AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 1998

REGISTRATION NO. 333-46929

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


AMENDMENT NO. 2

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933


YOUNG & RUBICAM INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

            DELAWARE                             7311                            13-1493710
(STATE OR OTHER JURISDICTION OF      (PRIMARY STANDARD INDUSTRIAL             (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)      CLASSIFICATION CODE NUMBER)           IDENTIFICATION NUMBER)


285 MADISON AVENUE
NEW YORK, NEW YORK 10017
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)


STEPHANIE W. ABRAMSON, ESQ.
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL
YOUNG & RUBICAM INC.
285 MADISON AVENUE
NEW YORK, NEW YORK 10017
(212) 210-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)


COPIES TO:

       PETER H. DARROW, ESQ.                                MARK C. SMITH, ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON               SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
         ONE LIBERTY PLAZA                                   919 THIRD AVENUE
     NEW YORK, NEW YORK 10006                            NEW YORK, NEW YORK 10022
          (212) 225-2000                                      (212) 735-3000


CALCULATION OF REGISTRATION FEE

========================================================================================================================
                   TITLE OF EACH CLASS OF                           PROPOSED MAXIMUM                 AMOUNT OF
                SECURITIES TO BE REGISTERED                   AGGREGATE OFFERING PRICE(1)         REGISTRATION FEE
------------------------------------------------------------------------------------------------------------------------
Common Stock, $0.01 par value...............................          $458,160,000                   $8,308(2)
------------------------------------------------------------------------------------------------------------------------
Preferred Share Purchase Rights(3)..........................
------------------------------------------------------------------------------------------------------------------------
Total.......................................................          $458,160,000                   $8,308(2)
========================================================================================================================

(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.

(2) $126,850 of registration fee was previously paid by the registrant.

(3) Rights initially will trade together with the Common Stock. The value attributable to the Rights, if any, is reflected in the market price of the Common Stock.


THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.


EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus; one to be used in connection with an offering in the United States and Canada (the "U.S. Prospectus") and one to be used in connection with a concurrent international offering outside the United States and Canada (the "International Prospectus"). The U.S. Prospectus and the International Prospectus will be identical in all respects except for the front cover pages, the back cover pages and an additional page for the International Prospectus. The form of the U.S. Prospectus is included herein; the form of the front cover page of the International Prospectus follows the front cover page of the U.S. Prospectus, the form of the back cover page of the International Prospectus follows the back cover page of the U.S. Prospectus and the form of additional page for the International Prospectus follows the "Available Information" section of the U.S. Prospectus.


INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED APRIL 20, 1998

PROSPECTUS
, 1998
16,600,000 SHARES

[YOUNG & RUBICAM INC. LOGO]
COMMON STOCK

Of the 16,600,000 shares of Common Stock, par value $.01 per share (the "Common Stock"), of Young & Rubicam Inc. ("Y&R" or the "Company") offered hereby, 13,280,000 shares are initially being offered in the United States and Canada (the "U.S. Offering") by the underwriters of the U.S. Offering named herein (the "U.S. Underwriters") and 3,320,000 shares are initially being offered in a concurrent international offering outside the United States and Canada (the "International Offering," and together with the U.S. Offering, the "Offerings") by the managers of the International Offering named herein (the "International Managers"). The initial public offering price and the per share underwriting discounts and commissions will be identical for each of the Offerings. Of the 16,600,000 shares of Common Stock offered hereby, 6,666,667 shares are being sold by the Company and 9,933,333 shares are being sold by certain selling stockholders (the "Selling Stockholders"). The Company will not receive any of the proceeds from the sale of shares of Common Stock by the Selling Stockholders. See "Principal and Selling Stockholders."

Prior to the Offerings, there has been no public market for the Common Stock. It is currently estimated that the initial public offering price of the Common Stock offered pursuant to the Offerings will be between $21.00 and $24.00 per share. For information relating to the factors to be considered in determining the initial public offering price, see "Underwriting."

Application has been made to list the Common Stock on the New York Stock Exchange under the symbol "YNR."

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES OFFERED HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE

ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A

CRIMINAL OFFENSE.

-----------------------------------------------------------------------------------------------------------------------
                                      PRICE              UNDERWRITING             PROCEEDS              PROCEEDS TO
                                     TO THE              DISCOUNTS AND             TO THE               THE SELLING
                                     PUBLIC             COMMISSIONS(1)           COMPANY(2)           STOCKHOLDERS(2)
-----------------------------------------------------------------------------------------------------------------------
Per Share....................           $                      $                      $                      $
Total(3).....................           $                      $                      $                      $
-----------------------------------------------------------------------------------------------------------------------

(1) The Company and the Selling Stockholders have agreed to indemnify the U.S. Underwriters and the International Managers (collectively, the "Underwriters") against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses estimated at $ which will be paid by the Company.

(3) Certain non-management Selling Stockholders have granted to the U.S. Underwriters an option, exercisable within 30 days of the date hereof, to purchase up to an aggregate of 2,490,000 additional shares of Common Stock at the Price to the Public less Underwriting Discounts and Commissions, solely to cover over-allotments, if any. If the option is exercised in full, the total Price to the Public, Underwriting Discounts and Commissions, Proceeds to the Company and Proceeds to the Selling Stockholders will be $ , $ , $ and $ , respectively. See "Underwriting."

The shares of Common Stock offered hereby are being offered by the several U.S. Underwriters when, as and if delivered to and accepted by the U.S. Underwriters against payment therefor and subject to various prior conditions, including their right to reject orders in whole or in part. It is expected that delivery of share certificates representing the Common Stock will be made in New York, New York on or about , 1998.

JOINT GLOBAL COORDINATORS AND JOINT BOOK-RUNNING MANAGERS
DONALDSON, LUFKIN & JENRETTE BEAR, STEARNS & CO. INC.
SECURITIES
CORPORATION
FURMAN SELZ

GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY


INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

[INTERNATIONAL COVER PAGE]

SUBJECT TO COMPLETION, DATED APRIL 20, 1998

PROSPECTUS
, 1998
16,600,000 SHARES

[YOUNG & RUBICAM INC. LOGO]

COMMON STOCK

Of the 16,600,000 shares of Common Stock, par value $.01 per share (the "Common Stock"), of Young & Rubicam Inc. ("Y&R" or the "Company") offered hereby, 3,320,000 shares are initially being offered outside the United States and Canada (the "International Offering") by the managers of the International Offering named herein (the "International Managers") and 13,280,000 shares are initially being offered in a concurrent offering in the United States and Canada (the "U.S. Offering," and together with the International Offering, the "Offerings") by the underwriters of the U.S. Offering named herein (the "U.S. Underwriters"). The initial public offering price and the per share underwriting discounts and commissions will be identical for each of the Offerings. Of the 16,600,000 shares of Common Stock offered hereby, 6,666,667 shares are being sold by the Company and 9,933,333 shares are being sold by certain selling stockholders (the "Selling Stockholders"). The Company will not receive any of the proceeds from the sale of shares of Common Stock by the Selling Stockholders. See "Principal and Selling Stockholders."

Prior to the Offerings, there has been no public market for the Common Stock. It is currently estimated that the initial public offering price of the Common Stock offered pursuant to the Offerings will be between $21.00 and $24.00 per share. For information relating to the factors to be considered in determining the initial public offering price, see "Underwriting."

Application has been made to list the Common Stock on the New York Stock Exchange under the symbol "YNR."

SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SECURITIES OFFERED HEREBY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE

ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A

CRIMINAL OFFENSE.

-----------------------------------------------------------------------------------------------------------------------
                                      PRICE              UNDERWRITING             PROCEEDS              PROCEEDS TO
                                     TO THE              DISCOUNTS AND             TO THE               THE SELLING
                                     PUBLIC             COMMISSIONS(1)           COMPANY(2)           STOCKHOLDERS(2)
-----------------------------------------------------------------------------------------------------------------------
Per Share....................           $                      $                      $                      $
Total(3).....................           $                      $                      $                      $
-----------------------------------------------------------------------------------------------------------------------

(1) The Company and the Selling Stockholders have agreed to indemnify the U.S. Underwriters and the International Managers (collectively, the "Underwriters") against certain liabilities, including liabilities under the Securities Act of 1933, as amended. See "Underwriting."

(2) Before deducting expenses estimated at $ which will be paid by the Company.

(3) Certain non-management Selling Stockholders have granted to the U.S. Underwriters an option, exercisable within 30 days of the date hereof, to purchase up to an aggregate of 2,490,000 additional shares of Common Stock at the Price to the Public less Underwriting Discounts and Commissions, solely to cover over-allotments, if any. If the option is exercised in full, the total Price to the Public, Underwriting Discounts and Commissions, Proceeds to the Company and Proceeds to the Selling Stockholders will be $ , $ , $ and $ , respectively. See "Underwriting."

The shares of Common Stock offered hereby are being offered by the several International Managers when, as and if delivered to and accepted by the International Managers against payment therefor and subject to various prior conditions, including their right to reject orders in whole or in part. It is expected that delivery of share certificates representing the Common Stock will be made in New York, New York on or about , 1998.

JOINT GLOBAL COORDINATORS AND JOINT BOOK-RUNNING MANAGERS
DONALDSON, LUFKIN & JENRETTE BEAR, STEARNS INTERNATIONAL LIMITED
INTERNATIONAL
FURMAN SELZ

GOLDMAN SACHS INTERNATIONAL
SALOMON SMITH BARNEY INTERNATIONAL


[PHOTOGRAPH OF A MAGAZINE OPEN TO A PAGE CONTAINING A PRINT ADVERTISEMENT FOR
YOUNG & RUBICAM INC.]

[FOLD-OUT PAGE]

[PHOTOGRAPH OF KEYS OF COMPUTER KEYBOARD VERY CLOSE-UP PREDOMINANTLY IN GREEN. A QUESTION MARK, SEMICOLON, COLON AND COMMA ARE IDENTIFIABLE.]

[FOLD-OUT PAGE]

[PHOTOGRAPH OF PRINTING PRESS ROLLER OF TYPEWRITTEN NUMBERS AND SYMBOLS VERY

CLOSE-UP PREDOMINANTLY IN PURPLE. THE NUMBERS 3, 4, 5, 6, 7, 8 AND 9 AND A PLUS

SIGN ARE REPEATED IN ROWS ON THE PAGE.]


