<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
GREY ADVERTISING INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
$125.00
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
GREY ADVERTISING INC.
777 THIRD AVENUE
NEW YORK, NEW YORK 10017
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 10, 1995
To the Stockholders of
GREY ADVERTISING INC.
The Annual Meeting of Stockholders of Grey Advertising Inc. ("Company")
will be held at the offices of APCO Associates Inc., the Company's public
affairs subsidiary, 1615 L Street, N.W., Washington, D.C., on October 10, 1995
at 8:00 A.M., local time, for the following purposes:
(1) To elect one director to hold office for a three year term.
(2) To consider and take action on a proposal to amend the Company's
Certificate of Incorporation to extend the date for the automatic
conversion of the Company's Limited Duration Class B Common Stock.
(3) To consider and take action on a proposal to ratify the selection
of Ernst & Young as independent auditors for the Company for 1995.
(4) To transact such other business as may properly come before the
meeting.
Holders of record of the Company's Common Stock and Limited Duration Class
B Common Stock at the close of business on September 1, 1995, and holders of the
Company's Preferred Stock, will be entitled to vote at the meeting.
By Order of the Board of Directors
STEVEN G. FELSHER
Secretary
New York, New York
September 8, 1995
PLEASE SPECIFY YOUR CHOICES, DATE AND SIGN THE ENCLOSED PROXIES
AND MAIL THEM PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE> 3
GREY ADVERTISING INC.
777 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 546-2000
---------------------
PROXY STATEMENT
---------------------
ANNUAL MEETING OF STOCKHOLDERS
OCTOBER 10, 1995
This Proxy Statement is being mailed to stockholders on or about September
8, 1995 in connection with the solicitation of proxies by the Board of Directors
of Grey Advertising Inc. ("Company") for the Annual Meeting of Stockholders to
be held at the offices of APCO Associates Inc., the Company's public affairs
subsidiary, 1615 L Street, N.W., Washington, D.C., on October 10, 1995 at 8:00
A.M., local time, and at any and all adjournments thereof, for the purposes set
forth in the Notice of Annual Meeting of Stockholders.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time prior to its exercise. A stockholder may effect revocation
of a proxy by delivering written notice to the Secretary of the Company, by
giving a later-dated proxy or by attending the meeting and voting in person. All
properly executed, unrevoked proxies will be voted as specified. Unless contrary
directions are given, proxies will be voted for the election of the nominee for
director proposed by the Board of Directors and in favor of the proposals set
forth in the notice. Shares represented by executed proxies received by the
Company will be counted for a quorum regardless of how or whether such shares
are voted on any particular matter. Where nominee stockholders of record do not
vote on specific issues because they did not receive instructions, such
"non-votes" will not be treated as votes cast or shares present for such issues.
The affirmative vote of the holders of a plurality of the votes cast is required
in the election of directors. The vote required to approve each of the other
matters to be voted on at the meeting, as well as the effect of abstentions and
broker non-votes, is set forth in the sections describing each such matter.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY STOCKHOLDER A COPY OF ITS
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994 ("10-K").
STOCKHOLDERS DESIRING TO OBTAIN A COPY OF THE 10-K SHOULD ADDRESS WRITTEN
REQUESTS TO MS. LUCILLE J. CASERIO, ASSISTANT SECRETARY, GREY ADVERTISING INC.,
777 THIRD AVENUE, NEW YORK, NEW YORK 10017.
VOTING SECURITIES
Holders of record of the Company's Common Stock and Limited Duration Class
B Common Stock ("Class B Stock" or "Class B Common Stock") at the close of
business on September 1, 1995, and holders of the Company's Preferred Stock,
will be entitled to vote at the meeting. On September 1, 1995, the Company had
outstanding 877,886 shares of Common Stock and 311,802 shares of Class B Stock.
The Company also
<PAGE> 4
has outstanding and entitled to vote at the meeting 20,000 shares of its Series
I Preferred Stock, and 5,000 shares each of its Series II Preferred Stock and
Series III Preferred Stock. At the meeting, each share of Common Stock will be
entitled to one vote; each share of Class B Stock will be entitled to ten votes;
and each share of Preferred Stock will be entitled to eleven votes.
To the knowledge of the Board of Directors, as of the record date 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
NAME AND ADDRESS OF OF BENEFICIAL OR PERCENTAGE
TITLE OF CLASS RECORD OR BENEFICIAL OWNER RECORD OWNERSHIP OF CLASS
---------------------------- ------------------------------------ ---------------- ----------
<S> <C> <C> <C>
Common Stock................ Edward H. Meyer, as Voting Trustee 179,349(a) 20.4
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 144,786(b) 15.8
777 Third Avenue
New York, New York 10017
The committee administering the 50,729(c) 5.8
Company's Employee Stock
Ownership Plan
777 Third Avenue
New York, New York 10017
Quest Advisory Corp. 88,162(d) 10.0
1414 Avenue of the Americas
New York, New York 10019
Southeastern Asset Management, Inc. 61,311(e) 7.0
860 Ridgelake Boulevard
Memphis, Tennessee 38120
Tweedy Browne Company L.P. 54,600(f) 6.2
52 Vanderbilt Avenue
New York, New York 10017
T. Rowe Price Associates, Inc. 54,065(g) 6.2
100 E. Pratt Street
Baltimore, Maryland 21202
All executive officers and 291,402(h) 31.2
directors as a group
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
AMOUNT OF
SHARES AND
NATURE
NAME AND ADDRESS OF OF BENEFICIAL OR PERCENTAGE
TITLE OF CLASS RECORD OR BENEFICIAL OWNER RECORD OWNERSHIP OF CLASS
---------------------------- ------------------------------------ ---------------- ----------
<S> <C> <C> <C>
Class B Stock............... Edward H. Meyer, as Voting Trustee 184,116(a) 59.1
under the Voting Trust Agreement
777 Third Avenue
New York, New York 10017
Edward H. Meyer 135,553(b) 40.2
777 Third Avenue
New York, New York 10017
The committee administering the 56,961(c) 18.3
Company's Employee Stock
Ownership Plan
777 Third Avenue
New York, New York 10017
All executive officers and 269,177(h) 79.8
directors as a group
Series I, Series II and
Series III Preferred
Stock..................... Edward H. Meyer 30,000(i) 100
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.)
