STOCKHOLDER EXCHANGE AGREEMENT
STOCKHOLDER EXCHANGE AGREEMENT, dated as of April
7, 1994, by and between Grey Advertising Inc., a Delaware
corporation (the "Company"), and Mr. Edward H. Meyer,
Chairman of the Board, President and Chief Executive
Officer of the Company ("Meyer").
WHEREAS, Meyer is the owner of 20,000 shares of
Series 1 Preferred Stock, par value $1.00 per share (the
"Series 1 Shares"), 5,000 shares of Series 2 Preferred
Stock, par value $1.00 per share (the "Series 2 Shares"),
and 5,000 shares of Series 3 Preferred Stock, par value
$1.00 per share (the "Series 3 Shares"), of the Company,
(collectively, the "Outstanding Preferred Shares");
WHEREAS, Meyer and the Company desire to exchange
(i) the Series 1 Shares for an equal number of shares of
newly created Series I Preferred Stock, par value $1.00 per
share (the "Series I Shares"), of the Company, (ii) the
Series 2 Shares for an equal number of shares of newly
created Series II Preferred Stock, par value $1.00 per
share (the "Series II Shares"), of the Company, and (iii)
the Series 3 Shares for an equal number of shares of newly
created Series III Preferred Stock, par value $1.00 per
share (the "Series III Shares"), of the Company (the Series
I Shares, Series II Shares and Series III Shares are
referred to collectively herein as the "New Preferred
Shares").
NOW, THEREFORE, in order to implement the
foregoing and in consideration of the mutual agreements
contained herein, the parties agree as follows:
I. AUTHORIZATION AND EXCHANGE
OF PREFERRED STOCK
1.1 Authorization of Preferred Stock
The Company has authorized the issuance of (i)
the Series I Shares, having the rights and preferences set
forth in the Certificate of Designations attached as
Exhibit A hereto, (ii) the Series II Shares, having the
rights and preferences set forth in the Certificate of
Designations attached as Exhibit B hereto and (iii) the
Series III Shares, having the rights and preferences set
forth in the Certificate of Designations attached as
Exhibit C hereto.
1.2 Exchange of Preferred Stock. Subject to the
terms and conditions of this Agreement, Meyer hereby agrees
to acquire through the exchange of the Outstanding
Preferred Shares, and the Company agrees to issue to Meyer
in exchange for such shares, the New Preferred Shares (the
"Exchange").
1.3 Closing. Subject to the terms and condi-
tions of this Agreement, the closing (the "Closing") of the
transactions contemplated hereby shall take place at the
offices of Skadden, Arps, Slate, Meagher & Flom, 919 Third
Avenue, New York, New York 10022, or at such other place as
the parties hereto shall mutually agree, on the date on
which the Certificates of Designations referred to in
Section 1.1 hereof are filed with the Secretary of State of
the State of Delaware (the "Closing Date"), which date
shall occur upon or as soon as practicable after the
execution hereof. At the Closing, Meyer will deliver to
the Company stock certificates representing the Outstanding
Preferred Shares duly endorsed and in form for transfer to
the Company and accompanied by such supporting documents as
may be necessary to transfer title to the Company, and the
Company will issue and deliver to Meyer duly executed stock
certificates representing the New Preferred Shares, each
registered in the name of Meyer. The Company will pay any
applicable New York State transfer tax payable as a result
of the Exchange.
II. RESTRICTION ON TRANSFER OF PREFERRED STOCK
2.1 Transfer of the Shares. Meyer may not
transfer any or all of his New Preferred Shares, or an
interest therein, except as permitted in the applicable
Certificate of Designations and any such transfer shall be
void unless (i) Meyer provides prior written notification
to the Company of his intention to transfer any or all of
the New Preferred Shares or an interest in any or all of
the New Preferred Shares, and (ii) Meyer receives written
notification from the Company that, in the opinion of
counsel to the Company, no registration, or perfection of
an exemption from registration, under, the Securities Act
of 1933, as amended ("Securities Act"), is required with
respect to such transfer.
