<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, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-7898
GREY ADVERTISING INC.
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(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
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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 $159,812,962 as at March 1, 1996.
The registrant had 884,292 shares of its common stock, par value $1 per share,
and 305,120 shares of its Limited Duration Class B Common Stock, par value $1
per share, outstanding as at March 1, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual proxy statement to be furnished in connection with the
registrant's 1996 annual meeting of stockholders are incorporated by reference
into Part III.
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The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report for the year ended
December 31, 1995 on Form 10-K as set forth in the pages attached hereto:
PART III
<TABLE>
<S> <C>
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.
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Grey Advertising Inc.
(Registrant)
Dated: April 29, 1996 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").
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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 ... 66 Partner, Skadden, 1973 1996 2,200(e) -(f)
Arps, Slate,
Meagher & Flom,
law firm (d)
Edward H. Meyer.... 69 Chairman of the 1961 1997 581,125 (g) 71.0%
Board, President
and Chief
Executive Officer
Richard R. Shinn... 78 Retired Chairman 1990 -(h) 1,000(i) -(f)
of Metropolitan
Life Insurance
Company
John Shannon... 59 President, 1991 1998 1,000 -(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, 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-six mutual funds advised by Merrill Lynch Asset Management,
Inc. or its wholly-owned subsidiary, Fund Asset Management, Inc.
Mr. Shinn is a director of Union Texas Petroleum, Inc.
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(c) Represents beneficial interests in shares of the Company's Common
Stock, Class B Stock, and Series I, II and III Preferred Stock. (See
"Voting Securities" above.) Information is as of the record date.
(d) Skadden, Arps, Slate, Meagher & Flom, a law firm in which Mr.
Kaplan is a partner, has provided certain legal services to the Company
in 1995 and 1996.
(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 104,553 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 11.8%, 36.1%, 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 (8.3%) 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 (3%) 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.
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 executive
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.(1) Stock Other
Position Year Salary(3) Bonus(3) Stock ($) Options (#) Comp. (2)
- -------- ---- ------ ----- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Edward H. Meyer 1995 $2,058,333 $591,667 -0- 40,000 $1,278,954
Chairman, 1994 1,725,000 400,833 -0- -0- 1,058,160
President 1993 1,700,000 300,000 -0- -0- 928,487
and Chief
Executive Officer
Robert L. Berenson 1995 $ 485,000 $200,000 -0- 5,000 $ 310,838
President 1994 485,000 180,000 -0- -0- 277,113
Grey-N.Y 1993 442,500 150,000 -0- -0- 336,530
Barbara S. Feigin 1995 $ 376,000 $150,000 -0- 2,000 $ 181,085
Executive 1994 342,250 130,000 -0- -0- 175,989
Vice President 1993 331,000 125,000 -0- -0- 260,006
Stephen A. Novick 1995 $ 737,500 $125,000 -0- 3,500 $ 385,439
Executive 1994 667,500 95,000 -0- -0- 400,638
Vice President 1993 635,000 85,000 -0- -0- 411,530
John Shannon 1995 $ 476,500 $201,500 -0- 2,000 $ 49,889
President 1994 473,616 168,300 -0- -0- 56,031
Grey-International 1993 407,000 165,000 -0- -0- 52,139
</TABLE>
(1) As at December 31, 1995, Mr. Novick owned 5,000 shares issued under
the Company's Restricted Stock Plan as to which restrictions lapsed
the next day and, had there been no such restrictions, would have had
an aggregate net value of $757,500 on such date. All shares of
restricted stock are entitled to dividends on the same basis as other
shares of Common Stock
(2) All Other Compensation includes: (i) contributions of $25,492,
$14,600, and $14,600 in 1993, 1994 and 1995, 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 insurance
premium expense coverage or reimbursement of $54,787, $52,795, and
$53,404, $16,038, $17,513, and $16,946, $6,038, $6,038, and $16,547,
$99,046, $25,800 and $25,883 in 1993, 1994, and 1995, respectively,
for Messrs. Meyer,
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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 $161,058, $186,275, and $180,000 for Mr. Meyer in 1993,
1994, and 1995, respectively, and $10,468, $9,726, and $11,310 for
Ms. Feigin in 1993, 1994, and 1995, 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 1993, 1994 and 1995, respectively, for Messrs. Berenson,
Meyer and Novick, and Ms. Feigin of $140,000, $145,000, and $179,292,
$687,150, $815,100 and $1,030,950, $150,000, $180,000, and $154,292
and $90,000, $125,000, and $129,292 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, 1994, and
1995 and $200,000 for each of 1993, 1994, and 1995 and of loan
forgiveness in respect of Messrs. Berenson's and Novick's
indebtedness to the Company. Does not include distributions of
$382,500 in 1994 and $155,000 in 1995 made to Mr. Shannon in
accordance with the terms of a subsidiary-sponsored deferred
compensation program in the United Kingdom, which amounts had vested
previously in Mr. Shannon, and related to, prior years.