(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, and shares of Common Stock issuable upon
exercise of stock options which are currently exercisable (after giving
effect to the assumed conversion and exercise 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 (5.8% of such
class) and Class B Stock (18.3%) 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.
3
<PAGE> 6
(d) 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.
(e) Information based on the Company's understanding of publicly-filed material.
Southeastern Asset Management, Inc., a registered investment advisor,
which, together with a related entity, on behalf of its clients, has been a
long-term investor in the Company, has sole or shared dispositive and
voting power with respect to the shares listed, except with respect to
5,000 such shares as to which it exercises no voting authority.
(f) Information based on the Company's understanding of publicly-filed material.
Tweedy Browne Company L.P., a registered investment advisor, which together
with related entities, on behalf of its clients, has sole or shared
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., a registered investment advisor, which
together with a related entity, on behalf of its clients, has been a
long-term investor in the Company, has sole dispositive power with respect
to the shares listed.
(h) Includes shares of Common Stock (5.8% of such class) and of Class B Stock
(18.3%), 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 (Mr.
Meyer) 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 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 in the Voting Trust acquired subsequent to the execution
of the Voting Trust Agreement, after giving effect to the assumed
conversion and exercise 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 of Series I Preferred Stock, and 5,000 shares of each of
the Company's Series II and Series III Preferred Stock, of which classes
Mr. Meyer owns 100% of the outstanding shares.
4
<PAGE> 7
ELECTION OF DIRECTOR
The Board of Directors presently consists of four members, one of whom is
elected by the holders of the Series I Preferred Stock, voting as a class, and
three of whom, divided into three classes, are elected by the holders of the
Common Stock, the Class B Stock and the Preferred Stock voting together. At each
Annual Meeting of Stockholders, directors of one class are elected to serve for
a three-year term or until the election of their successors.
John Shannon has been nominated to be elected at the meeting to serve as a
director until the Annual Meeting of Stockholders to be held in 1998. Mr.
Shannon is currently serving on the Board.
The Company's Restated Certificate of Incorporation provides for cumulative
voting for elections of directors. Therefore, if more than one director is being
elected at a meeting, each stockholder is entitled to cast as many votes as
shall equal the number of votes represented by the shares owned by such
stockholder multiplied by the number of directors to be elected and such
stockholder may cast all of such votes for a single nominee for director, or may
distribute them among the number of nominees, as the stockholder determines.
Information relating to Mr. Shannon and to the directors not standing for
election who will continue in office following the meeting is set forth below.
Each person listed below is currently a director of the Company.
<TABLE>
<CAPTION>
TERM 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............ 65 Partner, Skadden, 1973 1996 2,200(e) --(f)
Arps, Slate,
Meagher & Flom,
law firm (d)
Edward H. Meyer........... 68 Chairman of the 1961 1997 584,556(g) 71.1%
Board, President
and Chief
Executive Officer
Richard R. Shinn.......... 77 Retired Chairman 1990 --(h) 1,000(i) --
of Metropolitan
Life Insurance
Company
John Shannon.............. 58 President, 1991 1995 1,000(j) --
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., Congoleum, Inc., Diagnostic/Retrieval Systems, Inc., Movie Fone Inc.,
The Harvey Group Inc., REFAC Technology Development Corporation, The
Shepaug Corporation, USA Mobile Communications, Inc. and Volt Information
Sciences, Inc.
5
<PAGE> 8
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-five mutual
funds advised by Merrill Lynch Asset Management, Inc. or its wholly-owned
subsidiary, Fund Asset Management, Inc.
(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 1994 and
1995.
(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 12.1%, 35.3%,
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 (2.9%) and Class B Stock (8.2%) 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 and shares of Common
Stock (1.5%) issuable upon exercise of currently exercisable stock options
owned by Mr. Meyer, after giving effect to the assumed exercise thereof.
Does not 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 holder of the Series I 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.
The Board of Directors has no reason to believe Mr. Shannon will, for any
reason, be unable to serve as a director. If, however, Mr. Shannon becomes
unavailable to serve, for any reason, it is the intention of the persons named
in the enclosed form of proxy, unless otherwise instructed by stockholders, to
vote such proxy for the election of such other person as the Board of Directors
may in its discretion recommend.
Directors who are not employees of the Company receive a fee of $4,500 per
quarter and a fee of $3,000 for each meeting of the Board attended. Directors
who are also employees receive no remuneration for serving on the Board. Under a
separate agreement with the Company, Mr. Kaplan has elected to have payment of
his director's fees deferred until he retires from the Board.
During 1994, the Board met five times. Each director attended at least 75%
of the meetings of the Board. The Audit Committee, which is comprised of Messrs.
Kaplan and Shinn, reviews the services of the Company's independent auditors,
the preparation of the Company's financial statements and the maintenance of
internal controls by the Company. Messrs. Kaplan and Shinn also comprise the
Company's Compensation
6
<PAGE> 9
Committee, which is charged with overseeing matters relating to senior executive
compensation. The Company does not have a standing nominating committee. Members
of the Audit Committee and the Compensation Committee receive $1,000 for each
meeting of each such committee which does not fall on the same day as a meeting
of the Board.
REMUNERATION OF MANAGEMENT
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of its Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company with respect to the three most recently completed fiscal
years of the Company, except as indicated below:
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION ALL
------------------------------- REST. STOCK OTHER
NAME AND POSITION YEAR SALARY BONUS STOCK($)(1) OPTION(#) COMP.(2)
----------------------------- ---- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Edward H. Meyer.............. 1994 $1,725,000 $400,833 -0- -0- $1,058,160
Chairman, President and Chief 1993 1,700,000 300,000 -0- -0- 928,487
Executive Officer 1992 1,700,000 200,000 -0- -0- 1,009,578
Robert L. Berenson........... 1994 $ 485,000 $180,000 -0- -0- $ 277,113
President, Grey-N.Y. 1993 442,500 150,000 -0- -0- 336,530
1992 400,000 135,000 -0- -0- 113,271
Barbara S. Feigin............ 1994 $ 342,250 $130,000 -0- -0- $ 175,989
Executive Vice President 1993 331,000 125,000 -0- -0- 260,006
1992 297,667 120,000 -0- -0- 87,162
Stephen A. Novick............ 1994 $ 667,500 $ 95,000 -0- -0- $ 400,638
Executive Vice President 1993 635,000 85,000 -0- -0- 411,530
1992 570,000 75,000 -0- -0- 333,001
John Shannon................. 1994 $ 473,616 $168,300 -0- -0- $ 56,031
President, Grey-International 1993 407,000 165,000 -0- -0- 52,139
1992 390,000 135,000 -0- -0- 41,199
</TABLE>
---------------
(1) As at December 31, 1994, Mr. Novick owned 5,000 shares issued under the
Company's Restricted Stock Plan as to which the restrictions thereon had not
lapsed, having an aggregate net value of $515,000 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) All Other Compensation includes: (i) contributions of $26,963, $25,492 and
$14,600 in 1992, 1993 and 1994, 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 represent deferred compensation pursuant to a
subsidiary-sponsored program for United Kingdom executives; (iii) respective
premium expense coverage or reimbursement of $54,949, $54,787, and $52,795,
$16,038, $16,038 and $17,513, $6,038, $6,038 and $6,038, $15,199, $99,046
and $25,800, in 1992, 1993 and 1994, 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, $161,058 and
$186,275 for
7
<PAGE> 10
Mr. Meyer in 1992, 1993 and 1994, respectively, and $10,468 and $9,726 for
Ms. Feigin in 1993 and 1994, respectively, generally 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, 1993 and 1994, respectively, for Messrs.