This Prospectus, information included in future filings by the Company with the United States Securities and Exchange Commission (the "Commission"), and information contained in written material, press releases and oral statements issued by or on behalf of the Company contain, or may contain, statements that constitute forward-looking statements. These statements appear in a number of places in this Prospectus and include statements regarding the intent, belief or current expectations of the Company or its officers (including statements preceded by, followed by or that include forward-looking terminology such as "may," "will," "should," "believes," "expects," "anticipates," "estimates," "continues" or similar expressions or comparable terminology, including the negative thereof) with respect to various matters. These forward-looking statements include statements in the "Business -- Industry Overview," " -- Industry Trends" and " -- Strategy" sections of this Prospectus relating to trends in the advertising and marketing and communications industries, including with respect to anticipated advertising expenditures (and the growth thereof) in the world's advertising markets, as well as statements relating to the Company's performance in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" sections of this Prospectus. It is important to note that the Company's actual results could differ materially from those anticipated in these forward-looking statements depending on, among other important factors, (i) revenues received from clients, including pursuant to incentive compensation arrangements entered into by the Company with certain clients, (ii) gains or losses of clients and client business and projects, as well as changes in the marketing and communications budgets of clients, (iii) the overall level of economic activity in the principal markets in which the Company conducts business and other trends affecting the Company's financial condition or results of operations, (iv) the impact of competition in the marketing and communications industry and (v) the Company's liquidity and financing plans. All forward-looking statements in this Prospectus are based on information available to the Company on the date hereof. In addition, the matters set forth under the caption "Risk Factors" in the Prospectus constitute cautionary statements identifying important factors with respect to such forward-looking statements, including certain risks and uncertainties, that could cause actual results to differ materially from those in such forward-looking statements.

Information regarding worldwide advertising expenditures, historical and projected growth in advertising expenditures and comparative rankings of the size of Young & Rubicam Inc., its affiliates, subsidiaries and operating units has been obtained from industry sources, principally Advertising Age, McCann-Erickson Report, O'Dwyer's PR Services Report, Med Ad News and Design Week. All information regarding comparative size rankings is based on 1996 billings or revenues.

References in this Prospectus to the years 1993, 1994, 1995, 1996 and 1997 are, unless the context otherwise requires, to the Company's fiscal years ended December 31.

Young & Rubicam, Y&R, Young & Rubicam Advertising, Y&R Advertising, Wunderman Cato Johnson, WCJ, The Chapman Agency, The Bravo Group, Burson-Marsteller, Marsteller Advertising, Cohn & Wolfe, Landor Associates, Sudler & Hennessey, BrandAsset Valuator, Brand Dialogue, The Media Edge and The Mead Point Group are trademarks of the Company. Other trademarks referenced herein are trademarks of their respective legal owners.

CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERINGS, AND MAY BID FOR, AND PURCHASE, SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed information, including "Risk Factors" and the Company's consolidated financial statements and notes thereto (the "Consolidated Financial Statements"), appearing elsewhere in this Prospectus. Except as otherwise indicated herein, the information in this Prospectus (i) assumes an initial public offering price of $22.50 per share of Common Stock, the mid-point of the range set forth on the cover page of this Prospectus, (ii) reflects a stock dividend of 14 shares of Common Stock payable for each share of Common Stock outstanding as of the date of effectiveness of the Registration Statement of which this Prospectus is a part, payable on such date (the "Stock Split"), (iii) reflects the effectiveness, upon the closing of the Offerings, of an Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws of Young & Rubicam Inc. and (iv) assumes that the U.S. Underwriters' over-allotment option is not exercised. Unless otherwise indicated, all references to the "Company" and "Y&R" refer to Young & Rubicam Inc., its predecessors and its consolidated subsidiaries, including Young & Rubicam L.P.

THE COMPANY

Young & Rubicam Inc. is the fifth largest consolidated marketing and communications organization in the world. Since its founding 75 years ago, Y&R has evolved from a single New York-based advertising agency to a diversified global marketing and communications company operating in 128 cities in 76 countries worldwide as of December 31, 1997. The Company operates through such internationally recognized market leaders as Young & Rubicam Advertising (full-service advertising), Wunderman Cato Johnson (direct marketing and sales promotion), Burson-Marsteller (perception management and public relations), Landor Associates (branding consultation and design services) and Sudler & Hennessey (healthcare communications). Y&R's revenues in 1997 were approximately $1.4 billion, having grown at a compound annual rate of 12.9% from 1995 to 1997.

Through multi-disciplinary, client-focused teams, Y&R provides clients with global access to fully integrated marketing and communications solutions. Among Y&R's approximately 5,500 client accounts are a number of large multinational organizations, including AT&T, Citibank, Colgate-Palmolive, Ford and Philip Morris. Y&R has maintained long-standing relationships with many of its clients, with the average length of relationship for the top 20 clients exceeding 20 years.

Y&R's mission is to be its clients' most valued business partner in building, leveraging, protecting and managing clients' brands for both short-term results and long-term growth. Consistent with its mission, Y&R has developed an organizational and management structure designed to meet the diverse needs of its large global clients as well as the more specialized needs of its other clients. The Company's strategy combines this organizational and management structure with the aggressive pursuit of new business opportunities and continued investment in Y&R's business, personnel and superior consumer knowledge.

In late 1992, Y&R created the Key Corporate Account ("KCA") program to enhance the coordination of services sought by clients from both a global coverage as well as an integrated solutions perspective. KCAs are large global client accounts that, as a group, contribute the greatest share of Y&R's revenues and profits, and are served on a multinational basis by two or more of Y&R's businesses. Y&R currently designates 42 of its client accounts as KCAs. Revenues from the KCAs, as a group, increased by 14.6% in 1997, and accounted for approximately 45.5% and 46.1% of consolidated revenues in 1996 and 1997, respectively. In order to further strengthen client relationships and reward Y&R for meeting or exceeding certain performance targets, Y&R is working with KCAs to adopt incentive compensation arrangements that align Y&R's compensation with its performance and its clients' business performance.

As part of Y&R's client focus, Peter A. Georgescu, Chairman and Chief Executive Officer of Y&R, John P. McGarry, Jr., President of Y&R, Edward H. Vick, Chief Operating Officer of Y&R and the Chairman and Chief Executive Officer of Young & Rubicam Advertising, and Thomas D. Bell, Jr., Executive Vice President of Y&R and President and Chief Executive Officer of Burson-Marsteller, all retain ongoing responsibilities for individual KCAs in addition to their managerial roles.

4

INDUSTRY TRENDS

The marketing and communications industry encompasses a wide range of services used to develop and deliver messages to both broad and targeted audiences through multiple communications channels. Several significant trends are changing the dynamics of the marketing and communications industry, including the following:

Growth in United States Marketing and Communications Markets. Advertising expenditures in the United States have continued to grow, increasing from approximately $140 billion in 1993 to approximately $175 billion in 1996.

Growth in International Marketing and Communications Markets. Since 1986, non-U.S. advertising expenditures have grown more rapidly than U.S. expenditures, and according to industry sources, have increased from approximately 44% of worldwide expenditures in 1986 to approximately 55% in 1996.

Investment in Brand Development. Over the last several years, advertisers have focused on the image or brand identity of their organizations, products and services in an effort to differentiate themselves from competitors and increase brand loyalty.

Demand for Integrated Service Offerings. Demand has increased for globally integrated marketing and communications solutions as companies seek consistent and effective delivery of their messages through multiple communications channels and across a variety of geographic markets.

Increased Emphasis on Targeted Marketing. The desire of companies to reach their target audiences and quantify the effectiveness of their communications has resulted in greater demand for customized direct marketing methods, such as database marketing, infomercials, in-store promotions and interactive programs.

STRATEGY

Y&R's strategy consists of the following key components:

Increase Penetration of Key Corporate Accounts. Y&R believes that significant opportunities exist to increase its share of KCA marketing and communications expenditures by leveraging its global network to provide integrated services to KCAs. In recent years, Y&R has successfully increased its share of the marketing and communications expenditures of certain KCAs. KCAs also have increased their use of multiple services offered by Y&R over the same period. During 1997, Y&R's 20 largest clients used the capabilities of an average of five of the Company's marketing and communications services.

Develop New Client Relationships. The Company believes that there are significant opportunities for future revenue and profit growth by providing services to new clients in targeted industry sectors and to those clients seeking to build and maintain global, regional and local brands. Y&R has successfully used its integrated and global approach as an effective tool in winning new business.

Leverage Existing Global Network. With a worldwide presence in 76 countries, the Company believes that it is well positioned to continue to benefit from the trend towards the globalization of client marketing and communications needs and the consolidation of such needs with a single international service provider.

Capitalize on Existing Capabilities. Y&R intends to continue the development of its existing capabilities into more visible and accessible client services. For example, Y&R recently launched a new unit, Brand Dialogue, by combining the existing interactive capabilities of Young & Rubicam Advertising and Wunderman Cato Johnson in the United States, Latin America, Europe and Asia/Pacific.

Utilize Superior Consumer Knowledge and Brand Insights. To assist its clients in building, leveraging, protecting and managing their brands, Y&R has developed and is maintaining extensive knowledge of consumer brand perceptions. For example, Y&R has developed BrandAsset Valuator ("BAV"), a proprietary database that reflects the perceptions of over 95,000 consumers in 32 countries on five continents. The Company believes that BAV is the first global consumer study that provides an empirically derived model for how brands gain and lose their strength over time.

5

Cultivate Creative Excellence. Y&R intends to continue emphasizing the importance of creative marketing and communications. Y&R has created numerous memorable marketing and communications programs for clients, including "The Softer Side of Sears," "Everybody Needs a Little KFC," "It's All Within Your Reach" for AT&T, "The Document Company" for Xerox and "Be All That You Can Be" for the United States Army, as well as identity and design assignments, including the creation of corporate identities, for Lucent Technologies, Netscape and the 2002 Salt Lake City Olympics.

Improve Operating Efficiencies. The Company believes that opportunities exist to improve operating efficiencies in order to expand margins and increase future profitability. For example, Y&R has implemented initiatives which have both improved productivity and reduced compensation expense as a percentage of consolidated revenues.

Expand Capabilities Through Acquisitions. In order to add new capabilities, enhance its existing capabilities and expand the geographic scope of its operations, Y&R regularly evaluates and intends to pursue appropriate acquisition opportunities.

THE RECAPITALIZATION

From the time of its founding until 1996, Y&R was wholly owned by its employees. In December 1996, Y&R consummated a recapitalization (the "Recapitalization"). The purpose of the Recapitalization was to realign the ownership of the Company with those senior employees who would most actively lead Y&R's future growth, to establish an equity-based incentive program to motivate current and future employees and to enhance Y&R's ability to make strategic investments in people, services and products. In connection with the Recapitalization, predecessor companies of Y&R acquired, canceled or exchanged all outstanding equity units, issued new shares of Common Stock and granted certain restricted stock awards and options to acquire shares of Common Stock to approximately 325 employees. In addition, at the time of the consummation of the Recapitalization, Hellman & Friedman Capital Partners III, L.P., H&F Orchard Partners III, L.P. and H&F International Partners III, L.P. (collectively, the "H&F Investors"), and six other investors not affiliated with the Company (together with the H&F Investors, the "Recapitalization Investors") and certain employees and former employees of Y&R contributed an aggregate of $242 million to the Company in exchange for shares of Common Stock and options to acquire additional shares of Common Stock.