(3) Includes amounts paid into a deferred compensation trust on Mr.
Meyer's behalf in 1995. (See "Employment Agreement and
Transactions.")
<TABLE>
<CAPTION>
AGGREGATED OPTIONS EXERCISED IN 1995 AND STOCK OPTION VALUES AS AT DECEMBER 31, 1995(1)
Value of
Number of Unexercised
Unexercised In-the-Money
Options at Options at
December 31, 1995 December 31, 1995
----------------- -----------------
Shares
Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized(2) Unexercisable Unexercisable
---- ----------- -------- ------------- -------------
<S> <C> <C> <C> <C>
Edward H. Meyer -- -- 26,666/13,334 $1,359,966/$680,034
Robert L. Berenson 1,000 $96,000 0/5,000 0/$255,000
Barbara S. Feigin 334 36,907 0/2,000 0/$102,000
Stephen A. Novick 1,000 95,000 5,000/3,500 $290,000/$178,500
John Shannon 1,000 102,000 0/2,000 0/$102,000
</TABLE>
(1) All options relate to shares of Common Stock.
(2) "Value Realized" represents the market price of the Common Stock on
the date of exercise less the exercise price payable.
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<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR(1)
---------------------------------
Grant Date
Individual Grants Value(2)
---------------------------------------------------------- -----
Number of % of Total
Shares Under- Options Granted Exercise
lying Options to Employees Price Grant Date
Granted in 1995 ($/share) Exp.Date Present Value
------------ -------------- --------- -------- -------------
Name
- ----
<S> <C> <C> <C> <C> <C>
Edward H. Meyer 40,000 48.0 $148.50 1/5/04 $2,050,000
Robert L. Berenson 5,000 6.0 148.50 1/5/05 267,450
Barbara Feigin 2,000 2.4 148.50 1/5/05 106,980
Steve A. Novick 3,500 4.2 148.50 1/5/05 187,215
John Shannon 2,000 2.4 148.50 1/5/05 106,980
</TABLE>
(1) Options granted to acquire Common Stock at market price on the date of
grant under the Grey Advertising Inc. 1994 Stock Incentive Plan. The
options are generally exercisable at a rate of one-third per year
beginning on the initial exercise date, which for Messrs. Berenson,
Novick and Shannon, and Ms. Feigin is January 5, 2000, and January 5,
1995 for Mr. Meyer.
(2) Amounts based on the modified Black-Scholes option pricing model with
the following assumptions: exercise price equal to fair market value
on the date of grant, ten year option term (nine year option term in
the case of Mr. Meyer), interest rate of 7.95% and a dividend rate of
2.33%. There is no assurance that the value realized by an optionee
will be at or near the value estimated by this pricing model. Should
the stock price not rise above the option price the optionees will
realize no gain.
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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.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of March 1, 1996, the Company had outstanding 884,292 shares of
Common Stock and 305,120 shares of Class B Stock.
<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 177,684(a) 20.1
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 156,665(b) 16.7
777 Third Avenue
New York, New York 10017
The committee administering 50,590(c) 5.7
the Company's Employee Stock
Ownership Plan
777 Third Avenue
New York, New York 10017
</TABLE>
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<PAGE> 9
<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>
Quest Advisory Corp. 74,762(d) 8.5
1414 Avenue of the Americas
New York, New York 10019
Southeastern Asset Management, Inc. 62,711(e) 7.1
6075 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
Tweedy Browne Company L.P. 51,930(f) 5.9
52 Vanderbilt Avenue
New York, New York 10017
T. Rowe Price Associates, Inc. 53,765(g) 6.1
100 E. Pratt Street
Baltimore, Maryland 21202
All executive officers and 293,309(h) 31.1
directors as a group
Class B Stock.......... Edward H. Meyer, as Voting 180,349(a) 59.1
Trustee under the Voting Trust
Agreement
777 Third Avenue
New York, New York 10017
Edward H. Meyer 135,499(b) 41.0
777 Third Avenue
New York, New York 10017
The committee administering 56,944(c) 18.7
the Company's Employee Stock
Ownership Plan
777 Third Avenue
New York, New York 10017
All executive officers and 265,339(h) 80.3
directors as a group
Series I, Series II
and Series III Edward H. Meyer 30,000(i) 100.0
Preferred Stock...... 777 Third Avenue
New York, New York 10017
</TABLE>
(a) Represents voting power only and includes certain shares subject to a
voting agreement pursuant to which shares owned by an executive officer of the
Company will be voted in the same manner as the Voting Trustee votes. Does not
include shares issuable upon exercise of options which are contractually bound
to be deposited pursuant to the Voting Trust Agreement. In general, investment
power over the shares deposited in the voting trust established pursuant to the
Voting Trust Agreement is retained by the several beneficiaries of the Voting
Trust Agreement. (See "Employment Agreements and Other Transactions" below.)