Berenson, Meyer and Novick, and Ms. Feigin of $125,000, $140,000 and
$145,000, $723,900, $687,150 and $815,100, $130,000, $150,000, and $180,000,
and $80,000, $90,000 and $125,000, 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 allocation to the five
year SMIP begun in 1993; and (vi) $100,000 for 1993 and 1994, and $200,000
for each of 1992, 1993 and 1994, and 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. Does not
include a distribution of $382,500 made to Mr. Shannon in 1994 in accordance
with the terms of a subsidiary-sponsored deferred compensation program in
the United Kingdom, which amount had vested previously in Mr. Shannon, and
related to, prior years.
AGGREGATED OPTION EXERCISES IN 1994 AND STOCK OPTION VALUES AS AT DECEMBER 31,
1994(1)
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
DECEMBER 31, 1994 OPTIONS
----------------- DECEMBER 31, 1994
SHARES -----------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED(2) UNEXERCISABLE UNEXERCISABLE
---------------------------------------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Robert L. Berenson...................... -- -- 1,000/0 $58,000/0
Barbara S. Feigin....................... -- -- 334/0 $19,372/0
Edward H. Meyer......................... -- -- 0/0 0/0
Stephen A. Novick....................... -- -- 4,333/1,667 $89,664/$15,837
John Shannon............................ -- -- 1,000/0 $59,000/0
</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.
8
<PAGE> 11
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee is comprised of the Company's outside directors.
The Committee is responsible for the establishment of the goals of the Company's
compensation practices and the implementation of the compensation programs that
further these goals. The Compensation Committee reviews regularly the
development of the Company's operations, its revenue and profit performance, its
prospects for growth, the general trends in the advertising agency industry and
the particular needs of the Company.
The Compensation Committee reviews and approves allocations under several
long-term deferred and current compensation programs which have been developed
over the years. These programs, which have utilized both cash and stock awards,
are designed to foster a strong commitment by the Company's senior executives to
the interests of the Company's stockholders, clients and business by rewarding
excellent performance with current compensation, enhancing motivation for
continued profit performance, encouraging a strong community of interests with
the Company's stockholders through share awards and fostering the long-term
retention of key management personnel through extended vesting periods.
These goals are particularly important, and not readily subject to a
short-term formula approach, in the advertising industry where compensation is
heavily negotiated and where there is great demand for talented people, thus
resulting in a high potential for executive turnover. The Compensation Committee
believes that the programs adopted by Grey have been helpful in retaining the
Company's executive officers who average more than 20 years of service with the
Company. This stability, which is not prevalent in the advertising agency
business, has, in the judgment of the Compensation Committee, been important in
enabling the Company to achieve its performance over the last 20 years. Over
such 20-year period, and as through the record date, the Company's stock price
has increased by over 5000% with a resulting annual compounded return before
dividends in excess of 21%.
The Company's executive officers, as disclosed in this proxy statement, own
a substantial interest in the Company's stock, a significant portion of which
was acquired over many years through a number of the Company's stock programs.
This indicates the importance which the Company places on management having the
same interests as stockholders generally.
In recent years, a significant portion of the executives' total
compensation has been provided through payment of discretionary annual bonuses
and through allocations under the Company's Senior Management Incentive Plan
("SMIP"). The total amounts paid or allocated, as the case may be, are related
to overall corporate operating performance and have trended upwards in better
years. In granting annual bonuses, the Compensation Committee considers the
executives' relative contribution to the Company's overall success, the need for
executives to believe they are compensated competitively, the need for bonuses
to be scaled to reflect seniority and contribution, and other relevant factors.
In approving the amount of the discretionary bonus for 1994 to Mr. Meyer which
was approximately $100,000 greater than his 1993 bonus, the Compensation
Committee also considered that Mr. Meyer has been employed by the Company since
1956 and has served as Chief Executive Officer since 1971, that despite the
continued tough business conditions in many major markets, Mr. Meyer led the
Company to record operating earnings and to a strong new business record, that
the Company continued its strong and steady growth and that since 1990, Mr.
Meyer had not received a salary increase (other than the cost-of-living increase
described below). The Committee also considered Mr. Meyer's long-term
contributions in creating value for the Company and its stockholders by
establishing and maintaining many significant client relationships, and by
overseeing the Company's expansion into new disciplines and parts of the world.
Overall, it is the generalized view of the Committee that under
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<PAGE> 12
Mr. Meyer's direction the Company has been and is well organized, and managed
for long-term, stable growth. Mr. Meyer's salary for 1994 was set by agreement
which was entered into a number of years ago and reflects all adjustments since
he became Chief Executive Officer of the Company (as of July 1994, Mr. Meyer's
salary was adjusted to reflect cost-of-living increases over the prior year).
Under SMIP, as approved at last year's stockholders meeting, participants
are credited with compensation in an aggregate amount equal to 12% of the
Company's pre-tax operating earnings for each year from 1993 through 1997.
Because of Mr. Meyer's senior position and his substantial interest in the
equity of the Company, the Compensation Committee, as agreed in prior years,
awarded Mr. Meyer with respect to 1994 an amount corresponding to 15% of the
aggregate amount credited for 1994 under SMIP.