2.2 Certificates. Each of the certificates
representing the New Preferred Shares shall bear a printed
or typewritten legend in substantially the following form,
and/or such other form of legend relating to the Securities
Act or the transfer restrictions in the applicable
Certificate of Designation for the New Preferred Shares as
may be deemed appropriate by the Company's counsel:
"The transfer of this certificate and
the shares of [Series I] [Series II] [Series
III] Preferred Stock represented hereby is
restricted under, and is subject to the
terms and conditions contained in, the
Certificate of Designations of [Series I]
[Series II] [Series III] Preferred Stock of
the Company, dated April 7, 1994, (the
"Certificate of Designations") and a
Stockholder Exchange Agreement, dated as of
April 7, 1994, between the original
registered owner and the Company (the
"Exchange Agreement"). In particular, this
certificate and the shares of [Series I]
[Series II] [Series III] Preferred Stock
represented hereby may only be transferred
to a corporation all the voting stock of
which is wholly owned by the original
registered owner, or, in the event of the
death of the original registered owner, the
estate of such registered owner, any
executor, administrator, legal
representative or trustee thereof and any
heir, distributee, devisee or legatee
thereunder. Such shares may not be
transferred without an effective
registration statement under the Securities
Act of 1933, as amended, or an opinion of
counsel to the Company that registration is
not required."
"This certificate and the shares of
[Series I] [Series II] [Series III]
Preferred Stock represented hereby are, upon
the happening of certain events set forth in
the Certificate of Designations, subject to
mandatory redemption by the Company. In
addition, upon the happening of certain
events set forth in such Certificate of
Designations, the registered owner shall no
longer be entitled to exercise certain
voting rights which such owner would
otherwise be entitled to exercise by virtue
of his ownership of shares of [Series I]
[Series II] [Series III] Preferred Stock."
"Copies of the Certificate of
Designations and the Exchange Agreement are
on file and may be inspected at the office
of the Company at 777 Third Avenue, New
York, New York 10017."
Any certificate issued without consideration therefor in
connection with a stock split, stock dividend,
recapitalization, combination or exchange of shares,
merger, consolidation or other similar reorganization,
distribution or transaction of or by the Company,
subsequent to the date hereof, shall, if deemed
appropriate by the Company's counsel, bear the same
legend as the certificate with respect to which it was
issued.
III. REPRESENTATIONS AND WARRANTIES OF MEYER
Meyer represents and warrants to the Company as
follows:
3.1 Authorization. Meyer has all requisite
power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby.
3.2 Authorization of Agreement. This
Agreement has been duly executed and delivered by Meyer
and constitutes a valid and binding obligation of Meyer
enforceable against him in accordance with its terms.
3.3 Investment Intention/Information. Meyer
represents and warrants to the Company that he
understands and agrees that the Shares are not being
registered under the Securities Act, that the Shares are
being issued and sold by reason of an exemption pursuant
to the Securities Act as a transaction by an issuer not
involving a public offering, and that Meyer has received
from the Company, or otherwise obtained, information
concerning the Company, sufficient for the purpose of
forming an independent judgment concerning the purchase
of the Shares for investment, and hereby represents that
the Shares are being acquired for the account of Meyer
for investment and not with a view to the sale or
distribution thereof, and it is understood that the
reliance of the Company upon such exemption is predicated
upon such representation. Meyer further represents and
warrants to the Company that he understands and agrees
that the Company is under no obligation to register the
Shares under the Securities Act or to insure the
availability of an exemption from registration under the
Securities Act so as to permit the resale of the Shares.
Meyer has been granted the opportunity to ask questions
of, and receive answers from, representatives of the
Company concerning the terms and conditions of the
Outstanding Preferred Shares and the New Preferred Shares
and any additional information about the Company and has
reviewed other information about the Company, including
proxy statements, annual reports and other public filings
and internal financial reports and, as he has deemed
necessary, other reports about the Company, Meyer's
knowledge and experience in financial and business
matters is such that he is capable of evaluating the
merits and risks of an investment in the New Preferred
Shares and he can bear the economic risk of holding the
New Preferred Shares for an indefinite period of time and
in making the decision to exchange the Outstanding
Preferred Shares for the New Preferred Shares, Meyer has
relied upon the independent investigations made by him
and, to the extent believed by him to be appropriate, his
representatives, including his own legal, tax and other
advisors.
3.4 Disposition of Shares; Rule 144. Meyer
represents and warrants that he has read, understands and
agrees to the limitations on the transfer of shares
contained in the Certificates of Designations and this
Exchange Agreement. Meyer further represents and
warrants that he has been informed of Rule 144 under the
Securities Act, which provides that persons selling
securities in conformity with Rule 144, if applicable,
shall not be deemed to be engaged in a distribution of
securities, and that such securities may be sold without
registration under the Securities Act.
