<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, 1994
/ / 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
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The aggregate market value of the voting stock held by non-affiliates of
registrant was $132,500,023 as at March 1, 1995.
The registrant had 920,932 shares of its common stock, par value $1 per share,
and 324,929 shares of its Limited Duration Class B Common Stock, par value $1
per share, outstanding as at March 1, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual proxy statement to be furnished in connection with the
registrant's 1995 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, 1994 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 27, 1995 By/s Steven G. Felsher
----------------------
Executive Vice President
Secretary and Treasurer
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Item 10. Directors and Executive Officers of the Registrant ("Company").
Set forth below is certain information concerning the Company's
directors:
<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 62,200(e) -(f)
Arps, Slate,
Meagher Flom,
law firm (d)
Edward H. Meyer.... 68 Chairman of the 1961 1997 592,115(g) 69.6%
Board, President
and Chief
Executive Officer
Richard R. Shinn... 77 Retired Chairman 1990 -(h) 1,000(i) -(f)
of Metropolitan
Life Insurance
Company
John Shannon... 58 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., 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.
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.
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(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 11.5%, 33.9%, 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 (2.7%) and Class B
Stock (7.3% 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 1.4% issuable upon exercise of
currently exercisable stock options owned by Mr. Meyer, after giving effect to
the assumed exercise 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 I
of this report.
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:
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<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
All
Name and Rest. Stock Other
Position Year Salary Bonus Stock($)(1) Options(#) Comp.(2)
- -------- ---- ------ ----- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Edward H. Meyer 1994 $1,725,000 $400,833 -0- -0- $1,058,160
Chairman, 1993 1,700,000 300,000 -0- -0- 928,487
President 1992 1,700,000 200,000 -0- -0- 1,009,578
and Chief
Executive Officer
Robert L. Berenson 1994 $ 485,000 $180,000 -0- -0- $ 277,113
President 1993 442,500 150,000 -0- -0- 336,530
Grey-N.Y. 1992 400,000 135,000 -0- -0- 113,271
Barbara S. Feigin 1994 $ 342,250 $130,000 -0- -0- $ 175,989
Executive 1993 331,000 125,000 -0- -0- 260,006
Vice President 1992 297,667 120,000 -0- -0- 87,162
Stephen A. Novick 1994 $ 667,500 $ 95,000 -0- -0- $ 400,638
Executive 1993 635,000 85,000 -0- -0- 411,530
Vice President 1992 570,000 75,000 -0- -0- 333,001
John Shannon 1994 $ 473,616 $168,300 -0- -0- $ 56,031
President 1993 407,000 165,000 -0- -0- 52,139
Grey-International 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
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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 Mr. Meyer in 1992, 1993 and 1994, respectively, $10,468 and
$9,726 for Ms. Feigin in 1993 and 1994, respectively, 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 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 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>
Value of
Number of Unexercised
Unexercised In-the-Money
Options Options
December 31, 1994 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
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
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.
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.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of March 1, 1995, the Company had outstanding 920,932 shares of
Common Stock and 324,929 shares of Class B. Stock. To the knowledge of the
Board of Directors, as of March 1, 1995 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:
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<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 181,358(a) 19.7
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 144,786(b) 15.1
777 Third Avenue
New York, New York 10017
The committee administering 50,833(c) 5.5
the Company's Employee Stock
Ownership Plan
777 Third Avenue
New York, New York 10017
Quest Advisory Corp. 88,162(d) 9.6
1414 Avenue of the Americas
New York, New York 10019
Southeastern Asset Management, Inc. 61,311(e) 6.7
860 Ridgelake Boulevard
Memphis, Tennessee 38120
Tweedy Browne Company L.P. 54,600(f) 5.9
52 Vanderbilt Avenue
New York, New York 10017
T. Rowe Price Associates, Inc. 54,065(g) 5.9
100 E. Pratt Street
Baltimore, Maryland 21202
</TABLE>
-8-
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<TABLE>
<S> <C> <C> <C>
All executive officers and 292,482(h) 30.0
directors as a group
Class B Stock.......... Edward H. Meyer, as Voting 190,595(a) 58.7
Trustee under the Voting Trust
Agreement
777 Third Avenue
New York, New York 10017
Edward H. Meyer 135,553(b) 38.7
777 Third Avenue
New York, New York 10017
The committee administering 56,961(c) 17.5
the Company's Employee Stock
Ownership Plan
777 Third Avenue
New York, New York 10017
All executive officers and 275,656(h) 78.7
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.)
(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 (5.5% of such class) and Class
B Stock (17.5%) 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
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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. 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 there is 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 dispositive
and voting power with respect to the shares listed except with respect to 8,310
of such shares as to which there is no voting authority
(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 (5.5% of such class) and of Class
B Stock (17.5%), 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 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 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.
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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 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 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 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 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 $1,750,000 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
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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 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 ensure the Company's ability to deduct compensation paid to
Mr. Meyer without the application of Section 162(m) of the Internal Revenue
Code ("Section"). 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,
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
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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 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 $700,000 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 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 each December 31 during which Mr. Novick
is employed); during 1994 the Company forgave $200,000 of this loan.
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<PAGE> 14
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 compensaton 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 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.
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.
PERFORMANCE GRAPH
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN FOR THE COMPANY, THE SP 500
INDEX AND FIVE OTHER PUBLICLY-TRADED ADVERTISING AGENCIES.
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Grey 100.00 79.93 71.53 87.64 121.94 100.40
Peer Group Index 100.00 70.11 103.65 130.63 138.69 145.94
S&P 500 Total Return 100.00 96.89 126.42 136.05 149.76 151.74
</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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