Effective in 1994, the tax law was amended to deny tax deductions to
publicly-held corporations for annual compensation paid to certain executive
officers in excess of $1,000,000, subject to certain exceptions. The Committee
believes the Company should take appropriate steps to be in a position to
preserve the tax deductibility of compensation payments, to the extent such
steps are consistent with providing competitive compensation to its executives
and the Company otherwise satisfies the requirements of the tax law. Thus, to
satisfy the requirements of the tax law, the Committee submitted to, and secured
the approval of, the stockholders at the 1994 annual meeting, stock compensation
and incentive plans designed to comply with such tax laws. In addition, and for
the same purpose, during 1995, as disclosed below, the Company and Mr. Meyer
entered into arrangements intended to ensure continued compliance in the future.
Mark N. Kaplan
Richard R. Shinn
SENIOR EXECUTIVE OFFICER POST-EMPLOYMENT COMPENSATION PLAN
The Senior Executive Officer Post-Employment Compensation 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, and have been designated by the Board of
Directors of the Company, 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 and
Novick, and Ms. Feigin.
EMPLOYMENT AGREEMENTS AND OTHER 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 employment 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
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<PAGE> 13
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 the bank 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 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 and
in early 1995, the Company loaned Mr. Berenson $125,000 which is to be repaid,
together with accrued interest, in May 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, 2002. The agreement also provides for a
minimum annual salary of $1,950,000 for Mr. Meyer's services as Chief Executive
Officer. If the Company terminates Mr. Meyer's full-time employment as Chief
Executive Officer 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 $38,013 in premiums in respect
of these policies in 1994. 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.
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<PAGE> 14
In the first quarter of 1995, the Company and Mr. Meyer entered into an
agreement extending the term of Mr. Meyer's employment agreement through the
date hereinabove mentioned, and providing for the deferral of certain
compensation otherwise payable to Mr. Meyer pursuant to his employment agreement
and the payment of such deferred compensation into a trust, commonly referred to
as a rabbi trust, established with United States Trust Company of New York. The
purpose of the trust arrangement is to enhance the Company's ability to deduct
compensation paid to Mr. Meyer without the application of Section 162(m) of the
Internal Revenue Code ("Section") at such times as the monies are paid to Mr.
Meyer from the trust. The Section, under certain circumstances, denies a tax
deduction to an employer for certain compensation expenses in excess of
$1,000,000 per year paid by a publicly held corporation to certain of its
executives. For 1995, all of cash compensation payable to Mr. Meyer from and
after March 15, 1995 will be deferred and paid into the trust. In subsequent
years, such compensation as shall be timely elected by Mr. Meyer shall be
deferred and paid into the trust provided that no such election shall cause any
compensation paid to Mr. Meyer to be non-deductible by reason of the Section.
Amounts deferred and paid into the trust shall be paid to Mr. Meyer or to his
estate, as the case may be, upon the expiration of Mr. Meyer's employment
agreement, or the termination of his employment by reason of death or
disability.
In 1983, the Company sold and issued $3,025,000 principal amount of its
8 1/2% Convertible Subordinated Debentures, due December 10, 1996, 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 of 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,
designated Series I Preferred Stock, Series II Preferred Stock and Series III
Preferred Stock (collectively, the "New 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 or his estate, as the
case may be, 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 or (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 $775,000 per year. The agreement provides that, Mr. Novick shall
remain employed with the Company through 1998, and that,
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<PAGE> 15
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 1996, 1997 and 1998, 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 without cause, 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, 1994, Mr. Novick had outstanding $200,000 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 advance was secured and shall be repayable on December 31, 1995
(except one-fifth of the loan shall be forgiven by the Company provided Mr.
Novick is employed by the Company on such date); during 1994 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, 1997, at a minimum annual compensation of $376,000 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 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.
If Messrs. Berenson, Meyer (had his employment agreement been extended as
it was in early 1995) and Novick, and Ms. Feigin had been terminated effective
December 31, 1994 under circumstances which would have resulted in payment of
the special severance detailed in the foregoing description of their respective
agreements, amounts then payable (inclusive of loan forgivenesses) to each would
have been $2,205,309, $28,448,920, $2,774,861 and $1,652,834. 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 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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<PAGE> 16
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN FOR THE COMPANY,
THE S&P 500 INDEX AND FIVE OTHER PUBLICLY-TRADED ADVERTISING AGENCIES
<TABLE>
<CAPTION>
MEASUREMENT PERIOD GREY ADVER- PEER GROUP S&P 500 TO-
(FISCAL YEAR COVERED) TISING INDEX TAL RETURN
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 79.93 70.11 96.89
1991 71.53 103.65 126.42
1992 87.64 130.63 136.05
1993 121.94 138.69 149.76
1994 100.40 145.94 151.74
</TABLE>
The Company's peer group is comprised of Cordiant plc, The Interpublic
Group of Companies, Inc., Omnicom Group Inc., True North Communications, Inc.
and WPP Group, plc. The graph assumes the initial investment of $100 on December
31, 1989 and the reinvestment of dividends thereafter.
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<PAGE> 17
PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION
TO EXTEND THE DATE OF THE AUTOMATIC CONVERSION OF THE COMPANY'S
CLASS B COMMON STOCK INTO SHARES OF THE COMMON STOCK
The Company's Board of Directors has adopted, and has voted to recommend
that stockholders adopt, an amendment ("Amendment") to Article Fourth of the
Company's Restated Certificate of Incorporation ("Restated Certificate") which
would extend for ten years the date of the automatic conversion of the Class B
Common Stock into shares of Common Stock. The automatic conversion is presently
scheduled for April 3, 1996, the tenth anniversary of the record date for the
initial distribution of shares of Class B Common Stock ("Distribution"). A copy
of the proposed Amendment is set forth in Exhibit A hereto.
BACKGROUND, REASONS FOR AND EFFECTS OF THE AMENDMENT
In 1986, the Company, following stockholder approval, amended Article
Fourth of the Restated Certificate and related provisions to authorize the
issuance of the Class B Common Stock. Promptly following the amendment of the
Restated Certificate, the Company declared a distribution of one share of Class
B Common Stock for each share of Common Stock outstanding on April 3, 1986
("Distribution Record Date").
