<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 Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
GREY ADVERTISING INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(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:
------------------------------------------------------------------------
[ ] 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
GREY ADVERTISING INC.
777 THIRD AVENUE
NEW YORK, NEW YORK 10017
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 23, 1997
To the Stockholders of
GREY ADVERTISING INC.
The Annual Meeting of Stockholders of Grey Advertising Inc. ("Company")
will be held at the Company's Toronto office, 1881 Yonge Street, Toronto,
Ontario, Canada, on June 23, 1997 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 ratify the selection
of Ernst & Young LLP as independent auditors for the Company for 1997.
(3) 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 May 30, 1997, 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
June 3, 1997
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
JUNE 23, 1997
This Proxy Statement is being mailed to stockholders on or about June 4,
1997 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 Company's Toronto office, 1881 Yonge Street, Toronto, Ontario,
Canada on June 23, 1997 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 proposal 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 the other matter to
be voted on at the meeting, as well as the effect of abstentions and broker
nonvotes, is set forth in the section describing 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, 1996 ("10-K").
STOCKHOLDERS DESIRING TO OBTAIN A COPY OF THE 10-K SHOULD ADDRESS WRITTEN
REQUESTS TO MS. ILENE P. MEISELES, 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") at the close of business on May 30, 1997, and
holders of the Company's Preferred Stock, will be entitled to vote at the
meeting. On May 30, 1997, the Company had outstanding 899,082 shares of Common
Stock and 285,769 shares of Class B Stock. The Company also has outstanding and
entitled to
<PAGE> 4
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 164,004(a) 18.2
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 178,128(b) 19.8
777 Third Avenue
New York, New York 10017
The committee administering the 49,774(c) 5.5
Company's Employee Stock Ownership
Plan
777 Third Avenue
New York, New York 10017
Tweedy Browne Company L.P. 65,264(d) 7.3
52 Vanderbilt Avenue
New York, New York 10017
Southeastern Asset Management, Inc. 62,711(e) 7.0
6075 Poplar Avenue, Suite 900
Memphis, Tennessee 38119
T. Rowe Price Associates, Inc. 54,565(f) 6.1
100 E. Pratt Street
Baltimore, Maryland 21202
All executive officers and directors 290,453(g) 29.9
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 168,674(a) 58.7
under the Voting Trust Agreement
777 Third Avenue
New York, New York 10017
Edward H. Meyer 135,562(b) 47.4
777 Third Avenue
New York, New York 10017
The committee administering the Com- 56,944(c) 19.9
pany's Employee Stock
Ownership Plan
777 Third Avenue
New York, New York 10017
All executive officers and directors 251,227(g) 80.7
as a group
Series I, Series II and
Series III Preferred
Stock..................... Edward H. Meyer 30,000(h) 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 or conversion of options or other
securities 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, 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 (19.9%) 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 in 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.
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, except with respect to
1,000 such shares as to which it exercises no voting authority.
(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
4,400 such shares as to which it exercises no voting authority.
(f) 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 and voting power
with respect to the shares listed.
(g) Includes shares of Common Stock (5.5% of such class) and of Class B Stock
(19.9%), 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 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 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, a director of one class is elected to serve for
a three-year term or until the election of his successor.
Edward H. Meyer has been nominated to be elected at the meeting to serve as
a director until the Annual Meeting of Stockholders to be held in 2000. Mr.
Meyer is currently serving on the Board.
The Company's 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. Meyer 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........... 67 Partner, Skadden, 1973 1999 2,200(e) --(f)
Arps, Slate,
Meagher & Flom LLP,
law firm(d)
Edward H. Meyer.......... 70 Chairman of the 1961 1997 567,479(g) 70.65%
Board, President
and Chief
Executive Officer
Richard R. Shinn......... 79 Retired Chairman 1990 --(h) 1,000(i) --(f)
of Metropolitan
Life Insurance
Company
John Shannon............. 60 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.
5
<PAGE> 8
(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., REFAC
Technology Development 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 also a director of Union Texas Petroleum, 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 LLP, a law firm in which Mr. Kaplan is
a partner, has provided certain legal services to the Company in 1996 and
1997.