The Company's principal executive office is located at 285 Madison Avenue, New York, New York 10017, and its telephone number is (212) 210-3000.

6

THE OFFERINGS

Common Stock offered by:
     The Company..........................  6,666,667 shares
     The Selling Stockholders.............  9,933,333 shares
                                            --------------------
          Total...........................  16,600,000 shares

Common Stock offered:
     U.S. Offering........................  13,280,000 shares
     International Offering...............  3,320,000 shares
                                            --------------------
          Total...........................  16,600,000 shares

Common Stock to be outstanding after the
  Offerings...............................  66,228,322 shares(1)

Dividend Policy................    The Company expects to commence the
                                   declaration and payment of a regular
                                   quarterly cash dividend in the last quarter
                                   of 1998. See "Dividend Policy."

Use of Proceeds................    The net proceeds to be received by the
                                   Company from the Offerings are estimated to
                                   be approximately $139,500,000 after deducting
                                   underwriting discounts and commissions and
                                   estimated offering expenses payable by the
                                   Company. The Company intends to use such net
                                   proceeds to repay a portion of the borrowings
                                   outstanding under the term loan portion of
                                   its existing credit facilities. See
                                   "Management's Discussion and Analysis of
                                   Financial Condition and Results of
                                   Operations -- Liquidity and Capital
                                   Resources." The Company will not receive any
                                   of the proceeds from the sale of shares of
                                   Common Stock by the Selling Stockholders. See
                                   "Use of Proceeds."

Proposed New York Stock
Exchange Symbol................    "YNR"
---------------------------

(1) As of the date hereof, the number of shares of Common Stock outstanding excludes (i) an aggregate of 28,844,880 shares reserved for issuance upon the exercise of outstanding options under the Young & Rubicam Holdings Inc. Management Stock Option Plan (under which no additional awards will be made) and the Young & Rubicam Inc. 1997 Incentive Compensation Plan (collectively, the "Stock Option Plans") at a weighted average exercise price of $6.98 per share and (ii) an aggregate of 2,598,105 shares reserved for issuance upon the exercise of outstanding options issued to certain of the Recapitalization Investors at a weighted average exercise price of $7.67 per share. The number of shares of Common Stock outstanding includes an aggregate of 9,231,105 shares of Restricted Stock (as defined herein) allocated to employees as of the date of consummation of the Offerings. See "Management -- Executive Compensation" and "Capitalization." All of such shares are subject to 180-day lock-up agreements following the Offerings. See "Shares Eligible for Future Sale."

RISK FACTORS

Prior to making an investment in the Common Stock offered hereby, prospective purchasers of the Common Stock should take into account the specific risks set forth under "Risk Factors" as well as the other information set forth in this Prospectus.

7

SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                                  YEARS ENDED DECEMBER 31,
                                                        --------------------------------------------
                                                           1995          1996             1997
STATEMENT OF OPERATIONS DATA:

  Revenues............................................  $1,085,494    $1,222,139       $ 1,382,740
  Compensation expense, including employee
     benefits(1)......................................     672,026       730,261           836,150
  General and administrative expenses(1)..............     356,523       391,617           463,936
  Recapitalization-related charges(2).................          --       315,397                --
  Other operating charges(2)..........................      31,465        17,166            11,925
                                                        ----------    ----------       -----------
     Operating expenses...............................   1,060,014     1,454,441         1,312,011
                                                        ----------    ----------       -----------
  Income (loss) from operations.......................      25,480      (232,302)           70,729
  Net income (loss)...................................         820      (238,311)          (23,938)
  Basic and diluted loss per common share(3)..........                                 $      (.51)
  Weighted average shares outstanding(3)..............                                  46,949,355
  Supplemental loss per common share(4)...............                                 $      (.37)
OTHER OPERATING DATA:
  EBITDA(1)(5)........................................  $   72,972    $  147,221       $   139,375
  Net cash provided by operating activities...........      79,809       178,064           224,511
  Net cash used in investing activities...............      45,821        76,094            67,142
  Net cash used in financing activities...............      50,025        12,614            98,667
  Capital expenditures................................      42,096        51,792            51,899
  International revenues as a % of total
     revenues(6)......................................       54.7%         53.3%             52.2%

                                                                  AS OF DECEMBER 31, 1997
                                                        --------------------------------------------
                                                                                        PRO FORMA
                                                          ACTUAL     PRO FORMA(10)   AS ADJUSTED(11)
BALANCE SHEET DATA:

  Total assets(7).....................................  $1,528,019    $1,528,019       $1,613,176
  Total debt(8).......................................     351,051       351,051          211,551
  Mandatorily redeemable equity securities(9).........     508,471            --               --
  Total (deficit) equity..............................    (661,714)     (153,243)          71,414


(1) For a discussion of charges included in compensation expense, including employee benefits, and general and administrative expenses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations."

(2) For a discussion of Recapitalization-related and other operating charges, see Notes 4 and 6 to the Consolidated Financial Statements.

(3) Basic net loss per common share for 1997 was computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding excludes 11,086,950 shares of Common Stock held by the Restricted Stock Trust (as defined herein), as such shares vest upon the consummation of an initial public offering, or the six-month anniversary thereof, a condition which was not satisfied at December 31, 1997. Diluted net loss per common share for 1997 was computed in the same manner as basic net loss per common share since the inclusion of potential common shares would be antidilutive.

At December 31, 1997, the Company had outstanding options to purchase 31,013,205 shares of Common Stock, with a weighted average exercise price of $6.84, that could potentially dilute basic earnings per share in the future. These options were excluded from the computation of diluted net loss per common share because the effect for 1997 would be antidilutive. In addition, at December 31, 1997, a maximum of 11,086,950 shares of Common Stock held by the Restricted Stock Trust would vest and be dilutive as a result of the consummation of the Offerings. See "Management -- Executive Compensation -- The Restricted Stock Plan and Trust Agreement" and Notes 3, 15 and 21 to the Consolidated Financial Statements.

Earnings per share for 1995 and 1996 cannot be computed because the Company's capital structure prior to the Recapitalization consisted of both common shares and limited partnership units in predecessor entities. See Note 4 to the Consolidated Financial Statements.

(4) The supplemental loss per common share was computed by dividing the supplemental loss of $19,587 by the supplemental common shares of 53,616,022. The supplemental loss of $19,587 has been computed by adjusting the historical net loss for 1997 to reflect the following: (i) additional interest cost, net of the related tax benefit, of $1,410 (computed utilizing an interest rate and statutory tax rate of 7.0% and 41.0%, respectively) associated with the $161,700 of Recapitalization-related borrowings under the Company's existing credit facilities, which occurred on March 18, 1997, as if such borrowings had occurred as of January 1, 1997 and (ii) the reduction in interest cost, net of tax, of $5,761 (computed utilizing an interest rate and statutory tax rate of 7.0% and 41.0%, respectively), associated with $139,500 of the net proceeds of the Offerings to the Company, which is expected to be utilized to

8

repay a portion of the outstanding borrowings under the term loan portion of the Company's existing credit facilities, as if the debt repayment had occurred as of January 1, 1997.

The supplemental shares of 53,616,022 were computed by adding the 6,666,667 shares of Common Stock offered by the Company to the 46,949,355 weighted average shares outstanding as of December 31, 1997. See "Capitalization."

Based upon an assumed initial public offering price of $22.50, the consummation of the Offerings will give rise to a non-recurring, non-cash, pre-tax charge of $207,700 ($122,543 net of the related tax benefit assuming a statutory tax rate of 41.0%) arising from the vesting of the aggregate of 9,231,105 shares of Restricted Stock allocated to employees as of the date of the consummation of the Offerings. The determination of supplemental loss for 1997 does not give effect to this charge due to its non-recurring nature. See "Management -- Executive Compensation -- The Restricted Stock Plan and Trust Agreement" and Note 15 to the Consolidated Financial Statements.

(5) EBITDA is defined as income (loss) from operations before depreciation and amortization, other non-cash charges and Recapitalization-related charges. EBITDA is presented because it is a widely accepted financial indicator and is generally consistent with the definition used for covenant purposes contained in the Company's existing credit facilities; however, EBITDA may not be comparable to other registrants' calculation of EBITDA or similarly titled items. EBITDA should not be considered as an alternative to net income (loss) as a measure of operating results in accordance with generally accepted accounting principles or as an alternative to cash flows as a measure of liquidity. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations." EBITDA for 1996 and 1997 is before $11,096 and $11,925, respectively, of non-cash charges primarily related to impairment write-downs which are included in other operating charges. See Notes 4 and 6 to the Consolidated Financial Statements.

(6) International revenues include all revenues earned outside the United States.

(7) Total assets as of December 31, 1997 (actual, pro forma and pro forma as adjusted) include net deferred tax assets of $157,024, $75,135 of which relate to net operating loss ("NOL") carryforwards of approximately $140,409 for U.S. tax purposes and approximately $69,231 for foreign tax purposes. See Note 9 to the Consolidated Financial Statements.

(8) Total debt includes current and non-current loans and installment notes.
See Notes 13 and 14 to the Consolidated Financial Statements.

(9) From the date of consummation of the Recapitalization and through the date of consummation of the Offerings, all outstanding shares of Common Stock, exclusive of shares of Common Stock held in the Restricted Stock Trust, are redeemable, subject to certain restrictions, at the option of the stockholder. Accordingly, all such shares of Common Stock have been recorded at their redemption values and classified as Mandatorily Redeemable Equity Securities in the Company's historical balance sheets at December 31, 1996 and 1997, respectively. See Notes 2, 15 and 16 to the Consolidated Financial Statements.

(10) The pro forma December 31, 1997 balance sheet reflects the termination of the redemption feature and subsequent reclassification of Mandatorily Redeemable Equity Securities, as discussed in Note (9) above, to stockholders' deficit. See "Capitalization" and Notes 2, 15 and 16 to the Consolidated Financial Statements.

(11) The pro forma as adjusted balance sheet reflects the following: (i) an increase in total assets of $85,157, resulting from the tax benefits arising from the compensation charge associated with the vesting of the Restricted Stock as further described in Note (4) above; (ii) a decrease in total debt resulting from the sale by the Company of 6,666,667 shares of Common Stock in the Offerings and the application of $139,500 of the net proceeds to the Company to repay a portion of the outstanding borrowings under the term loan portion of the Company's existing credit facilities; and (iii) a $224,657 increase in total equity resulting from the $139,500 net proceeds to the Company from the Offerings and $85,157 resulting from the vesting of Restricted Stock upon consummation of the Offerings as discussed in (i) above. See "Capitalization."

9

RISK FACTORS

A prospective investor should consider carefully all of the information contained in this Prospectus before deciding whether to purchase the Common Stock offered hereby and, in particular, the following factors.

