprised of Mr. Meyer and Steven G. Felsher.
(d) Information based on the Company's understanding of
publicly-filed material. Nicholas Company, Inc. ("Nicholas"), a registered
investment advisor which, on behalf of its clients, has been a long-term
investor in the Company, has sole dispositive power with respect to the shares
listed. Nicholas Fund, Inc., a diversified mutual fund, has the sole voting
power with respect to 79,500 of Nicholas' listed shares (about 8.8% of the
outstanding Common Stock) and is located at the same address as Nicholas.
(e) Information based on the Company's understanding of
publicly-filed material. Southeastern Asset Management, Inc., a registered
investment advisor which, on behalf of its clients, has been a long-term
investor in the Company, has sole dispositive and voting power with respect to
the shares listed.
(f) Information based on the Company's understanding of
publicly-filed material. Quest Advisory Corp., a registered investor advisor,
which (together with a related entity), on behalf of its clients, has been a
long-term investor in the Company, has sole dispositive and voting power with
respect to the shares listed.
(g) Information based on the Company's understanding of
publicly-filed material. T. Rowe Price Associates, Inc. ("TRP"), a registered
investment advisor which, on behalf of its clients, has been a long-term
investor in the Company, has sole dispositive power with respect to the shares
listed. T. Rowe Price Small Cap Value Fund, Inc., a diversified mutual fund,
has sole voting power with respect to 51,865 of TRP's listed shares (about 5.8%
of the outstanding Common Stock) and is located at the same address at TRP.
(h) Includes shares of Common Stock (5.6% of such class) and of
Class B Stock (16.8%), as the case may be, as to which certain executive
officers exercise shared voting power by virtue of their membership on the
committee administering the Company's Employee Stock Ownership Plan. Includes
shares of Common Stock and Class B Stock as to which the Voting Trustee under
the Voting Trust Agreement exercises voting power. Includes shares of Common
Stock and of Class B Stock issuable upon conversion of the Company's 8-1/2%
Convertible Subordinated Debentures owned by Mr. Meyer and shares of
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<PAGE> 11
Common Stock and of Class B Stock issuable upon exercise of stock options which
are exercisable by beneficiaries under the Voting Trust Agreement, who are
obliged, under the terms of the Voting Trust Agreement, to deposit shares
acquired subsequent to the execution of the Voting Trust Agreement in
accordance with the terms thereof, after giving effect to the assumed exercise
and conversion thereof. Does not include shares of Common Stock and Class B
Stock issuable to beneficiaries under the Voting Trust Agreement upon exercise
of stock options which are not presently exercisable.
(i) Represents 20,000 and 5,000 shares of each of the Company's
Series I, Series II and Series III Preferred Stock, of which classes Mr. Meyer
owns 100% of the outstanding shares.
Item 13. Certain Relationships and Related Transactions.
Messrs. Berenson, Meyer and Novick, and Ms. Feigin have employment agreements
with the Company. The Company has entered into an employment agreement with
Mr. Berenson providing for his continued employment with the Company through
December 31, 1995 at a minimum annual compensation of $485,000 per year. In
addition, the agreement with Mr. Berenson provided that the Company would
advance him a compensatory loan in an amount not to exceed $500,000 to
facilitate the purchase of a primary residence which would secure the loan.
Such loan was to be repayable five years after it was made or upon termination
of Mr. Berenson's with the Company under certain circumstances (except that the
Company was to forgive 20% of the loan each December 31 on which Mr. Berenson
was employed after the closing of the loan). Mr. Berenson's agreement also
contemplates that following a change in control as defined in his agreement,
and if Mr. Berenson terminates his employment upon a breach of the agreement by
the Company or the Company terminates his agreement without cause, the
remainder of any outstanding loan would be forgiven. During 1993, in lieu of
making the loan to Mr. Berenson and forgiving it as contemplated, the Company
assisted Mr. Berenson in securing a loan from a commercial bank by agreeing to
amortize up to $100,000 per year for up to five years of the principal on the
mortgage loan Mr. Berenson took from such bank. The Company's obligation to
reimburse is essentially parallel to the obligation it would have had to Mr.
Berenson to forgive the loan his agreement comtemplated being made to him and,
therefore, it is considered the equivalent of a loan forgiveness. In addition,
following a change of control and upon the termination of Mr. Berenson's
employment under the circumstances mentioned above, he shall thereupon vest in
his currently owned unvested stock options and restricted stock, and be
entitled to a lump sum payment equal to three times the sum of his then annual
salary and his most recent annual bonus, provided that all of such
consideration shall not exceed the maximum limitations on the tax deductibility
thereof imposed by Sections 280G and 4999 of the Internal Revenue Code.