(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 owns beneficially 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 11.8%, 38.5%,
100%, 100% and 100% of each class, respectively. Also includes shares held
pursuant to the Voting Trust Agreement, as to which Mr. Meyer, as the Voting
Trustee, exercises voting power, and shares of Common Stock and Class B
Stock held in the Company's Employee Stock Ownership Plan as to which Mr.
Meyer exercises shared voting power by virtue of his membership on the
committee charged with its administration. Also includes shares of Common
Stock (2.8%) and Class B Stock (8.9%) 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 (5.2%) 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.
6
<PAGE> 9
(i) Mr. Shinn owns 1,000 shares of Common Stock.
The Board of Directors has no reason to believe Mr. Meyer will, for any
reason, be unable to serve as a director. If, however, Mr. Meyer 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 1996, the Board met four times. Each director attended all 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 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 $1,000 for each meeting of each such committee which does not
fall on the same day as a meeting of the Board.
7
<PAGE> 10
REMUNERATION OF MANAGEMENT
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of its Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company with respect to the three most recently completed fiscal
years of the Company, except as indicated below:
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION ALL
------------------------------- REST. STOCK OTHER
NAME AND POSITION YEAR SALARY(2) BONUS(2) STOCK($)(1) OPTIONS(#) COMP.(1)
- ---------------------------- ---- ----------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Edward H. Meyer............. 1996 $ 2,300,000 $ 325,000 -0- 20,000 $1,519,957
Chairman, President and 1995 2,058,333 591,667 -0- 40,000 1,278,954
Chief
Executive Officer 1994 1,725,000 400,833 -0- -0- 1,058,160
Robert L. Berenson.......... 1996 $ 540,000 $ 240,000 -0- -0- $ 339,466
President, Grey-N.Y. 1995 485,000 200,000 -0- 5,000 310,838
1994 485,000 180,000 -0- -0- 277,113
Barbara S. Feigin........... 1996 $ 376,000 $ 160,000 -0- -0- $ 188,843
Executive Vice President 1995 376,000 150,000 -0- 2,000 181,085
1994 342,250 130,000 -0- -0- 175,989
Stephen A. Novick........... 1996 $ 775,000 $ 125,000 -0- -0- $ 419,345
Executive Vice President 1995 737,500 125,000 -0- 3,500 385,439
1994 667,500 95,000 -0- -0- 400,638
John Shannon................ 1996 $ 555,022 $ 240,000 -0- -0- $ 51,498
President, 1995 476,500 201,500 -0- 2,000 49,889
Grey-International
1994 473,616 168,300 -0- -0- 56,031
</TABLE>
- ---------------
(1) All Other Compensation includes: (i) contributions of $14,650 in 1996 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) amount shown for Mr. Shannon represents
deferred compensation pursuant to a subsidiary-sponsored program for United
Kingdom executives; (iii) respective insurance premium expense coverage or
reimbursement of $58,217, $16,232, $21,111 and $25,050 in 1996, for Messrs.
Meyer, Berenson and Novick, and Ms. Feigin; (iv) accruals in the amounts of
$215,000 for Mr. Meyer and $15,559 for Ms. Feigin in 1996 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 year but for certain limitations determined under the
federal tax laws; (v) respective allocations under the Company's Senior
Management Incentive Plan ("SMIP") in 1996, for Messrs. Berenson, Meyer and
Novick, and Ms. Feigin of $208,584, $1,232,090, $183,584 and $133,584; and
(vi) $100,000 and $200,000, respectively, of loan forgiveness in 1996 in
respect of Messrs. Berenson's and Novick's indebtedness to the Company.
(2) Includes amounts paid into a deferred compensation trust on Mr. Meyer's
behalf in 1996. (See "Employment Agreement and Other Transactions.")