RECENT HISTORY OF NET LOSSES

The Company reported a net loss for 1996 and 1997 of $238.3 million and $23.9 million, respectively. In addition, the Company expects to report a net loss for 1998 resulting from charges relating to the Offerings. The Company expects to recognize a non-cash compensation charge of $207.7 million in connection with the vesting of the Restricted Stock upon consummation of the Offerings. The Company also expects to enter into a new revolving credit facility to become effective upon completion of the Offerings, and as a result expects to write off approximately $7.4 million, which represents the unamortized portion of capitalized charges relating to the Company's existing $700 million senior secured credit facilities as of March 31, 1998 (the "Credit Facilities"), which will be repaid and replaced with net proceeds to the Company from the Offerings and borrowings under the new revolving credit facility.

COMPETITION

The marketing and communications industry is highly competitive. Y&R's principal competitors are large multinational marketing and communications companies, as well as numerous smaller agencies that operate in one or more countries or local markets. Y&R must compete with such other companies and agencies to maintain existing client relationships and to obtain new clients and assignments. Some clients, such as U.S. governmental agencies, require agencies to compete for business at mandatory intervals. Principal competitive factors include an agency's creative reputation, knowledge of media, financial controls, geographical coverage and diversity, relationships with clients and quality and breadth of services. Recently, traditional advertising agencies have also been competing with major consulting firms which have developed practices in marketing and communications, and with smaller companies such as systems integrators, database marketing and modeling companies and telemarketers, which are offering technological solutions to marketing and communications issues faced by clients.

Representation of a client does not necessarily mean that all advertising or public relations for that client is handled by one agency. Many large multinational companies are served by a number of agencies within the marketing and communications industry. In many cases, clients' conflicts policies or desires to be served by multiple agencies result in one or more global agency networks representing a client only for a portion of its marketing and communications needs or only in particular geographic areas. In addition, the ability of agencies within marketing and communications organizations to acquire new clients or additional assignments from existing clients may be limited by the conflicts policy followed by many clients not to permit agencies to perform similar services for competing products or companies. Y&R's principal international competitors are holding companies for more than one global advertising agency network, which, in some situations, may permit separate agency networks within such holding companies to perform services for competing products or for products of competing companies. The Company has one global advertising agency network, and accordingly Y&R's ability to compete for new advertising assignments and, to a lesser extent, other marketing and communications assignments, may be limited by these conflicts policies. Industry practices in other areas of the marketing and communications business reflect similar concerns with respect to client relationships. See "Business -- Competition."

TREND TOWARDS CONSOLIDATION OF GLOBAL ACCOUNTS WITH GLOBAL AGENCIES

The Company believes that large multinational companies will seek to consolidate their accounts with one organization that can fulfill their marketing and communications needs worldwide. There can be no assurance that the Company will continue to benefit from this trend towards consolidation of global accounts. In addition, this trend towards consolidation of global accounts requires companies seeking to compete effectively in the international marketing and communications industry to make significant investments in additional offices and personnel around the world and in new and improved technology for linking such offices

10

and people. Y&R's international network of employees and offices are linked by computer networks which require significant capital expenditures for maintenance, expansion and upgrades. To the extent that Y&R's competitors may have broader geographic scope or greater financial resources to invest in additional offices, personnel or technology, such competitors may be better able than Y&R to take advantage of an opportunity for the consolidation of a global account. In such event, Y&R's prospects, business, financial condition and results of operations could be adversely affected.

CONCENTRATION OF REVENUES FROM A LIMITED NUMBER OF LARGE CLIENTS

A relatively small number of clients contributes a significant percentage of Y&R's consolidated revenues. In 1997, Y&R's 20 largest clients contributed approximately 40.5% of consolidated revenues, its three largest clients contributed approximately 18.6% of consolidated revenues and its largest client, Ford Motor Company, contributed approximately 10.0% of consolidated revenues. Based upon Y&R's strategy of increasing its penetration of existing large clients, it is possible that Y&R's dependence on revenues from such clients will increase in the future. Most of Y&R's agreements with U.S.-based clients are cancelable on 90 days' notice, and its agreements with non-U.S. clients typically are cancelable on 90 to 180 days' notice. In addition, clients generally are able to reduce marketing and communications spending or cancel projects at any time for any reason. There can be no assurance that any of Y&R's clients will continue to utilize Y&R and its services to the same extent, or at all, in the future. A significant reduction in the marketing and communications spending by, or the loss of one or more of, Y&R's largest clients, if not replaced by new client accounts or an increase in business from existing clients, would have a material adverse effect on Y&R's prospects, business, financial condition and results of operations. See "Business."

CLIENT TURNOVER; DEVELOPMENT OF NEW CLIENTS

The success of a marketing and communications organization depends on its continuing ability to attract and retain clients. Y&R has approximately 5,500 client accounts worldwide. Although historically Y&R has had long-term relationships with many of its largest clients, clients may move their advertising and other communications assignments from agency to agency, or may divide their assignments among two or more agencies, with relative ease. In addition, the perception management and public relations business, as well as the branding consultation and design business, are principally project-based and require new assignments in order to maintain and increase revenues. As is typical in the marketing and communications industry, Y&R has lost or resigned client accounts and assignments for a variety of reasons, including conflicts with newly acquired clients. Although typically Y&R has been able to replace such client and revenue losses with new clients and assignments, there can be no assurance that Y&R will continue to be successful in replacing clients or in replacing revenues when a client significantly reduces the amount of work given to Y&R. The failure to maintain existing clients or attract new clients could have a material adverse effect on Y&R's prospects, business, financial condition and results of operations. See "Business."

CYCLICAL INDUSTRY

The marketing and communications industry is cyclical because it is subject to downturns in general economic conditions and changes in client business and marketing budgets. There can be no assurance that the Company's prospects, business, financial condition and results of operations would not be materially adversely affected by a downturn in general economic conditions in one or more markets or changes in client business and marketing budgets. See "Business."

CURRENCY RISK

The Company's Consolidated Financial Statements are denominated in U.S. dollars. Y&R derived approximately 52.2% of its revenues from operations outside of the United States in 1997. Currency fluctuations may give rise to translation gains or losses when financial statements of foreign operating units are translated into U.S. dollars. Significant strengthening of the U.S. dollar against other major foreign currencies could have a material adverse effect on Y&R's results of operations. With limited exceptions, Y&R does not

11

actively hedge its foreign currency exposure. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources."

CONTROL OF Y&R

Substantially all of Y&R's Common Stock is owned by employee equityholders (the "Management Investors") and the Recapitalization Investors. See "Management." All Common Stock held at any time by Management Investors is deposited in a voting trust (the "Management Voting Trust") which is controlled by eight members of Y&R's senior management, in their capacities as voting trustees (the "Voting Trustees"). Upon consummation of the Offerings, the Management Voting Trust will hold voting power over approximately 53.8% of the outstanding shares of Common Stock (assuming the exercise of all currently vested options). As a result, the Management Voting Trust will be able to exercise substantial control over any matters requiring the vote of stockholders, including the election of Directors, which could delay or prevent a change in control of the Company. Furthermore, the vote of Peter A. Georgescu (or any other person duly elected Chief Executive Officer of Y&R with the prior approval of the Management Voting Trust) will bind the Management Voting Trust unless he (or his successor) is outvoted by the vote of six of the other Voting Trustees. As a result of the foregoing, Peter A. Georgescu (or any such successor) will be able to exercise a significant degree of control over business decisions affecting Y&R. The Management Voting Trust will remain in existence following consummation of the Offerings but will terminate no later than 24 months after the consummation of the Offerings. See "Description of Capital Stock -- The Management Voting Trust Agreement." In the event that, following the termination of the Management Voting Trust, management of the Company continues to own collectively a significant percentage of the outstanding shares of Common Stock, management acting together would be able to exercise a significant degree of control over business decisions affecting Y&R.

Upon consummation of the Offerings, the H&F Investors are expected to beneficially own an aggregate of approximately 35.1% of the outstanding shares of Common Stock (assuming the exercise of all currently vested options). As a result of their stock ownership, the H&F Investors currently are, and upon consummation of the Offerings will be, able to influence matters requiring the vote of stockholders, including the election of Directors. In addition, pursuant to the Amended Stockholders' Agreement (as defined herein), the H&F Investors will have the right to nominate and have elected two members of the Company's Board of Directors (the "Board" or the "Company Board") for so long as they continue to hold, in the aggregate, at least 10% of the Outstanding Shares (as defined in the Amended Stockholders' Agreement), and one member of the Board for so long as they continue to hold, in the aggregate, at least 5% of the Outstanding Shares. Should the Management Voting Trust and the H&F Investors act together, they would be able to elect the members of the Board and exercise a controlling influence over the business and affairs of the Company. In addition, the Management Voting Trust and the H&F Investors could, acting together, delay or prevent a change in control of the Company. See "-- Certain Anti-Takeover Effects" and "Description of Capital Stock -- The Stockholders' Agreement."

DEPENDENCE ON KEY PERSONNEL

The Company's ability to maintain its competitive position is dependent on the services of its senior management. The loss of the services of one or more members of senior management could have a material adverse effect on the Company. In addition, the success of Y&R has been, and will continue to be, highly dependent upon the skills of its creative, research, media and account personnel and practice group specialists, and their relationships with clients. Employees generally are not subject to contracts of employment and are, therefore, typically able to move within the industry with relative ease. Although the Management Voting Trust Agreement (as defined herein) and certain stock option and restricted stock agreements contain non-competition and non-solicitation covenants, there can be no assurance that such provisions will be effective in helping Y&R retain qualified personnel or that Y&R would not be adversely affected by the failure to retain such personnel.

If Y&R were unable to continue to attract and retain additional key personnel, or if it were unable to retain and motivate its existing key personnel, its prospects, business, financial condition and results of

12

operations would be materially adversely affected. See "Management" and "Description of Capital Stock -- The Management Voting Trust Agreement."

RISKS OF MULTINATIONAL OPERATIONS

The Company conducts business in various developing countries in Asia, Latin America, Eastern Europe and Africa, where the systems and bodies of commercial law and trade practices arising thereunder are evolving. Commercial laws in such countries are often vague, arbitrary, contradictory, inconsistently administered and retroactively applied. Under such circumstances, it is difficult for the Company to determine with certainty at all times the exact requirements of such local laws. If the Company consistently were unable to remain in compliance with local laws in such developing countries, it could have a material adverse impact on Y&R's prospects, business, results of operations and financial condition. In addition, the global nature of the Company's operations poses various challenges to the Company's management and its financial, accounting and other systems which, if not satisfactorily met, could have a material adverse impact on the Company's prospects, business, financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations."