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(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 (5.7% of such class) and Class B Stock (18.7%) held in the
Company's Employee Stock Ownership Plan as to which Mr. Meyer exercises shared
voting power by virtue of his membership on the committee charged with its
administration. Does not include shares of Common Stock and Class B Stock held
in trust for Mr. Meyer's children which have been deposited with the Voting
Trust under the Voting Trust Agreement, or shares of Common Stock or of Class B
Stock as to which Mr. Meyer exercises voting power by virtue of being the Voting
Trustee under the Voting Trust Agreement.
(c) The committee which administers the Company's Employee Stock Ownership
Plan exercises voting power over shares held in such plan, and is comprised of
Mr. Meyer and Steven G. Felsher.
(d) Information based on the Company's understanding of publicly-filed
material. Quest Advisory Corp., a registered investor advisor, which, on behalf
of its clients, has been a long-term investor in the Company, has sole
dispositive and voting power with respect to the shares listed.
(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 been a long-term
investor in the Company, 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 (5.7% of such class) and of Class B
Stock (18.7%), 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
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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.
Item 13. Certain Relationships and Related Transactions.
Messrs. Meyer and Novick, and Ms. Feigin have employment agreements with
the Company. The Company had an employment agreement with Mr. Berenson providing
for his continued employment with the Company through December 31, 1995 at a
minimum annual salary of $485,000 per year. The Company will be executing an
agreement extending the understandings with Mr. Berenson on mutually
satisfactory terms. In addition, the understandings 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 (with the Company having agreed to forgive 20% of the original
amount thereof each December 31 on which Mr. Berenson was employed after the
closing of the loan). 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 contemplated being made to him and, therefore, it is considered
the equivalent of a loan forgiveness. In addition, in early 1994, the Company
loaned Mr. Berenson $50,000 which is forgivable by the Company assuming his
continued employment through 1998, in early 1995, the Company loaned Mr.
Berenson $125,000 which is to be repaid, together with accrued interest, in May
1998, and in early 1996 the Company loaned Mr. Berenson $200,000 which is to be
repaid, together with accrued interest, in May 1999.
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 $2,300,000 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
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<PAGE> 12
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 $38,539 in
premiums in respect of these policies in 1995. The employment agreement also
provides that Mr. Meyer may, for a period subsequent to his termination of
full-time employment as Chief Executive Officer, provide the Company with
consulting services at $10,000 per month. If the Company terminates Mr. Meyer's
full-time employment as Chief Executive Officer without cause, or if Mr. Meyer
effects such termination due to a change in control of the Company or for other
good reason, Mr. Meyer will receive a lump sum payment equal to his then current
aggregate remuneration multiplied by the greater of the number of years
remaining in the term of the employment agreement and the number three. In such
event, Mr. Meyer will also have an option to sell to the Company each share of
the Common Stock and the Class B Stock which he then owns at the per share
market value of the Common Stock. Mr. Meyer's agreement also provides that, for
the ten year period (subject to reduction or suspension in the event Mr. Meyer
becomes disabled or is in breach of his agreement) following his termination of
employment, the Company will, among other things, provide Mr. Meyer with an
office, and related office staff and facilities, and the continued use of a car
and driver. The Company has also agreed to reimburse Mr. Meyer for certain
business expenses incurred by him following termination of his employment up to
$100,000 per year during the first five years of such period and $50,000 per
year during the remainder of such period, with such amounts being adjusted for
increases in the consumer's price index until the date of termination of his
employment. During such ten year period, Mr. Meyer has also been charged with
the responsibility of overseeing a certain portion of the Company's charitable
contributions and, thus, will see to the contribution to charities of $100,000
per year of the Company's funds during the first five years of the period and of
$50,000 per year during the remainder of the period.
In 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 him 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 was 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. For the purpose of the presentation
of Mr. Meyer's compensation in the Summary Compenstion Table hereinabove given,
the amounts deferred and paid into the trust are deemed having been paid to Mr.
Meyer.
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<PAGE> 13
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 $118.88, 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 exercise. 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 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, 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. In 1995,
the Company forgave the last $200,000 of a compensatory loan in the original
amount of $1,000,000 made to Mr. Novick pursuant to an earlier employment
agreement and used to facilitate the financing of his purchase of a residence.
Such advance was secured and would have been repayable had Mr. Novick left the
Company's employ before December 31, 1995 (except one-fifth of the loan was
forgiven each December 31 by the Company from 1991 through 1995 provided Mr.
Novick was employed by the Company); during 1995 the Company forgave $200,000 of
this loan.
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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.
If Mr. Meyer (had his employment agreement been extended as it was in early
1995) had been terminated effective December 31, 1995 under circumstances which
would have resulted in payment of the special severance detailed in the
foregoing description of his agreement,the amount then payable to him would have
been $29,434,681. 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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