8
<PAGE> 11
AGGREGATE OPTIONS EXERCISED IN 1996 AND STOCK OPTION VALUES AS AT DECEMBER 31,
1996(1)
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
DECEMBER 31, 1996 OPTIONS
----------------- DECEMBER 31, 1996
SHARES ---------------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED(2) UNEXERCISABLE UNEXERCISABLE
- ----------------------------------- ----------- ----------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Edward H. Meyer.................... -- -- 33,333/26,667 $2,940,023/$1,659,978
Robert L. Berenson................. -- -- 0/ 5,000 0/ 527,500
Barbara S. Feigin.................. -- -- 0/ 2,000 0/ 211,000
Stephen A. Novick.................. 5,000 $ 467,500 0/ 3,500 0/ 369,250
John Shannon....................... -- -- 0/ 2,000 0/ 211,000
</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 paid.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------------------
% OF TOTAL
NUMBER OF SHARES OPTIONS GRANTED EXERCISE
UNDERLYING TO EMPLOYEES PRICE GRANT DATE
NAME OPTIONS GRANTED IN 1996 (PER SHARE) EXP. DATE PRESENT VALUE(2)
- -------------------------- ----------------- ---------------- ------------ ---------- ----------------
<S> <C> <C> <C> <C> <C>
Edward H. Meyer........... 20,000(1) 50.0 $ 235.00 11/26/05 $1,589,400
</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
exercisable at a rate of one-third per year beginning with the date of grant
which is November 26, 1996.
(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, nine year option term, interest rate of 6.22% and a dividend rate
of 1.7%. 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 optionee will realize no gain.
9
<PAGE> 12
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 more generally, 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 had an annual compounded return, exclusive of
dividends, of approximately 18%.
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.
The Compensation Committee increased Mr. Meyer's salary effective the beginning
of 1997. The raise, the first since 1995, on an annualized basis amounted to
7.9%, significantly less than the Company's growth and record profit
performance. Mr. Meyer's bonus for 1996 was $325,000. In 1996, the Committee
also granted a number of stock options to Mr. Meyer and other executives of the
Company. The Committee believes the grant of such options to be an appropriate
form of compensation to reward and motivate executives, and to align their
interests with the Company's stockholders. The Committee also recognizes the
increasingly costly marketplace for senior executive talent in the advertising
agency industry generally and the necessity for the Company to remain
competitive. In reviewing Mr. Meyer's compensation elements, the Compensation
Committee further considered that Mr. Meyer has been employed by the Company
since 1956 and has served as the Chief Executive Officer
10
<PAGE> 13
since 1971, and that the Company's continued strong and steady growth is
importantly attributed to Mr. Meyer's leadership. 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 Compensation
Committee that under Mr. Meyer's direction the Company has been and is well
organized, and managed for long-term, stable growth.
Under SMIP, as approved by the Company's stockholders, 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 1996 an amount corresponding to 15% of the aggregate amount
credited for 1996 under SMIP.
The income tax laws 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 Compensation 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, as
discussed below, the Company has entered arrangements with each of Messrs. Meyer
and Novick 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 an agreement with Mr. Berenson
providing for his continued employment with the Company through 1999 at a base
annual salary of $540,000 per year. In addition, 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
11
<PAGE> 14
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 1995, the Company loaned Mr. Berenson $125,000 which
is forgivable by the Company assuming Mr. Berenson's continued employment
through 1999. During 1996, the Company loaned Mr. Berenson $700,000, $200,000 of
which is to be repaid with accrued interest in May 1999 and $500,000 of which is
to be repaid with accrued interest in December 2003.
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 $2,575,000 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 $42,217 in premiums in respect
of these policies in 1996. 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 for compensation
at the rate of $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.
The Company and Mr. Meyer have entered into an agreement providing for the
deferral of certain compensation otherwise payable to him and the payment of
such deferred compensation into a trust,
12
<PAGE> 15
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 1996, all of cash compensation
payable to Mr. Meyer in excess of $930,000 was deferred and paid into the trust.
In 1997 and 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 Compensation Table hereinabove provided, the amounts
deferred and paid into the trust are deemed having been paid to Mr. Meyer.
In 1983, the Company sold and issued $3,025,000 principal amount of its
8 1/2% Convertible Subordinated Debentures 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. During 1996, the Company and Mr. Meyer
amended the Debentures and related promissory note to extend the maturity date
of the Debentures to December 31, 2003 and the maturity date of the promissory
note to December 31, 2004. 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 $118.59, 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 pursuant 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 redemption date of the three
series of new preferred stock is fixed at April 7, 2004. 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 fulltime employment for good reason or (iv)
termination of full-time employment by the Company without cause.