3.5 Not an Employment Agreement. Meyer
recognizes that this Agreement does not constitute an
employment agreement, or an agreement by the Company to
keep him in its employ for any period of time, or to
provide him with rights of any nature except as expressly
provided herein.
3.6 Transfer of Outstanding Preferred Shares.
Meyer has good and valid title to the Outstanding
Preferred Shares, free and clear of all pledges, security
interests, liens, encumbrances, claims, charges, options
or restrictions of whatever nature, except as otherwise
provided in the Restated Certificate of Incorporation of
the Company. At the Closing, good and valid title to the
Outstanding Preferred Shares will pass to the Company,
free and clear of any pledges, security interests, liens,
encumbrances, claims, charges, options or restrictions of
whatever nature, except as otherwise provided in the
Restated Certificate of Incorporation of the Company.
IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Meyer as
follows:
4.1 Authorization. The Company has all
requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby.
4.2 Binding Nature of Agreement. This
Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and
binding obligation of the Company enforceable against it
in accordance with its terms.
4.3 Issuance of New Preferred Shares. The New
Preferred Shares, when issued and delivered in exchange
for the Outstanding Preferred Shares in accordance with
the terms hereof, will be duly authorized, validly
issued, fully paid and nonassessable, and will have the
voting power and the preferences and relative,
participating, optional, dividend and other special
rights, and the qualifications, limitations and
restrictions, set forth in the applicable Certificate of
Designations, and, except as set forth in the applicable
Certificate of Designations, will be free and clear of
any liabilities, obligations, claims, liens, options,
proxies, charges and encumbrances of any kind whatsoever.
4.4 Financial Condition. The Company makes no
representation or warranty with respect to its business
or financial condition or prospects. The Company
undertakes to furnish to Meyer information concerning the
business, financial affairs and condition of the Company
on a regular basis.
4.5 Resale of the Shares. The Company shall
provide Meyer with any information necessary to enable
Meyer to sell the shares under Rule 144 of the Securities
Act, if applicable, subject to the restrictions on
transfer set forth in the Restated Certificate of
Incorporation of the Company.
4.6 Directors. Following the redemption of
the Series I Preferred Stock, the Company shall use its
best efforts to effect the appointment to its Board of
Directors of person(s) designated by Meyer (or if he is
mentally disabled or no longer alive, a representative of
his immediate family members and/or his estate) up to
that number which represents a percentage (rounded down
to the nearest whole number) of the total number of
Directors equal to the percentage reflecting the number
of shares of capital stock of the Company beneficially
owned in the aggregate by Meyer and/or his immediate
family members and/or his estate to the total number of
outstanding shares of capital stock of the Company,
provided, however, that so long as Meyer and/or his
immediate family members and/or his estate own in the
aggregate over five percent of the total number of
outstanding shares of capital stock of the Company, Meyer
and/or his immediate family members and/or his estate
shall be entitled to so designate at least one member of
the Board.
V. MISCELLANEOUS
5.1 Meyer's Put Option. Except as is
otherwise provided in this Section 5.1, Meyer shall have
the Option (the "Put Option") to require the Company to
repurchase as part of the same transaction in which the
Company redeems any shares of redeemable preferred stock
pursuant to the Certificates of Designations referred to
in Section 1.1 hereof, that number of shares of common
stock, par value $1 per share ("Common Stock"), that
number of Series I Shares, that number of the Series II
Shares, and that number of Series III Shares, of the
Company which, when viewed as an integrated transaction
with each such redemption of shares of redeemable
preferred stock is, in the opinion of counsel to Meyer,
necessary to assure treatment of each such redemption of
shares of redeemable preferred stock as a payment in
exchange for such shares of redeemable preferred stock
within the meaning of Section 302(a) of the Internal
Revenue Code of 1986, as amended. The purchase price per
share ("Purchase Price") for shares of Common Stock,
Series I Shares, Series II Shares and Series III Shares
which the Company shall be obligated to repurchase
pursuant to this Section 5.1 shall be, respectively, (i)
the average of the closing bid and asked prices for a
share of Common Stock on the business day next preceding
the Redemption Date or Subsequent Redemption Date (both
as defined in the Certificates of Designations), as the
case may be, on which the shares of redeemable preferred
stock are to be redeemed, as such prices are reported by
the National Association of Securities Dealers Automated
Quotation System ("NASDAQ"), if the shares of Common
Stock are quoted thereon, or, if such shares of Common
Stock are not quoted on NASDAQ, then, as reported by the
National Quotation Bureau, Inc., (ii) the Redemption
Price for the Series I Shares as determined in accordance
with the applicable Certificate of Designations, (iii)
the Redemption Price for the Series II Shares as
determined in accordance with the applicable Certificate
of Designations, and (iv) the Redemption Price for the
Series III Shares as determined in accordance with the
applicable Certificate of Designations.