In general, the Class B Common Stock and the Common Stock are identical
except that the Class B Common Stock possesses ten votes per share, while the
Common Stock possesses one vote per share. In addition, the Class B Common Stock
is generally not transferable (except to certain permitted transferees), but is
convertible on a share for share basis into the Common Stock. A detailed summary
of the relative rights, powers and limitations of the Common Stock and the Class
B Common Stock are set forth on Exhibit B hereto.
The purpose for amending the Restated Certificate and effecting the
Distribution in 1986 was to (i) enable management to concentrate on the
long-term objectives and goals of the Company, without being distracted by
threat of a surprise or hostile takeover attempt; (ii) encourage persons
interested in a business combination with the Company to conduct arms-length
negotiations with management and the Board of Directors; (iii) enhance the
continuity and stability of the Company's management and employees, and their
relationships with the Company's clients; and (iv) afford the Company the
maximum ability to realize business opportunities which present themselves, by
insuring that control of the Company could not be acquired other than in a
transaction which is approved by the Company's long-term stockholders, including
its key employees.
The Company intended to achieve these objectives with the Distribution
since following the Distribution voting control would be vested in the holders
of Class B Common Stock and, as a result, it would be difficult, if not
impossible, for a third party to acquire control of the Company in a transaction
which is not approved by the holders of Class B Common Stock. In this regard,
the Class B Common Stock presently has the effect of increasing the voting power
of shares beneficially owned by the Company's executive officers and directors,
which is exercised directly, and including through the voting trust and ESOP, as
described herein, from 47% to 71% of the votes entitled to be cast generally at
meetings of stockholders. See "Voting Securities" and "Election of Director."
The Board of Directors is proposing the Amendment at this time so as to
extend the benefits afforded by the Class B Common Stock for an additional ten
years since, in accordance with the terms of Article Fourth of the Restated
Certificate, the Class B Common Stock is presently scheduled to convert
automatically into Common Stock on April 3, 1996, the tenth anniversary of the
Distribution Record Date. The Board of Directors has chosen to extend the
conversion date for only ten years since that mirrors the initial term of the
Class B Common Stock and to ensure that stockholders will have another
opportunity to vote on the
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<PAGE> 18
conversion of the Class B Common Stock should the Board of Directors believe at
that time that a further extension is appropriate.
The Board of Directors believes strongly that a service enterprise such as
Grey benefits significantly from the stability of its management structure, and
the ability of the management to focus single-mindedly on the servicing of its
clients' needs. The Board believes that this has been a major reason for the
Company's successful performance over the past 15 years. Further, the Company,
in the Board's judgement, has benefitted from the fact that a number of its
competitors have suffered and lost ground as a result of takeovers of
advertising agencies in the 1980's. While the Board of Directors is not aware of
any existing or threatened takeover, the Company, in proposing the Amendment at
this time, wishes to maintain the significant competitive advantages it has
obtained from the continuity of its management, and its uninterrupted focus and
dedication to its clients' needs.
The Board of Directors has given due consideration to the Amendment and has
concluded that its adoption would be in the best interests of the Company.
However, stockholders should consider the fact that the Amendment would preserve
the increased voting power of the holders of Class B Common Stock, which as
described above, to a significant extent include executive officers and other
key employees of the Company, and will likely make more difficult, and thereby
discourage, takeovers of the Company which are opposed by the holders of the
Class B Common Stock. Similarly, the existence of the Class B Common Stock would
make it more difficult for third parties to engage successfully in proxy
contests which, among other things, may seek to change the composition of the
Board of Directors. As a result, the Amendment may be characterized as
"anti-takeover" in nature.
In addition, as described at the time the Class B Common Stock was
authorized, the continued existence of the Class B Common Stock may limit the
Company's ability to effect a business combination eligible to be accounted for
using the "pooling of interests" method. In order for such method to be used,
the Company may be required to issue Class B Common Stock as the consideration
for the combination, which, in accordance with the Restated Certificate, the
Company is presently not authorized to do. It should be noted, however, that the
Company has not effected any business combination utilizing any of its equity
securities as consideration in more than 25 years and has no expectation of
doing so in the foreseeable future.
The Board of Directors does not presently contemplate adopting, or
recommending to the stockholders for their adoption, any further amendments to
the Company's Restated Certificate or By-Laws. See "Existing Provisions in the
Restated Certificate and By-Laws and Related Matters" below for a description of
existing provisions in the Company's Restated Certificate and By-Laws, and in
certain other agreements, which might be viewed as having "anti-takeover"
effects.
EXISTING PROVISIONS IN THE RESTATED CERTIFICATE AND BY-LAWS AND RELATED MATTERS.
The Company's Restated Certificate and By-Laws currently contain certain
provisions which may have an "anti-takeover" effect. Set forth below is a
summary of these provisions, as well as certain other agreements which also may
be deemed to have an anti-takeover effect.
The Company's Restated Certificate and By-Laws (a) require the vote of
two-thirds of the outstanding stock of the company and the vote of a majority of
the Series I Preferred Stock to approve a merger or consolidation of the
Company, or the disposition of all or substantially all of the assets of the
Company, (b) divide the Board of Directors into three classes, one class to be
elected each year, (c) require cumulative voting in the election of directors,
(d) require the vote of four-fifths of the outstanding stock of the Company to
permit the stockholders to amend the By-Laws for the purpose of changing the
number of directors and (e) provide that in the event a vote of the Board of
Directors is tied, the Chairman of the Board shall be entitled to cast an
additional vote.
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<PAGE> 19
Article Seventh of the Company's Restated Certificate also permits the
holders of the Series I Preferred Stock to vote as a separate class to elect or
remove one-quarter of the Board of Directors. Articles Seventh and Tenth require
a majority of the outstanding shares of Series I Preferred Stock, voting as a
separate class, to approve the issuance of additional series of Preferred Stock
if the holders of such new shares will be entitled to vote with the holders of
Series I Preferred Stock on the election of directors or the merger,
consolidation or sale of all or substantially all of the assets of the Company.
Upon Mr. Meyer's death or the redemption of the shares of Series I Preferred
Stock issued to him, the foregoing voting privileges of the Series I Preferred
Stock expire. The holders of the Series I Preferred Stock also vote with the
holders of the Common Stock on all matters submitted to the stockholders of the
Company.
Subject to applicable law, the Board of Directors of the Company may issue,
in its sole discretion, additional shares of Common Stock and Preferred Stock
without further action by holders of Common Stock or Class B Common Stock.