TERMS OF CERTAIN INDEBTEDNESS

The Company's Credit Facilities contain certain financial and operating covenants and require the Company to achieve or maintain certain financial ratios and net worth requirements, and restrict the Company's ability to incur additional indebtedness, sell assets, redeem equity, pay cash dividends, make acquisitions and take other specified actions. The Company's obligations under the Credit Facilities are secured by a security interest in certain domestic assets, including its headquarters building in New York, all of the capital stock of the direct and indirect domestic subsidiaries of the Company and 66.7% of the capital stock of the Company's first-tier non-U.S. subsidiaries. The net proceeds to the Company from the Offerings are expected to be used to repay a portion of the borrowings outstanding under the term loan portion of the Credit Facilities. The Company expects to enter into a $400 million unsecured revolving credit facility (the "New Facility") to become effective upon the consummation of the Offerings, and has received an executed commitment letter for an aggregate of $150 million of the $400 million total from two commercial banks. The New Facility is expected to contain certain financial and operating restrictions and covenant requirements. Consummation of the New Facility is subject to execution of definitive documentation and a number of other closing conditions, and there can be no assurance that the Company will be successful in consummating such Facility.

Outstanding borrowings under the Credit Facilities, which aggregated $330.6 million at December 31, 1997, bear interest at rates that fluctuate with changes in certain prevailing market interest rates. Any increase in interest rates would adversely affect Y&R's net income and the cash flow available after debt service to fund operations and expansion. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources."

ACQUISITION STRATEGY RISKS

Y&R's business strategy includes increasing its share of clients' marketing expenditures by adding to or enhancing its existing marketing and communications capabilities, and expanding its geographic reach. Y&R intends to implement this strategy in part by making acquisitions. There can be no assurance that the Company will be successful in identifying appropriate acquisition candidates or consummating acquisitions on terms satisfactory to Y&R, or that any newly acquired companies will be successfully integrated into Y&R's existing global network. The Company may use Common Stock (which could result in dilution to purchasers of Common Stock offered hereby) or may incur indebtedness (which may be long-term), expend cash or use a combination thereof for all or part of the consideration to be paid in future acquisitions. While the Company regularly evaluates potential acquisition opportunities, it has no present commitments, agreements or understandings with respect to any material acquisition. See "Business."

13

THIRD PARTY LIABILITY

Y&R from time to time may be, or may be joined as, a defendant in litigation brought against its clients by third parties, including, without limitation, claims brought by such clients' competitors, regulatory bodies or consumers, alleging that advertising claims made with respect to such client's products or services are false, deceptive or misleading, that such clients' products are defective or injurious or that marketing and communications materials created for such clients infringe on the proprietary rights of third parties. If, in such circumstances, Y&R is not insured under the terms of the insurance policies with its insurers or is not indemnified under the terms of its agreements with such clients (or such indemnification is unavailable) with respect to such claims, then the damages, costs, expenses or attorneys' fees arising from any such claims could have an adverse effect on Y&R's prospects, business, results of operations and financial condition. In addition, Y&R's contracts with clients sometimes require it to indemnify clients for claims brought by competitors or others claiming that advertisements or other communications infringe on intellectual property rights. Although Y&R maintains an insurance program, including insurance for advertising agency liability, there can be no assurance that such insurance will be available, or will be sufficient to cover any claim if available, in the event a significant adverse claim is made. In the opinion of management, none of the existing claims and legal actions to which the Company currently is a party is expected to have a material adverse effect on the Company.

YEAR 2000 RISK

The Company is conducting a comprehensive review of its computer systems to identify all software applications that could be affected by the inability of many existing computer systems to process time-sensitive data accurately beyond the year 1999 (referred to as the "Year 2000" issue). The Company intends to modify or replace all affected systems for compliance with the Year 2000 issue and is also monitoring the adequacy of the processes and progress of third-party vendors of systems that may be affected by the Year 2000 issue. Y&R is dependent on third-party computer systems and applications, particularly with respect to such critical tasks as accounting, billing and buying, planning and paying for media, as well as on its own computer systems. While Y&R believes its process is designed to be successful, because of the complexity of the Year 2000 issue and the interdependence of organizations using computer systems, there can be no assurance that Y&R's efforts, or those of third parties with whom Y&R interacts, will be satisfactorily completed in a timely fashion. Failure to satisfactorily address the Year 2000 issue could have a material adverse effect on Y&R's prospects, business, financial condition and results of operations. The costs of the Company's Year 2000 project have not been determined but are not expected to have a material adverse effect on the Company. However, there can be no assurance that Y&R will not experience cost overruns or delays in connection with its plan for replacing or modifying systems, which could have a material adverse effect on Y&R's prospects, business, financial condition and results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Year 2000 Compliance."

DIVIDEND POLICY

Although the Company intends to commence the declaration and payment of a regular quarterly cash dividend in the last quarter of 1998, the Company's ability to pay dividends will depend upon, among other factors, the Company's results of operations, financial condition and capital requirements. In addition, the covenants under the Credit Facilities currently prohibit Y&R from the declaration and payment of cash dividends. The terms of the New Facility, which the Company expects to enter into upon consummation of the Offerings, are expected to permit the payment of cash dividends except in the event of a continuing default under the credit agreement. Any cash dividend is therefore contingent upon the consummation of the New Facility, which is subject to execution of definitive documentation and a number of other closing conditions, and there can be no assurance that the Company will be successful in consummating such Facility. See "Dividend Policy."

14

BENEFIT TO EXISTING STOCKHOLDERS

The initial public offering price of the shares of Common Stock to be sold in the Offerings is substantially in excess of the net tangible book value per share, which results in a benefit to existing stockholders of the Company. See "-- Immediate and Substantial Dilution" and "Dilution." Consummation of the Offerings will result in the vesting of the Company's Restricted Stock, which will provide a substantial benefit to management stockholders who have been allocated shares of Restricted Stock. In addition, consummation of the Offerings will result in the elimination of the Company's right to repurchase shares of Common Stock held by Management Investors upon their termination of employment. See "The Company -- The Recapitalization" and "Description of Capital Stock -- The Stockholders' Agreement."

IMMEDIATE AND SUBSTANTIAL DILUTION

The initial public offering price of the Common Stock is substantially in excess of the net tangible book value per share. As a result, purchasers of Common Stock in the Offerings will experience immediate and substantial dilution of $23.18 per share. See "Dilution."

ABSENCE OF PRIOR MARKET FOR COMMON STOCK

Prior to the Offerings, there has been no public market for the Common Stock, and there can be no assurance that an active trading market for the Common Stock will develop or will continue if it develops. The initial public offering price of the Common Stock will be determined by negotiations between the Company and representatives of the Underwriters and may not be indicative of the market price of the Common Stock following the Offerings. See "Underwriting." The market price of the Common Stock could be subject to significant fluctuations in response to various factors and events, including the liquidity of the market for the Common Stock, differences between the Company's actual financial or operating results and those expected by investors and analysts, changes in analysts' recommendations or projections, marketing and communications budgets of clients, new statutes or regulations or changes in interpretations of existing statutes and regulations affecting the Company's business, changes in general economic or market conditions and broad market fluctuations.

POSSIBLE ADVERSE IMPACT ON SHARE PRICE OF SHARES ELIGIBLE FOR FUTURE SALE

Following the Offerings, the Company will have 66,228,322 shares of Common Stock outstanding. Of these, 20,239,045 shares will be freely transferable by persons other than "affiliates" of the Company without restriction or further registration under the Securities Act. The remaining 45,989,277 outstanding shares of Common Stock will be "restricted securities" within the meaning of Rule 144 under the Securities Act or securities issued and sold pursuant to Regulation S under the Securities Act and subject to transfer restrictions. Following the Offerings and subject to certain 180-day lock-up agreements described herein, certain of the Recapitalization Investors will have demand and piggyback registration rights with respect to an aggregate of 22,199,002 shares of Common Stock. In addition, beginning 90 days after the date of this Prospectus, such shares will be eligible for sale in the public market without registration under the Securities Act, subject to compliance with the resale volume limitations and other restrictions of Rule 144 under the Securities Act. Subject to certain 180-day lock-up agreements described herein, and beginning 90 days after the date of this Prospectus, shares of Common Stock held by Management Investors will be eligible for sale in the public market without registration under the Securities Act, subject to compliance with the resale volume limitations and other restrictions of Rule 144 under the Securities Act. Future sales of the Common Stock, or the perception that such sales could occur, could adversely affect prevailing market prices for the Common Stock. See "Shares Eligible for Future Sale" and "Underwriting."

CERTAIN ANTI-TAKEOVER EFFECTS

Certain provisions of the Company's Amended and Restated Certificate of Incorporation (the "Company's Charter") and the Company's Amended and Restated By-Laws (the "Company's By-Laws"), which will become effective upon consummation of the Offerings, and of the Delaware General Corporation Law

15

(the "DGCL") may have the effect of delaying, deterring or preventing a change in control of the Company not approved by the Company Board. These provisions include (i) a classified Board, (ii) a requirement that no action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting, (iii) a requirement that special meetings of stockholders be called only by the Chairman of the Board or the Company Board,
(iv) advance notice requirements for stockholder proposals and nominations, (v) limitations on the ability of stockholders to amend, alter or repeal certain provisions of the Company's Charter and the Company's By-Laws, (vi) authorization for the Company Board to issue without stockholder approval preferred stock with such terms as the Board may determine and (vii) authorization for the Company Board to consider the interests of clients and other customers, creditors, employees and other constituencies of the Company and its subsidiaries and the effect upon communities in which the Company and its subsidiaries do business, in evaluating proposed corporate transactions. With certain exceptions, Section 203 of the DGCL ("Section 203") imposes certain restrictions on mergers and other business combinations between the Company and any holder of 15% or more of the Company's Common Stock (other than the H&F Investors and their permitted transferees, who have been exempted from these restrictions by the Company Board). In addition, the Company has adopted a stockholder rights plan that will become effective upon consummation of the Offerings (the "Rights Plan") under which the H&F Investors and their permitted transferees will have the benefit of certain exceptions. The Rights Plan is designed to protect stockholders in the event of an unsolicited offer and other takeover tactics which, in the opinion of the Company Board, could impair the Company's ability to represent stockholder interests. The provisions of the Rights Plan may render an unsolicited takeover of the Company more difficult or less likely to occur or might prevent such a takeover.

These provisions of the Company's Charter and the Company's By-Laws, the DGCL and the Rights Plan, together with the control of 53.8% of the outstanding shares of Common Stock by the Management Voting Trust upon consummation of the Offerings (assuming the exercise of all currently vested options) could discourage potential acquisition proposals and could delay or prevent a change in control of the Company, although such proposals, if made, might be considered desirable by a majority of the Company's stockholders. Such provisions could also make it more difficult for third parties to remove and replace the members of the Company Board. Moreover, these provisions could diminish the opportunities for a stockholder to participate in certain tender offers, including tender offers at prices above the then-current market price of the Company's Common Stock, and may also inhibit increases in the market price of the Company's Common Stock that could result from takeover attempts or speculation. In addition, certain options issued to employees of the Company contain change in control provisions that could have the effect of delaying, deterring or preventing a change in control of the Company. See "Management -- Executive Compensation -- 1997 ICP -- Acceleration of Vesting" and "Description of Capital Stock -- Anti-Takeover Effects of Certain Provisions of the Charter, the By-Laws, the Rights Plan and Delaware Law."