In addition, in early 1994, the Company loaned Mr. Berenson $50,000
which is forgivable by the Company assuming his continued employment through
1998. In 1984, the Company entered into an employment agreement, which has
been amended subsequently, with Mr. Meyer, which provides for Mr. Meyer's
employment with the Company through December 31, 1997. The agreement also
provides for a minimum annual salary of $1,900,000 for Mr. Meyer's services as
Chief Executive Officer. If the Company terminates Mr. Meyer's full-time
employment as Chief Executive Officer
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<PAGE> 12
without cause (as defined in the agreement), or if Mr. Meyer effects such
termination due to a change of control of the Company or other good reason
specified in the agreement, Mr. Meyer will receive $3,000,000 in consideration
of his employment. The agreement further provides that the Company will defray
premiums on life insurance policies on Mr. Meyer's life payable to a
beneficiary designated by him; the Company paid $40,005 in premiums in respect
of these policies in 1993. The employment agreement also provides that Mr.
Meyer may, for a period subsequent to his termination of full-time employment
as Chief Executive Officer, provide the Company with consulting services at
$10,000 per month. If the Company terminates Mr. Meyer's full-time employment
as Chief Executive Officer without cause, or if Mr. Meyer effects such
termination due to a change in control of the Company or for other good reason,
Mr. Meyer will receive a lump sum payment equal to his then current aggregate
remuneration multiplied by the greater of the number of years remaining in the
term of the employment agreement and the number three. In such event, Mr.
Meyer will also have an option to sell to the Company each share of the Common
Stock and the Class B Stock which he then owns at the per share market value of
the Common Stock. Mr. Meyer's agreement also provides that, for the ten year
period (subject to reduction or suspension in the event Mr. Meyer becomes
disabled or is in breach of his agreement) following his termination of
employment, the Company will, among other things, provide Mr. Meyer with an
office and related office staff and facilities, and the continued use of a car
and driver. The Company has also agreed to reimburse Mr. Meyer for certain
business expenses incurred by him following termination of his employment up to
$100,000 per year during the first five years of such period and $50,000 per
year during the remainder of such period, with such amounts being adjusted for
increases in the consumer's price index until the date of termination of his
employment. During such ten year period, Mr. Meyer has also been charged with
the responsibility of overseeing a certain portion of the Company's charitable
contributions and, thus, will see to the contribution to charities of $100,000
per year of the Company's funds during the first five years of the period and
of $50,000 per year during the remainder of the period. In 1983, the Company
sold and issued $3,025,000 principal amount of its 8-1/2% Convertible
Subordinated Debentures, due December 10, 1997, to Mr. Meyer in consideration
of a purchase price of equal amount, of which $25,000 was paid in cash and the
remainder by delivery of Mr. Meyer's long-term 9% full recourse promissory note
in the principal amount of $3,000,000. The Debentures are convertible at any
time into one share of Common Stock and one share of Class B Stock, at a
current conversion price of $118.63, subject to adjustment upon the occurrence
of certain events. During 1992, Mr. Meyer exercised certain stock options
which had been granted to him in 1984, and, in connection therewith pusuant to
the stock option agreement, issued to the Company his promissory note in the
amount of $3,169,690, representing the exercise price in excess of the par
value of the shares issued on exercise, which amount was paid in cash, and his
promissory note in the amount of $2,339,998, representing the amount of tax
required to be withheld in connection with such option excercise. The
promissory notes are each full recourse, mature on December 22, 2001 and bear
interest at the rate of 6.06% per year. Mr. Meyer is also indebted to the
Company in the aggregate amount of $762,950 pursuant to long-term 9%, full
recourse promissory notes delivered to the Company in 1981, 1982 and 1983 as
part payment for Mr. Meyer's purchase shares of Series 1, 2 and Series 3
Preferred Stock (collectively, "Original Preferred Stock"). In 1994, the
Company and Mr. Meyer entered into an Exchange Agreement pursuant to which Mr.