Preferred Stock may be issued in one or more series and may have such
designations, preferences and relative rights, qualifications and limitations as
the Board of Directors may fix by resolution or resolutions at the time of
issuance. It might be possible for the Board to use its authority to issue
Common Stock or Preferred Stock in a way which could deter or impede the
completion of a tender offer or other attempt to gain control of the Company of
which the Board of Directors does not approve. The Company does not have any
present plans or commitments to use its authority to effect any such issuance,
but reserves the right to take any action in the future which the Board deems to
be in the best interests of the Company and its stockholders under the
circumstances. Additionally, the issuance of shares of Preferred Stock could
result in a class of securities outstanding that will have certain preferences
with respect to dividends and upon liquidation superior to those of the Common
Stock and Class B Common Stock.
Mr. Meyer's employment agreement with the Company provides that if the
Company terminates Mr. Meyer's full-time employment as Chief Executive Officer
without cause (as defined in the agreement), or if Mr. Meyer effects such
termination due to change in control of the Company or for other good reasons
specified in the agreement, Mr. Meyer will receive $3,000,000 in consideration
of his employment. If the Company terminates Mr. Meyer's full-time employment as
Chief Executive Officer without cause, or if Mr. Meyer effects such a
termination due to a change in control of the Company or for other good reason,
Mr. Meyer's agreement also provides that he 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 all of the Common Stock and Class B Common Stock which he then owns at
the market price therefor. The Company also has change in control provisions in
employment agreements with certain of its other executive officers. See
"Remuneration of Management -- Employment Agreements and Other Transactions".
STOCKHOLDER APPROVAL
The vote of the holders of a majority of the Company's Common Stock, Class
B Common Stock and Preferred Stock, each voting as a separate class, is required
to adopt the Amendment. Accordingly, an abstention or a broker non-vote will
have same the effect as a negative vote.
THE BOARD OF DIRECTORS BELIEVES THAT THE AMENDMENT IS IN THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR ADOPTION OF THE AMENDMENT.
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<PAGE> 20
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board of Directors of the Company has selected its present auditors,
the firm of Ernst & Young, as independent auditors to examine and report on the
financial statements of the Company for the year ending December 31, 1995.
Representatives of Ernst & Young are expected to be present at the meeting to
make such statements as they deem appropriate and to respond to appropriate
stockholder questions. The Board has determined that, although not required, it
would be desirable to request from the stockholders an expression as to whether
they concur in the foregoing selection. The Board recommends that stockholders
vote to ratify such selection. If the holders of a majority of the votes
represented at the meeting do not ratify the selection of Ernst & Young, the
selection of independent auditors will be reconsidered by the Board. Abstentions
will have the same effect as a negative vote, while broker non-votes will be
disregarded and have no effect.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMMENDS A VOTE "FOR" THIS PROPOSAL.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal to be presented at the 1996
Annual Meeting of stockholders must forward such proposal to the Secretary of
the Company at the address of the Company which is given above, so that it is
received by him no later than May 11, 1996.
SOLICITATION OF PROXIES
The solicitation of proxies will be conducted primarily by mail. However,
employees of the Company may solicit proxies by telephone, telegraph or personal
contact, but at no additional compensation. Bankers, brokers and others holding
stock in their names or in the names of nominees will be reimbursed for
out-of-pocket expenses incurred in forwarding proxies and proxy material to the
beneficial owners of such shares. The total cost of solicitation will be borne
by the Company. The Company has retained Georgeson & Company Inc., Wall Street
Plaza, New York, New York to assist in the solicitation of proxies for a fee of
$10,000 plus out-of-pocket expenses.
OTHER MATTERS
The Board of Directors is not aware of any other matters which may be
brought before the meeting. If other matters not known come before the meeting,
the persons named in the accompanying form of proxy or their substitutes will
vote such proxy in accordance with their best judgment.
STEVEN G. FELSHER
Secretary
September 8, 1995
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<PAGE> 21
EXHIBIT A
PROPOSED AMENDMENT TO SUBPARAGRAPH B.III (D) (9) OF
ARTICLE FOURTH OF THE RESTATED CERTIFICATE OF INCORPORATION
All outstanding shares of Class B Common Stock will automatically convert
into shares of Common Stock on April 3, 2006. Upon such conversion, certificates
evidencing previously outstanding shares of Class B Common Stock will thereafter
be deemed to evidence a like number of shares of Common Stock. None of the
provisions of this subparagraph (9) may be amended, altered, supplemented or
repealed without the affirmative vote of the holders of the Common Stock, of the
Class B Common Stock and of each series of the Preferred Stock entitled to vote
and outstanding on the Distribution Record Date.
<PAGE> 22
EXHIBIT B
DESCRIPTION OF THE COMMON STOCK
AND THE CLASS B COMMON STOCK
The rights, powers and limitations of the Common Stock and the Class B
Common Stock, which are set forth in full in Article Fourth of the Restated
Certificate, are summarized below.
1. VOTING
Subject to the rights of the holders of Preferred Stock, each share of
Common Stock entitles the holder thereof to one vote on all matters submitted to
the stockholders, including the election of directors, and each share of Class B
Common Stock entitles the holder thereof to ten votes on all such matters. Each
share of Series I, Series II and Series III Preferred Stock is entitled to
eleven votes per share until such time as the shares of Class B Common Stock are
automatically converted into shares of Common Stock, after which each such share
of Preferred Stock will be entitled to two votes per share. Except as set forth
below, all actions submitted to a vote of stockholders are voted on by holders
of the Common Stock and the Preferred Stock entitled to vote, voting together as
a single class. The holders of each class of stock, however, vote separately as
classes with respect to amendments to the Restated Certificate that alter or
change the powers, preferences or special rights of their respective classes of
stock to affect them adversely, and with respect to such other matters as may
require class votes under the General Corporation Law of the State of Delaware.
The holders of all outstanding shares of stock of the Company entitled to vote,
vote together as a single class upon any proposal to authorize additional shares
of Common Stock or Class B Common Stock.
2. DIVIDENDS AND OTHER DISTRIBUTIONS
Each share of Common Stock and Class B Common Stock is equal in respect of
rights to dividends and other distributions in cash, stock or property of the
Company (including distributions upon liquidation of the Company), except that,
in the case of stock dividends or distributions, holders of each class will
receive only shares for such class. Neither Common Stock nor Class B Common
Stock will be split, divided or combined unless the other is split, divided or
combined equally.