16

THE COMPANY

GENERAL

Since its founding 75 years ago by John Orr Young, an account executive, and Raymond Rubicam, a copywriter, Y&R has evolved from a single New York-based advertising agency to a diversified global marketing and communications organization. In its early years, the Company grew its core advertising business by either opening additional offices in the United States and abroad, or by acquiring established local agencies and fully integrating them into the Company under the Y&R name. By the early 1970s, the Company had established a network of approximately 40 Young & Rubicam Advertising agency offices in the United States and 22 other countries.

In 1973, Y&R began to expand its capabilities beyond traditional general advertising by acquiring well-established leaders in other marketing and communications disciplines. Y&R began this diversification with its acquisitions of Wunderman Ricotta & Kline (the predecessor to Wunderman Worldwide), a direct marketing firm, and Sudler & Hennessey, a healthcare communications specialist. In 1976, the Company added the sales promotion firm, Cato Johnson Associates, which was merged with Wunderman Worldwide in 1992 to form Wunderman Cato Johnson. Y&R continued implementing its diversification strategy with its acquisitions of Burson-Marsteller, a public relations company, in 1979 and Landor Associates, a branding consultation and strategic design firm, in 1989. Y&R has been successful in integrating the diverse capabilities of these companies, which the Company believes enables it to better serve clients' marketing and communications needs on a global basis.

The Company's principal executive office is located at 285 Madison Avenue, New York, New York 10017, and its telephone number is (212) 210-3000.

THE RECAPITALIZATION

From the time of its founding until 1996, Y&R was wholly owned by its employees. In December 1996, Y&R consummated the Recapitalization. The purpose of the Recapitalization was to realign the ownership of the Company with those senior employees who would most actively lead Y&R's future growth, to establish an equity-based incentive program to motivate current and future employees and to enhance its ability to make strategic investments in people, services and products. In connection with the Recapitalization, predecessor companies of Y&R acquired for cash, canceled or exchanged all then outstanding equity and equity-based compensation units, including shares of common stock, limited partnership interests, options to acquire shares of common stock and limited partnership interests, and growth participation units (collectively, the "Predecessor Units"). In place of the Predecessor Units, the Company issued new shares of Common Stock and granted certain restricted stock awards and options to acquire shares of Common Stock to approximately 325 employees. In addition, at the time of consummation of the Recapitalization, an aggregate of $242 million was contributed to the Company in exchange for an aggregate of 31,566,345 shares of Common Stock and options to acquire an additional aggregate of 2,598,105 shares of Common Stock. The Recapitalization Investors contributed an aggregate of $231.7 million in exchange for 30,228,195 shares of Common Stock and options to purchase an additional 2,598,105 shares of Common Stock and are selling an aggregate of 7,831,473 shares of Common Stock in the Offerings, and 55 Management Investors contributed an aggregate of $10.3 million in exchange for 1,338,150 shares of Common Stock and no options, of which 223,065 shares of Common Stock were received by four Management Investors who are selling an aggregate of 443,205 shares of Common Stock in the Offerings. See "Principal and Selling Stockholders."

Upon consummation of the Recapitalization, the H&F Investors were granted registration rights as well as the right to nominate and have elected three members of the Company Board and to designate jointly with the Management Voting Trust two additional members of the Company Board. See "Risk Factors -- Control of Y&R," "Management -- Executive Compensation" and "-- Officers and Directors," "Shares Eligible for Future Sale" and "Description of Capital Stock -- The Management Voting Trust Agreement."

In connection with the Recapitalization, the Company entered into the $700 million Credit Facilities, a portion of the proceeds of which were used to prepay the Company's indebtedness under its previous credit facilities. Recapitalization-related borrowings under the Credit Facilities totalled $361.7 million, $200.0

17

million of which was borrowed on December 12, 1996 and $161.7 million of which was borrowed on March 18, 1997.

At the time of the Recapitalization, Y&R adopted certain incentive compensation plans, including the Young & Rubicam Holdings Inc. Management Stock Option Plan (the "Management Stock Option Plan") and the Young & Rubicam Holdings Inc. Restricted Stock Plan (the "Restricted Stock Plan"), designed to attract, retain and motivate key employees. The Management Stock Option Plan provides for the grant of options to purchase Common Stock. At the time of the Recapitalization, non-qualified options to purchase 16,823,565 shares of Common Stock of Y&R were granted to certain members of Y&R management in consideration of their surrender for cancellation of all or a portion of their outstanding options to purchase equity units of predecessor companies of Y&R (the "Rollover Options"). The Rollover Options were immediately vested and exercisable upon grant. Each Rollover Option has an exercise price of $1.92 per share. In addition to the Rollover Options, immediately following the closing of the Recapitalization, non-qualified options with exercise prices of $7.67 per share with respect to 5,200,590 shares of Common Stock were granted to certain key employees of Y&R (the "Closing Options"). Each Closing Option became exercisable immediately upon grant with respect to 40% of the shares subject thereto and will become exercisable (i) on the third anniversary of its grant date with respect to 30% of such shares and (ii) on the fifth anniversary of its grant date with respect to the remaining 30% of such shares. See "Management -- Executive Compensation -- Management Stock Option Plan."

Pursuant to the Restricted Stock Plan, Y&R issued a total of 11,086,950 shares of Common Stock to a trust (the "Restricted Stock Trust") established by Y&R for allocation to key employees of Y&R. Of such amount, as of the date of consummation of the Offerings, 9,231,105 shares of Common Stock will have been allocated to employees pursuant to the Restricted Stock Plan ("Restricted Stock"). The Restricted Stock Plan provides that such shares will vest upon the six-month anniversary of the consummation of the Offerings, subject to the power of the Board of Directors to accelerate the vesting and distribution date to the consummation of the Offerings. The Board of Directors has so accelerated the vesting and distribution date, subject to the ability of the holders to sell such number of shares of Restricted Stock in the Offerings as is necessary to fund the personal tax liabilities associated with the vesting and distribution thereof. In addition, in the event the Restricted Stock does not vest upon consummation of the Offerings, the Restricted Stock will vest upon the earliest to occur of the six-month anniversary of the consummation of the Offerings, certain change of control events and certain other events described in the Restricted Stock Plan, provided that in all cases each such employee is then still employed by Y&R. Certain of such shares of Restricted Stock will be placed in a deferral trust upon vesting thereof and the holders will have such shares distributed to them from such deferral trust at specified times in the future. See "Management -- Executive Compensation."

All shares of Common Stock (including all shares of Common Stock issued upon the exercise of options) held by current or former members of Y&R management and all shares of Common Stock held in the Restricted Stock Trust are required to be deposited in the Management Voting Trust, the Voting Trustees of which have the power to vote all shares of Common Stock held by it. The voting rights of the Management Voting Trust are exercised by eight members of Y&R senior management in their capacities as Voting Trustees. The Management Voting Trust will remain in existence following consummation of the Offerings but will terminate no later than 24 months after the consummation of the Offerings. See "Shares Eligible for Future Sale" and "Description of Capital Stock -- The Management Voting Trust Agreement."

18

USE OF PROCEEDS

The net proceeds to the Company from the Offerings, assuming an initial public offering price of $22.50 per share, the midpoint of the range set forth on the cover page of this Prospectus (after deducting applicable underwriting discounts and commissions and estimated offering expenses payable by the Company), are estimated to be approximately $139.5 million. The Company intends to use such net proceeds to repay a portion of the borrowings outstanding under the term loan portion of the Credit Facilities. The Company will not receive any of the proceeds from the sale of shares of Common Stock by the Selling Stockholders. As of December 31, 1997, there was an aggregate of $330.6 million outstanding under the term loan, which bore interest at a rate of 6.875% per annum. The term loan portion of the Credit Facilities is repayable in quarterly installments which commenced on September 30, 1997 with final maturity on March 31, 2003. The proceeds of the term loan portion of the Credit Facilities were received by the Company in December 1996 and March 1997 and were used by the Company primarily to prepay indebtedness, to repurchase equity units from certain employees and to repay certain expenses in connection with the Recapitalization.

DIVIDEND POLICY

Since the consummation of the Recapitalization, the Company has not declared or paid any cash or other dividends on its Common Stock (other than the Stock Split). The Company expects to commence the declaration and payment of a regular quarterly cash dividend in the last quarter of 1998. However, any determination to pay dividends will be at the discretion of the Company Board and will depend upon, among other factors, the Company's results of operations, financial condition, capital requirements and contractual restrictions pursuant to the Company's Credit Facilities. The covenants under the Company's existing Credit Facilities currently prohibit Y&R from declaring and paying cash dividends; any cash dividend is therefore contingent upon a renegotiation or refinancing of the existing Credit Facilities in order to remove such restriction. The Company has received a commitment letter in respect of the New Facility, which the Company expects to enter into effective upon the consummation of the Offerings. The New Facility, which would replace the Credit Facilities, is expected to contain certain financial and operating restrictions and covenant requirements and to permit the payment of cash dividends except in the event of a continuing default under the credit agreement. The New Facility is subject to execution of definitive documentation and a number of other closing conditions, and there can be no assurance that the Company will be successful in consummating such Facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources."

19

CAPITALIZATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following table sets forth the Company's consolidated cash and cash equivalents, current portion of installment notes and loans payable and capitalization as of December 31, 1997 on (i) an actual basis; (ii) a pro forma basis giving effect to the termination of the redemption feature and subsequent reclassification of the Mandatorily Redeemable Equity Securities to stockholders' deficit upon consummation of the Offerings; and (iii) a pro forma as adjusted basis giving further effect to the sale of 6,666,667 shares of Common Stock offered by the Company hereby and the application of the estimated net proceeds therefrom as described in "Use of Proceeds" and the non-recurring, non-cash, after-tax compensation charge resulting from the vesting of Restricted Stock.