Meyer exchanged the Original Preferred Stock for a like number of shares of new
Preferred Stock, desiginated Series I Preferred Stock, Series II Preferred
Stock and Series III Preferred Stock (collectively, the "New
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<PAGE> 13
Preferred Stock"). The terms of the New Preferred Stock, including the basic
economic terms relating thereto, are essentially the same as the Original
Preferred Stock, except that the redemption date of the three series of new
preferred stock is fixed at April 7, 2004 rather than on a date determined by
reference to Mr. Meyer's termination of full-time employment with the Company
as was the case with the Original Preferred Stock. The terms of the New
Preferred Stock also give Mr. Meyer the option to require the Company to redeem
his Preferred Stock for a period of 12 months following his (i) death, (ii)
permanent disability or permanent mental disability, (iii) termination of
full-time employment for good reason and (iv) termination of full-time
employment by the Company without cause. Previously, Mr. Meyer had the option
to require the Company to redeem his Preferred Stock only upon the termination
of his full-time employment with the Company prior to his attainment of age 65.
During 1994, the Company entered into an agreement with Mr. Novick pursuant to
which his employment by the Company was continued at a minimum annual
compensation of and $635,000 per year. The agreement provides that, Mr. Novick
shall remain employed with the Company through 1998, and that, during the term
of his agreement, he shall have an annual allocation pursuant to the SMIP of
not less than $150,000 and an annual bonus of not less than $75,000. The
agreement also provided for the Company to lend to Mr. Novick $600,000 to
acquire a new residence intended to be used, in part, for business
entertaining. This loan is forgivable in three annual installments of $200,000
at the end of each of 1995, 1996 and 1997, provided Mr. Novick is still
employed by the Company. Mr. Novick's agreement also provides that, if prior
to the end of 1995, there is a change in control, as defined in the agreement,
and either Mr. Novick terminates his employment upon breach thereof by the
Company or the Company terminates his employment, under such circumstances, the
remaining balances of his loans shall be forgiven; in addition, and under such
circumstances, he shall thereupon vest in his currently owned unvested stock
options and restricted stock, and be entitled to a lump sum payment equal to
three times the sum of his then annual salary and his most recent annual bonus,
provided that all such consideration shall not exceed the maximum limitations
on the tax deductibility thereof imposed by Sections 280G and 4999 of the
Internal Revenue Code. Furthermore, as at December 31, 1993, Mr. Novick had
outstanding $400,000 of a compensatory loan in the original amount of
$1,000,000 made to him pursuant to an earlier employment agreement and used to
facilitate the financing of his purchase of a residence. Such $1,000,000
advance was secured and shall be repayable on December 31, 1995 (except
one-fifth of the loan shall be forgiven by the Company each December 31 during
which Mr. Novick is employed); during 1993 the Company forgave $200,000 of this
loan. In 1993, the Company entered into an employment agreement with Ms.
Feigin providing for her continued employment by the Company at least through
December 31, 1996, at a minimum annual compensaton of $331,000 per year. The
agreement also provides that the Company will pay for certain life and
disability insurance coverages for Ms. Feigin. Ms. Feigin's agreement also
provides that if there is a change in control, as defined in her agreement, and
either Ms. Feigin terminates her employment upon a breach thereof by the
Company or the Company terminates her employment, under such circumstances, she
shall thereupon vest in her currently owned unvested stock options and
restricted stock, and be entitled to a lump sum payment equal to three times
the sum of her then annual salary and her most recent annual bonus, provided
that all of such consideration shall not exceed the maximum limitations on the
tax deductibility thereof imposed by Sections 280G and 4999 of the Internal
Revenue Code. Other than pursuant to the loans described above in connection
with Mr. Meyer's securities, and Messrs. Berenson's and Novick's arrangements,
no named executive is indebted to the Company for
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<PAGE> 14
more than $60,000. Certain key employees of the Company, including the named
executives and certain members of their immediate families ("Beneficiaries"),
have entered into the Voting Trust Agreement, as amended in 1987 and 1994,
pursuant to which the Beneficiaries have deposited the shares of Common Stock
and Class B Stock owned by them into a voting trust. The Beneficiaries have
also agreed to deposit into the voting trust shares of Common Stock or Class B
Stock hereafter acquired by them. The trust was extended in 1994 and will
continue until 2004. Mr. Meyer has been designated the sole Voting Trustee.
Beneficiaries retain the sole authority to receive dividends and, in general,
to dispose of their shares held in the voting trust. The Company has entered
into indemnification agreements with each of the members of the Board of
Directors providing, generally, for the fullest indemnification permitted by
law.
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