3. TRANSFERABILITY OF COMMON STOCK; TRADING MARKET
The Common Stock is freely transferable and is traded publicly on the
Nasdaq National Market System ("NMS") of the National Association of Securities
Dealers, Inc. ("NASD"). Although the NASD, together with the New York Stock
Exchange and the American Stock Exchange, recently adopted uniform policies
restricting the ability of NMS companies to (i) issue multiple classes of Common
Stock with differing voting rights or (ii) take other action which disparately
reduces or restricts the voting rights of existing stockholders, the Voting
Rights Policy of the Board of Governors of the NASD recognizes an exemption for
companies, such as the Company, with existing dual class Common Stock
structures. In addition, the staff of the NASD has confirmed to the Company's
counsel that the adoption of the Amendment is consistent with the NASD's Voting
Rights policy and, accordingly, would not affect the continued reporting of the
Common Stock on the NMS.
<PAGE> 23
4. RESTRICTIONS ON TRANSFER OF CLASS B COMMON STOCK, CONVERTIBILITY OF CLASS B
COMMON STOCK
INTO COMMON STOCK
As more fully described below the Class B Common Stock is not transferable
by a stockholder except to or among principally such holder's spouse, certain of
such holder's relatives and certain trusts established for their benefit.
Accordingly, no trading market exists and none will develop in the Class B
Common Stock. The Class B Common Stock, however, will continue to be,
convertible at all times, and without cost to the stockholder (except any
transfer taxes which may be payable if certificates are to be issued in a name
other than that in which the certificate surrendered is registered), into Common
Stock on a share-for-share basis. Therefore, stockholders desiring to sell the
equity interest in the Company represented by their shares of Class B Common
Stock may convert those shares into an equal number of shares of Common Stock
and sell the shares of Common Stock in the public market. A stockholder who does
not wish to complete the conversion process prior to a sale may effect a sale of
the Common Stock into which such stockholder's Class B Common Stock is
convertible by simply delivering the certificate or certificates for such shares
of Class B Common Stock to a broker, properly endorsed, in completion of the
sale. The broker will then present the Class B Common Stock certificate or
certificates to the Company's transfer agent who will issue to the purchaser a
certificate for the number of shares of Common Stock sold in settlement of the
transaction. The Common Stock is not convertible into the Class B Common Stock.
Shares of Class B Common Stock issued in a stockholder's own name are not
transferable into a "nominee" or "street" name. If on the Distribution Record
Date, however, shares of Common Stock were registered in a nominee or street
name, the shares of Class B Common Stock issued in respect thereof will be
registered in the same nominee or street name. Such shares of Class B Common
Stock may be transferred out of the nominee or street name into the name of the
person who was the beneficial owner of the Common Stock on the Distribution
Record Date (or a "Permitted Transferee," as hereinafter described, of such
person), and once so transferred, they may not be transferred back into nominee
or street name. Shares of Class B Common Stock held in nominee or street name
may be converted into Common Stock and the shares of Common Stock received are,
depending on the nature of the transaction, registered in the name of the
original beneficial owner, a transferee of such owner, or a nominee for such
owner or transferee.
Other than pursuant to conversions into Common Stock as described above, a
holder of shares of Class B Common Stock may transfer such shares (whether by
sale, assignment, gift, bequest, appointment or otherwise), ONLY to a "Permitted
Transferee," which Term is defined generally as follows:
i) such Class B stockholders's spouse;
ii) any of the lineal descendants of such Class B stockholder,
including adopted children (said descendants, together with the Class B
Stockholder and his or her spouse, are hereinafter referred to as "such
Class B Stockholder's family members");
iii) a trust for the sole benefit of such Class B stockholder's family
members; or
iv) a voting trust created by the voting trust agreement referred to
elsewhere in this Proxy Statement.
Shares of Class B Common Stock held by a corporation may be transferred to
a successor by merger or consolidation. Shares held by trusts that are
irrevocable on the Distribution Record Date may be transferred as a distribution
for such trust in accordance with its terms to any person to whom or for whose
benefit principal may be distributed under the terms of the trust.
B-2
<PAGE> 24
The restrictions on the transferability of the Class B Common Stock are set
forth in full in Article Fourth of the Restated Certificate. Each certificate
representing shares of Class B Common Stock bears a legend stating that there
are restrictions on transfer and registration of transfer set forth in the
Restated Certificate.
Any transfer of shares of Class B Common Stock not permitted under Article
Fourth will result in the automatic conversion of the transferor's shares of
Class B Common Stock into shares of Common Stock, effective the date on which
certificates representing such shares are presented for transfer on the books of
the Company. The Company shall be entitled to require the furnishing of such
affidavits or other proof as it deems necessary to establish that any person is
the beneficial owner of Class B Common Stock or is a Permitted Transferee.
5. FUTURE ISSUANCES OF CLASS B COMMON STOCK
The Company has not issued any additional shares of Class B Common Stock
after the Distribution Record Date and will not do so except (i) pursuant to
stock dividends stock splits and similar distributions as described in paragraph
2 above, (ii) upon conversion or redemption of outstanding securities and (iii)
pursuant to employee benefit plans existing as of the Distribution Record Date.
The Restated Certificate authorizes the issuance of 2,000,000 shares of Class B
Common Stock to provide a sufficient number of authorized shares for such future
issuances. As described earlier, the Board of Directors may not declare a stock
split or dividend on the Class B Common Stock, without declaring a similar stock
split or dividend on the Common Stock.
6. TERMINATION OF CLASS B COMMON STOCK
All outstanding shares of Class B Common Stock will automatically be
converted into shares of Common Stock on April 3, 1996, the tenth anniversary of
the Distribution Record Date, unless the Restated Certificate is amended in
accordance with the Amendment; in such case such conversion will occur on April
3, 2006. Upon such conversion, certificates formerly representing outstanding
shares of Class B Common Stock will thereafter be deemed to represent a like
number of shares of Common Stock. Such automatic conversion may not be delayed
or postponed without an affirmative vote of the holders of the Common Stock, the
Class B Common Stock and the Preferred Stock, each voting separately as a class.