If Meyer shall elect to exercise the Put
Option, he shall, no more than ten nor less than five
days before a Redemption Date or Subsequent Redemption
Date, as the case may be, provide the Company with
written notice specifying the number of shares of Common
Stock, the number of Series I Shares, the number of
Series II Shares and the number of Series III Shares
which the Company is to repurchase.
Meyer shall only be entitled to exercise the
Put Option to the extent that there shall be, on a
Redemption Date or Subsequent Redemption Date, sufficient
surplus, profits or other funds of the Company available
for the payment of the Purchase Price under the General
Corporation Law of the State of Delaware, and only to the
extent that the payment of the Purchase Price does not
violate any term of any agreement to which the Company is
a party or by which it is bound.
5.2 Original Discount. Meyer and the Company
agree that the "Original Discount" applicable to the
Series 1 Shares, Series 2 Shares and Series 3 Shares
shall be applicable to the Series I Shares, Series II
Shares and Series III Shares, respectively.
5.3 Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the parties to
this Agreement, and their respective successors and
permitted assigns. Nothing in this Agreement, express or
implied, is intended or shall be construed to give any
person other than the parties to this Agreement or their
respective successors or permitted assigns any legal or
equitable right, remedy or claim under or in respect of
any agreement or any provisions contained herein.
5.4 Governing Law. This Agreement shall be
governed by, and construed and enforced in accordance
with, the laws of the State of Delaware, without regard
to its conflicts of law principles.
5.5 Notices. All notices and other
communications hereunder shall be deemed to have been
duly given if delivered personally or sent by registered
or certified mail (return receipt requested, postage
prepaid), to the parties at the following addresses (or
at such other address for a party as shall be specified
by like notice, provided that notices of a change of
address shall be effective only upon receipt thereof).
(a) If to the Company, to it at:
Grey Advertising Inc.
777 Third Avenue
New York, New York 10017
Attn: Corporate Secretary
with a copy to:
Skadden, Arps, Slate, Meagher &
Flom
919 Third Avenue
New York, New York 10022
Attn: Mark N. Kaplan, Esq.
(b) If to Meyer, to him at:
Mr. Edward H. Meyer
580 Park Avenue
New York, New York 10021
with a copy to:
Schulte Roth & Zabel
900 Third Avenue
New York, New York 10022
Attn: Stephen J. Schulte, Esq.
5.6 Waiver and Consent. The waiver by any
party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver
of any preceding or succeeding breach and no failure by
any party to exercise any right or privilege hereunder
shall be deemed a waiver of such party's rights or
privileges hereunder or shall be deemed a waiver of such
party's rights to exercise the same at any subsequent
time or times.
5.7 Integration. This Agreement and the
Exhibits hereto contain the entire understanding of the
parties with respect to the subject matter hereof and
supersede all prior agreements and understandings,
written or oral, of the parties with respect to its
subject matter.
5.8 No Assignment. Neither this Agreement nor
the rights or obligations of the parties hereunder may be
assigned by either party without the prior written
consent of the other party, except to the extent such
assignment is in conjunction with a transfer of New
Preferred Shares permitted under the terms of the
applicable Certificate of Designations.
5.9 Counterparts. This Agreement may be
executed in two or more counterparts, each of which shall
be deemed to be an original and all of which together
shall be deemed to constitute one and the same agreement.
5.10 Promissory Notes. Section 1 of each of
the Promissory Notes delivered by Meyer to the Company,
dated May 20, 1981, May 27, 1982, and June 13, 1983,
respectively, is hereby revised to read as follows:
"Subject to the provisions of Sections
2 and 3 hereof, the principal of this
Promissory Note shall become due and
payable on April 7, 2004."
IN WITNESS WHEREOF, the Company and Meyer have
executed this Agreement as of the date first written
above.
GREY ADVERTISING INC.
By: /s/ Stephen G. Felsher
Steven G. Felsher
Executive Vice President
/s/ Edward H. Meyer
Mr. Edward H. Meyer