                                                                    AS OF DECEMBER 31, 1997
                                                              -----------------------------------
                                                                             PRO       PRO FORMA
                                                               ACTUAL       FORMA     AS ADJUSTED
Cash and cash equivalents...................................  $ 160,263   $ 160,263    $ 160,263
                                                              =========   =========    =========
Current portion of installment notes and loans payable......     13,996      13,996       13,996
                                                              =========   =========    =========
Long-term debt:
  Installment notes payable.................................      6,503       6,503        6,503
  Loans payable:
     Term loan facility(1)..................................    299,000     299,000      159,500
     Revolving credit facility..............................     31,552      31,552       31,552
                                                              ---------   ---------    ---------
          Total long-term debt..............................    337,055     337,055      197,555
                                                              ---------   ---------    ---------
Mandatorily Redeemable Equity Securities:
  Common Stock, $.01 par value, 250,000,000 shares
     authorized; 50,658,180 shares issued and outstanding
     (actual) and no shares issued and outstanding (pro
     forma and pro forma as adjusted)(2)....................    508,471          --           --
                                                              ---------   ---------    ---------
Stockholders' deficit:
  Cumulative Preferred Stock:
     Money Market Preferred Stock -- variable dividend;
       liquidating value of $7.67 per share; one-tenth of
       one vote per share; 10,000,000 shares authorized; 87
       shares issued and outstanding (actual, pro forma and
       pro forma as adjusted)...............................         --          --           --
     Cumulative Participating Junior Preferred
       Stock -- $            dividend; liquidating value of
       $1.00 per share; 100 votes per share; 2,500,000
       shares authorized (pro forma as adjusted); no shares
       issued and outstanding (pro forma as adjusted)(3)....         --          --           --
  Common Stock, $.01 par value, 250,000,000 shares
     authorized (actual and pro forma); 250,000,000 shares
     authorized (pro forma as adjusted); 11,086,950 shares
     issued and outstanding (actual); 61,745,130 shares
     issued and outstanding (pro forma) and 66,555,952
     shares issued and outstanding (pro forma as
     adjusted)(2)(4)(5).....................................        111         617          665
  Capital surplus(2)(5).....................................     23,613     531,578      741,991
  Accumulated deficit(6)....................................   (522,866)   (522,866)    (645,409)
  Cumulative translation adjustment.........................    (16,577)    (16,577)     (16,577)
  Pension liability adjustment..............................       (706)       (706)        (706)
                                                              ---------   ---------    ---------
  Subtotal..................................................   (516,425)     (7,954)      79,964
Common stock in treasury....................................     (8,550)     (8,550)      (8,550)
Unearned compensation-Restricted Stock(5)...................   (136,739)   (136,739)          --
                                                              ---------   ---------    ---------
          Total stockholders' (deficit) equity..............   (661,714)   (153,243)      71,414
                                                              ---------   ---------    ---------
          Total capitalization..............................  $ 183,812   $ 183,812    $ 268,969
                                                              =========   =========    =========

20


(1) The pro forma as adjusted column reflects the application of $139,500 of estimated net proceeds to the Company from the Offerings to repay a portion of the borrowings outstanding under the term loan portion of the Credit Facilities.

(2) From the date of consummation of the Recapitalization and through the date of consummation of the Offerings, all outstanding shares of Common Stock, exclusive of shares of Common Stock held in the Restricted Stock Trust, are redeemable, subject to certain restrictions, at the option of the stockholder. Accordingly, all such shares of Common Stock have been recorded at their redemption values and classified as Mandatorily Redeemable Equity Securities in the Company's historical balance sheets at December 31, 1996 and 1997, respectively. The pro forma December 31, 1997 balance sheet reflects the reclassification of the $508,471 carrying value of Mandatorily Redeemable Equity Securities to stockholders' deficit in connection with the termination of the redemption feature upon consummation of the Offerings, of which $506 is attributable to the par value of the 50,658,180 common shares and the remaining $507,965 is attributable to capital surplus. See Notes 2, 15 and 16 to the Consolidated Financial Statements.

(3) Reflects the authorization of 2,500,000 shares of Cumulative Participating Junior Preferred Stock which is effective upon the closing of the Offerings. See "Description of Capital Stock -- Rights Plan."

(4) Excludes 31,013,205 shares of Common Stock issuable upon exercise of options outstanding at a weighted average exercise price of $6.84 at December 31, 1997. See "Management -- Executive Compensation."

(5) Pro forma as adjusted common stock and capital surplus reflect an increase of $48 and $210,413, respectively, for the following: (i) a $139,500 increase resulting from the issuance of 6,666,667 newly issued shares of Common Stock in the Offerings (of the $139,500 net increase in stockholders' equity, $67 is attributable to Common Stock for the par value of the 6,666,667 shares issued with the remaining $139,433 increasing capital surplus); (ii) a $207,700 increase resulting from the vesting of the 9,231,105 shares of Restricted Stock (based upon an assumed initial public offering price of $22.50 per share) allocated to employees as of the date of consummation of the Offerings (of the $207,700 aggregate increase to Common Stock and capital surplus, $92 is attributable to Common Stock for the par value of the 9,231,105 shares vested and $207,608 is attributable to capital surplus); and (iii) the elimination of the unearned compensation included as a component of stockholders' equity resulting from recognition of the Restricted Stock compensation charge (discussed in Note (6) below) in connection with the vesting of such awards upon consummation of the Offerings (this charge results in a $111 decrease in Common Stock (par value of the 11,086,950 shares of Common Stock held by the Restricted Stock Trust outstanding at December 31, 1997) and a decrease in capital surplus of $136,628).

(6) Reflects the vesting of the aggregate 9,231,105 shares of Restricted Stock allocated to employees as of the consummation of the Offerings and the resulting non-recurring, non-cash, after-tax compensation charge estimated at $122,543 (at an assumed initial public offering price of $22.50 per share) as an increase in the accumulated deficit herein. The charge to compensation expense will occur upon consummation of the Offerings. See "Management -- Executive Compensation -- The Restricted Stock Plan and Trust Agreement" and Note 15 to the Consolidated Financial Statements.

21

DILUTION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

As of December 31, 1997, after giving effect to the termination of the redemption feature of the Mandatorily Redeemable Equity Securities upon the consummation of the Offerings, the Company had a pro forma deficit in net tangible book value of $269,880, or $4.37 per share of Common Stock based upon 61,745,130 pro forma shares of Common Stock outstanding. The deficit in pro forma net tangible book value per share is determined by dividing the pro forma deficit in net tangible book value of the Company (total tangible assets less total liabilities) on such date by the number of pro forma shares of Common Stock outstanding as of such date. After giving effect to the sale by the Company of the 6,666,667 shares of Common Stock offered hereby and after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company, the Company's pro forma as adjusted deficit in net tangible book value as of December 31, 1997 would have been $45,223 or $.68 per share of Common Stock. This represents an immediate decrease in the deficit in the pro forma net tangible book value of $3.69 per share to existing stockholders and immediate dilution of $23.18 per share to new investors purchasing shares of Common Stock in the Offerings. The following table illustrates dilution to new investors on a per share basis:

Assumed initial public offering price per share.............           $22.50
  Pro forma deficit in net tangible book value per share
     before the Offerings...................................  $4.37
  Decrease in deficit in pro forma net tangible book value
     per share attributable to new investors................  $3.69
                                                              -----
Pro forma as adjusted deficit in net tangible book value per
  share after the Offerings.................................           $  .68
                                                                       ------
Dilution per share to new investors.........................           $23.18
                                                                       ======

The following table sets forth, as of the date of this Prospectus, a comparison of the number of shares of Common Stock owned by the existing stockholders and the new investors, the total consideration paid and the average price per share paid by the Company's existing stockholders and new investors purchasing shares of Common Stock from the Company in the Offerings.

                                            SHARES PURCHASED       TOTAL CONSIDERATION     AVERAGE
                                         ----------------------    -------------------      PRICE
                                           NUMBER       PERCENT     AMOUNT     PERCENT    PER SHARE
Existing stockholders(1)...............   59,561,655       90%     $273,695       65%      $ 4.60
New investors(1).......................    6,666,667       10       150,000       35        22.50
                                         -----------      ---      --------      ---
          Total........................   66,228,322      100%     $423,695      100%
                                         ===========      ===      ========      ===


(1) Sales of Common Stock by the Selling Stockholders in the Offerings will reduce the number of shares of Common Stock held by existing stockholders to 49,628,322, or approximately 75% of the total shares of Common Stock outstanding after the Offerings and will increase the number of shares held by new investors to 16,600,000, or approximately 25% of the total shares of Common Stock outstanding after the Offerings. See "Principal and Selling Stockholders."

The foregoing tables exclude (i) an aggregate of 28,844,880 shares of Common Stock reserved for issuance upon exercise of outstanding options under the Stock Option Plans and (ii) an aggregate of 2,598,105 shares reserved for issuance upon the exercise of outstanding options issued to certain of the Recapitalization Investors. See "Management -- Executive Compensation -- Management Stock Option Plan" and "-- 1997 ICP."

22

SELECTED CONSOLIDATED FINANCIAL DATA

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The following selected consolidated balance sheet data and consolidated statement of operations data as of and for the years 1993 through 1997 have been derived from the Company's audited annual consolidated financial statements, including the consolidated balance sheets at December 31, 1996 and 1997 and the related consolidated statements of operations and of cash flows for the three years ended December 31, 1997 and the notes thereto appearing elsewhere in this Prospectus. The selected consolidated financial data set forth below should be read in conjunction with, and are qualified in their entirety by reference to, the Consolidated Financial Statements and related notes thereto appearing elsewhere in this Prospectus. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."

                                                                     YEARS ENDED DECEMBER 31,
                                                    ----------------------------------------------------------
                                                      1993       1994        1995         1996         1997
STATEMENT OF OPERATIONS DATA:

  Revenues........................................  $905,770   $959,275   $1,085,494   $1,222,139   $1,382,740
  Compensation expense, including employee
    benefits(1)...................................   583,723    594,322      672,026      730,261      836,150
  General and administrative expenses(1)..........   312,083    323,087      356,523      391,617      463,936
  Recapitalization-related charges(2).............        --         --           --      315,397           --
  Other operating (income) charges(2).............   (11,714)     4,507       31,465       17,166       11,925
                                                    --------   --------   ----------   ----------   ----------
    Operating expenses............................   884,092    921,916    1,060,014    1,454,441    1,312,011
                                                    --------   --------   ----------   ----------   ----------
  Income (loss) from operations...................    21,678     37,359       25,480     (232,302)      70,729
  Interest income.................................    10,646     12,100        9,866       10,269        8,454
  Interest expense................................   (17,958)   (23,027)     (27,441)     (28,584)     (42,879)
                                                    --------   --------   ----------   ----------   ----------
  Income (loss) before income taxes...............    14,366     26,432        7,905     (250,617)      36,304
  Income tax provision (benefit)..................     8,583     12,998        9,130      (20,611)      58,290
                                                    --------   --------   ----------   ----------   ----------
                                                       5,783     13,434       (1,225)    (230,006)     (21,986)
  Equity in net income (loss) of unconsolidated
    companies.....................................       102      4,740        5,197       (9,837)         342
  Minority interest in net (income) loss of
    consolidated subsidiaries.....................    (1,271)    (2,742)      (3,152)       1,532       (2,294)
                                                    --------   --------   ----------   ----------   ----------
  Income after taxes and before accounting
    changes.......................................     4,614     15,432          820     (238,311)     (23,938)
  Cumulative effect of accounting changes (net of
    tax benefit of $3,400)........................    (5,100)        --           --           --           --
                                                    --------   --------   ----------   ----------   ----------
  Net (loss) income...............................  $   (486)  $ 15,432   $      820   $ (238,311)  $  (23,938)
                                                    ========   ========   ==========   ==========   ==========
  Basic and diluted loss per common share(3)......                                                  $     (.51)
  Weighted average shares outstanding(3)..........                                                  46,949,355
  Supplemental loss per common share(4)...........                                                  $     (.37)
OTHER OPERATING DATA:
  EBITDA(1)(5)....................................  $ 59,282   $ 77,662   $   72,972   $  147,221   $  139,375
  Net cash provided by operating activities.......    15,426     43,314       79,809      178,064      224,511
  Net cash used in investing activities...........    34,226     49,941       45,821       76,094       67,142
  Net cash (provided by) used in financing
    activities....................................   (41,644)    30,705       50,025       12,614       98,667
  Capital expenditures............................    25,241     33,196       42,096       51,792       51,899
  International revenues as a % of total
    revenues(6)...................................     51.7%      53.6%        54.7%        53.3%        52.2%