The Company has an agreement with Mr. Novick pursuant to which he is
employed by the Company through 1998 at a base annual salary of $825,000 per
year. The agreement also provides 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
13
<PAGE> 16
Mr. Novick is still employed by the Company. During 1996 the Company forgave
$200,000 of this loan. In addition, in order to have Mr. Novick's compensation
remain fully deductible for tax purposes pursuant to the Section, the bonus
allocated to Mr. Novick for 1996, and disclosed in the Summary Compensation
Table, has been deferred until such time as the payment thereof will be
deductible pursuant to the Section.
The Company has an employment agreement with Ms. Feigin pursuant to which
she is employed by the Company through 1997 at a base annual salary of $400,000
per year.
If Mr. Meyer had been terminated effective December 31, 1996 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 $36,655,230. Other than pursuant to the loans described
above in connection with Mr. Meyer's securities, and Messrs. Berenson's and
Novick's arrangements, no executive named above is indebted to the Company for
more than $60,000. Certain key employees of the Company, including the named
executives (other than Mr. Shannon) 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 voting 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.
14
<PAGE> 17
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 PAPER & FOREST
(FISCAL YEAR COVERED) AIPM S&P 500 PRDS
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 103.33 107.62 114.34
1993 107.77 118.47 126.01
1994 121.10 120.03 131.30
1995 115.41 165.13 144.57
1996 119.89 203.05 159.92
</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, 1991 and the reinvestment of dividends thereafter.
15
<PAGE> 18
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board of Directors of the Company has selected its present auditors,
the firm of Ernst & Young LLP, as independent auditors to examine and report on
the financial statements of the Company for the year ending December 31, 1997.
Representatives of Ernst & Young LLP 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 LLP, 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 RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal to be presented at the 1998
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 no later than February 3, 1998.
SOLICITATION OF PROXIES
The solicitation of proxies will be conducted primarily by mail. Employees
of the Company, however, may solicit proxies by telephone, other means of
communication or personal contact, but at no additional compensation.
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
June 3, 1997
16
<PAGE> 19
PROXY COMMON STOCK
GREY ADVERTISING INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 23, 1997
The undersigned stockholders(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 Company's Toronto office, 1881 Yonge
Street, Toronto, Ontario, Canada, on June 23, 1997 at 8:00 AM, 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
PROPOSAL REFERRED TO IN ITEM 2. 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)
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 20
PLEASE MARK YOUR
VOTE AS INDICATED
IN THIS EXAMPLE. [X]
WITHHELD
FOR FROM
PROPOSAL NO. 1. The election of Edward H. Meyer, as [ ] [ ]
a director, to hold office until the Annual Meeting to
be held in 2000 or until the election of his successor.
FOR AGAINST ABSTAIN
PROPOSAL NO. 2. A proposal to ratify the selection of [ ] [ ] [ ]
Ernst & Young LLP as independent auditors for the
Company for 1997.
3. 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 June 3, 1997.
Signature(s) ____________________________________ (L.S.) Dated: June ___, 1997.
Stockholder(s) should sign exactly as name appears above.
- -------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 21
PROXY 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 JUNE 23, 1997
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 Company's Toronto office, 1881 Yonge
Street, Toronto, Ontario, Canada, on June 23, 1997 at 8:00 AM, 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
PROPOSAL REFERRED TO IN ITEM 2. 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)
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- FOLD AND DETACH HERE -
<PAGE> 22
Please mark
your votes as
indicated in /X/
this example.
PROPOSAL NO. 1. The election of Edward H. Meyer, as a director, to hold
office until the Annual Meeting to be held in 2000 or until the election
of his successor.
WITHHELD
FOR FROM
/ / / /
PROPOSAL NO. 2. A proposal to ratify the selection of Ernst & Young LLP as
independent auditors for the Company for 1997.
FOR AGAINST ABSTAIN
/ / / / / /
3. 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 June 3, 1997.
Signature(s) (L.S.) Dated: June , 1997.
--------------------------------------- --
Stockholder(s) should sign exactly as name appears above.
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- FOLD AND DETACH HERE -