7. EMPLOYEE BENEFIT PLANS
As a result of the Distribution, each outstanding option granted prior to
the Distribution Record Date under the Company's Executive Growth and Incentive
Stock Option Plans (collectively, the "Option Plans") were adjusted for the
Distribution so that the holders of such options were entitled, following the
Distribution, to receive upon exercise one share of Common Stock and one share
of Class B Common Stock for each share of Common Stock subject to such options.
The aggregate exercise price of each outstanding option was not affected by the
Distribution.
8. PREFERRED STOCK AND CONVERTIBLE SECURITIES
At the time of the Distribution, there were outstanding 34,000 shares of
Preferred Stock and $3,025,000 principal amount of the Company's 8 1/2%
Convertible Subordinated Debentures (the "Debentures"). In connection with
Distribution, the conversion and other terms of the Preferred Stock and the
Debentures were equitably adjusted to give effect to the Distribution.
B-3
<PAGE> 25
9. OTHER
The Common Stock and the Class B Common Stock do not carry any preemptive
rights enabling a holder to subscribe for or receive shares of stock of the
Company of any class or any other securities convertible into shares of stock of
the Company.
The Company delivers to the holders of Class B Common Stock the same
information and reports as it delivers to holders of Common Stock.
B-4
<PAGE> 26
COMMON STOCK
GREY ADVERTISING INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 10, 1995
The undersigned stockholder(s) of Grey Advertising Inc. ("Company")
hereby appoint(s) Edward H. Meyer and Steven G. Felsher, and each of them, the
true and lawful proxies, agents and attorneys of the undersigned each with full
power to act without the other and with full power of substitution and
revocation, to represent and act for the undersigned, in the name, place and
stead of the undersigned, and to vote all shares of the Company which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders to be held at the offices of APCO Associates Inc., the
Company's public affairs subsidiary, 1615 L Street N.W., Washington, D.C., on
October 10, 1995 at 8:00 A.M., local time, and at any and all adjournments
thereof, on the following matters:
THE SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS HEREIN, BUT WHERE SPECIFICATIONS ARE NOT INDICATED, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE NOMINEE FOR DIRECTOR AND IN FAVOR OF THE
PROPOSALS REFERRED TO IN ITEMS 2 AND 3. If other matters not now known come
before the meeting the persons named herein or their substitutes will vote such
shares in accordance with their best judgment.
The undersigned hereby ratifies and confirms all that said proxies,
agents and attorneys, or either of them, or their substitutes, lawfully may do
at the meeting and hereby revokes all proxies heretofore given by the
undersigned to vote at said meeting or any and all adjournments thereof.
If only one of said proxies, or his substitute, be present and vote at
said meeting, or at any or all adjournments thereof, such person shall have and
may exercise all powers hereby granted.
(Continued on reverse side)
<PAGE> 27
PROPOSAL NO. 1. The election of John Shannon,
as a director, to hold office until the
Annual Meeting to be held in 1998 or until the
election of his successor.
WITHHELD
FOR FROM
/ / / /
PROPOSAL NO. 2. A proposal to amend the
Company's Restated Certificate of Incorporation
to extend the conversion date of the
Company's Limited Duration Class B Common
Stock.
FOR AGAINST ABSTAIN
/ / / / / /
PROPOSAL NO. 3. A proposal to ratify the
selection of Ernst & Young as independent
auditors for the Company for 1995.
FOR AGAINST ABSTAIN
/ / / / / /
4. The transaction of such other business as
may properly come before the meeting, and at
any and all adjournments thereof.
The undersigned hereby acknowledges receipt of the Notice of
the Meeting and Proxy Statement, dated September 8, 1995.
Dated: September , 1995.
(L.S.)
---------------------------------------------------------
Stockholder should sign exactly as name appears at left.
(L.S.)
---------------------------------------------------------
Stockholder should sign exactly as name appears at left.
<PAGE> 28
LIMITED DURATION CLASS B COMMON STOCK
GREY ADVERTISING INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 10, 1995
The undersigned stockholder(s) of Grey Advertising Inc. ("Company")
hereby appoint(s) Edward H. Meyer and Steven G. Felsher, and each of them, the
true and lawful proxies, agents and attorneys of the undersigned each with full
power to act without the other and with full power of substitution and
revocation, to represent and act for the undersigned, in the name, place and
stead of the undersigned, and to vote all shares of the Company which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders to be held at the offices of APCO Associates Inc., the
Company's public affairs subsidiary, 1615 L Street N.W., Washington, D.C., on
October 10, 1995 at 8:00 A.M., local time, and at any and all adjournments
thereof, on the following matters.
THE SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH
THE SPECIFICATIONS HEREIN, BUT WHERE SPECIFICATIONS ARE NOT INDICATED, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEE FOR DIRECTOR AND IN FAVOR
OF THE PROPOSALS REFERRED TO IN ITEMS 2 AND 3. If other matters not now known
come before the meeting the persons and named herein or their substitutes will
vote such shares in accordance with their best judgment.
The undersigned hereby ratifies and confirms all that said proxies,
agents and attorneys, or either of them, or their substitutes, lawfully may do
at the meeting and hereby revokes all proxies heretofore given by the
undersigned to vote at said meeting or any and all adjournments thereof.
If only one of said proxies, or his substitute, be present and vote at
said meeting, or at any or all adjournments thereof, such person shall have and
may exercise all powers hereby granted.
(Continued on reverse side)
<PAGE> 29
PROPOSAL NO. 1. The election of John Shannon,
as a director, to hold office until the
Annual Meeting to be held in 1998 or until the
election of his successor.
WITHHELD
FOR FROM
/ / / /
PROPOSAL NO. 2. A proposal to amend the
Company's Restated Certificate of Incorporation
to extend the conversion date of the
Company's Limited Duration Class B Common
Stock.
FOR AGAINST ABSTAIN
/ / / / / /
PROPOSAL NO. 3. A proposal to ratify the
selection of Ernst & Young as independent
auditors for the Company for 1995.
FOR AGAINST ABSTAIN
/ / / / / /
4. The transaction of such other business as
may properly come before the meeting, and at
any and all adjournments thereof.
The undersigned hereby acknowledges receipt of the Notice of
the Meeting and Proxy Statement, dated September 8, 1995.
Dated: September , 1995.
(L.S.)
---------------------------------------------------------
Stockholder should sign exactly as name appears at left.
(L.S.)
---------------------------------------------------------
Stockholder should sign exactly as name appears at left.