                                                                 AS OF DECEMBER 31,
                                    ----------------------------------------------------------------------------
                                                                                         1997          1997
                                      1993        1994         1995         1996        ACTUAL     PRO FORMA(11)
BALANCE SHEET DATA:
  Working capital (deficit)(7)....  $100,519   $   72,651   $   27,827   $ (196,509)  $ (106,169)   $ (106,169)
  Total assets(8).................   998,808    1,118,846    1,226,581    1,598,812    1,528,019     1,528,019
  Total debt(9)...................   197,929      256,032      230,831      267,238      351,051       351,051
  Mandatorily Redeemable Equity
    Securities(10)................        --           --           --      363,264      508,471            --
  Total equity (deficit)..........   123,661       69,982      (55,485)    (480,033)    (661,714)     (153,243)

23


(1) For a discussion of charges included in compensation expense, including employee benefits, and general and administrative expenses, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations."

(2) For a discussion of Recapitalization-related and other operating charges, see Notes 4 and 6 to the Consolidated Financial Statements.

(3) Basic net loss per common share for 1997 was computed by dividing the net loss by the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding excludes 11,086,950 shares of Common Stock held by the Restricted Stock Trust, as such shares vest upon the consummation of an initial public offering, or the six-month anniversary thereof, a condition which was not satisfied at December 31, 1997. Diluted net loss per common share for 1997 was computed in the same manner as basic net loss per common share since the inclusion of potential common shares would be antidilutive.

At December 31, 1997, the Company had outstanding options to purchase 31,013,205 shares of Common Stock with a weighted average exercise price of $6.84 that could potentially dilute basic earnings per share in the future. These options were excluded from the computation of diluted net loss per common share because the effect for 1997 would be antidilutive. In addition, at December 31, 1997, a maximum of 11,086,950 shares of Common Stock held by the Restricted Stock Trust would vest and be dilutive as a result of the consummation of the Offerings. See "Management -- Executive Compensation -- The Restricted Stock Plan and Trust Agreement" and Notes 3, 15 and 21 to the Consolidated Financial Statements.

Earnings per share for 1995 and 1996 cannot be computed because the Company's capital structure prior to the Recapitalization consisted of both common shares and limited partnership units in predecessor entities. See Note 4 to the Consolidated Financial Statements.

(4) The supplemental loss per common share was computed by dividing the supplemental loss of $19,587 by the supplemental shares of 53,616,022. The supplemental loss of $19,587 has been computed by adjusting the historical net loss for 1997 to reflect the following: (i) additional interest cost, net of the related tax benefit of $1,410 (computed utilizing an interest rate and statutory tax rate of 7.0% and 41.0% respectively), associated with the $161,700 of Recapitalization-related borrowings under the Company's Credit Facilities, which occurred on March 18, 1997, as if such borrowings had occurred as of January 1, 1997 and (ii) the reduction in interest cost, net of tax, of $5,761 (computed utilizing an interest rate and statutory tax rate of 7.0% and 41.0% respectively) associated with $139,500 of the net proceeds of the Offerings to the Company, which is expected to be utilized to repay a portion of the outstanding borrowings under the term loan portion of the Company's Credit Facilities, as if the debt repayment had occurred as of January 1, 1997.

The supplemental shares of 53,616,022 were computed by adding the 6,666,667 shares of Common Stock offered by the Company to the 46,949,355 weighted average shares outstanding as of December 31, 1997. See "Capitalization."

Based upon an assumed initial public offering price of $22.50, the consummation of the Offerings will give rise to a non-recurring, non-cash, pre-tax charge of $207,700 ($122,543 net of the related tax benefit assuming a statutory tax rate of 41.0%) arising from the vesting of the aggregate of 9,231,105 shares of Restricted Stock allocated to employees as of the date of the consummation of the Offerings. The determination of supplemental loss for 1997 does not give effect to this charge due to its non-recurring nature. See "Management -- Executive Compensation -- The Restricted Stock Plan and Trust Agreement" and Note 15 to the Consolidated Financial Statements.

(5) EBITDA is defined as income (loss) from operations, before depreciation and amortization, other non-cash charges and Recapitalization-related charges. EBITDA is presented because it is a widely accepted financial indicator and is generally consistent with the definition used for covenant purposes contained in the Company's existing credit facilities; however, EBITDA may not be comparable to other registrants' calculation of EBITDA or similarly titled items. EBITDA should not be considered as an alternative to net income (loss) as a measure of operating results in accordance with generally accepted accounting principles or as an alternative to cash flows as a measure of liquidity. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Results of Operations." EBITDA for 1996 and 1997 are before $11,096 and $11,925, respectively, of non-cash charges primarily related to impairment write-downs which are included in other operating charges. See Notes 4 and 6 to the Consolidated Financial Statements.

(6) International revenues include all revenues earned outside the United States.

(7) Working capital deficit as of December 31, 1996 includes approximately $161,700 of accruals related to the Recapitalization which were paid in 1997 through long-term borrowings. Working capital deficit as of December 31, 1997 is the result of improved collection of accounts receivable and use of cash to repay short-term borrowings under the Company's Credit Facilities during 1997. See the Consolidated Statements of Cash Flows and Note 4 to the Consolidated Financial Statements.

(8) Total assets as of December 31, 1997 (actual and pro forma) include net deferred tax assets of $157,024, $75,135 of which relate to NOL carryforwards of approximately $140,409 for U.S. tax purposes and approximately $69,231 for foreign tax purposes. See Note 9 to the Consolidated Financial Statements.

(9) Total debt includes current and non-current loans and installment notes.
See Notes 13 and 14 to the Consolidated Financial Statements.

(10) From the date of consummation of the Recapitalization and through the date of consummation of the Offerings, all outstanding shares of Common Stock, exclusive of shares of Common Stock held in the Restricted Stock Trust, are redeemable, subject to certain restrictions, at the option of the stockholder. Accordingly, all such shares of Common Stock have been recorded at their redemption values and classified as Mandatorily Redeemable Equity Securities in the Company's historical balance sheets at December 31, 1996 and 1997, respectively. See Notes 2, 15 and 16 to the Consolidated Financial Statements.

(11) The pro forma December 31, 1997 balance sheet reflects the termination of the redemption feature and subsequent reclassification of Mandatorily Redeemable Equity Securities, as discussed in Note (10) above, to stockholders' equity. See "Capitalization" and Notes 2, 15 and 16 to the Consolidated Financial Statements.

24

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated Financial Statements.

OVERVIEW

Y&R is the fifth largest marketing and communications organization in the world, with integrated services in advertising, direct marketing and sales promotion, perception management and public relations, branding consultation and design services, and healthcare communications. Y&R's revenues were approximately $1.4 billion in 1997, having grown at a compound annual rate of 12.9% from 1995 to 1997.

Y&R's revenues consist principally of commissions and fees received by the Company from its clients. Commissions are derived using a negotiated percentage of an advertiser's media and production spending through Y&R. Fees are based on hours spent and costs incurred by agency staff plus a negotiated mark-up. Commission revenue is recognized primarily when media placements appear on television, on radio or in print, and when labor and production costs are billed. Fee revenue is recognized when services are rendered.

Y&R has also implemented certain incentive-oriented compensation arrangements with several clients to further strengthen client relationships and reward Y&R for superior performance. These incentive arrangements create a range of compensation which could result in either higher or lower revenues and operating margins than a more traditional commission or fee arrangement. Incentive levels are determined with reference to agreed upon operating, performance and other benchmarks, with respect to both clients' businesses as well as Y&R's performance. Although incentive arrangements did not materially impact Y&R's revenues in 1997, management believes that additional clients may request that Y&R institute incentive compensation arrangements in the future.

Y&R's revenues are diversified across geographic regions, various sectors of the economy and among many clients. In 1997, approximately 47.8% of Y&R's revenues were derived from its U.S. operations, with approximately 34.2% coming from its European operations and the rest divided among its operations in Latin America, Australia/New Zealand, Asia, Canada and Africa. For the years 1995, 1996 and 1997, the Company's revenue from any one country, other than the United States, has not exceeded 10% of the Company's consolidated revenues. The United Kingdom, Germany, Brazil, France, Australia, the Netherlands, Italy, Canada and Switzerland represent the Company's largest sources of revenues by country (other than the United States).Y&R represents clients in various industries, including automotive, consumer packaged goods, financial services, food and beverage, government services and telecommunications. Y&R's revenues are diversified across its approximately 5,500 client accounts, with the largest client, Ford Motor Company, and the top 20 clients accounting for approximately 10.0% and 40.5%, respectively, of revenues in 1997.

Y&R has two principal categories of operating expenses: compensation expense and general and administrative expenses. Y&R's largest expense is compensation, which includes the salaries, bonuses and benefits of all employees, as well as fees paid to freelance contractors. General and administrative expenses principally consist of facilities' costs, depreciation, amortization, new business costs, travel expenses and professional fees.

From the time of its founding until 1996, Y&R was wholly owned by its employees. As further described in Note 4 to the Consolidated Financial Statements, in December 1996, Y&R consummated the Recapitalization, which resulted in the recording of a pre-tax charge of $315.4 million in 1996. In connection with the Recapitalization, the Company issued Restricted Stock. Based upon an assumed initial offering price of $22.50, the consummation of the Offerings will give rise to a non-recurring, non-cash, pre-tax charge of $207.7 million ($122.5 million net of the related tax benefit assuming a statutory tax rate of 41.0%) from the vesting of an aggregate of 9,231,105 shares of Restricted Stock allocated to employees as of the date of consummation of the Offerings.

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RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items derived from the Company's consolidated statements of operations and the percentages of revenue represented by such items. Totals may not add due to rounding.

                                                                  YEARS ENDED DECEMBER 31,
                                          -------------------------------------------------------------------------
                                                       % OF                      % OF                      % OF
                                           1995      REVENUES        1996      REVENUES        1997      REVENUES
                                                                    (DOLLARS IN MILLIONS)
Revenues................................  $1,085.5       100.0%     $1,222.1       100.0%     $1,382.7       100.0%
Compensation expense, including employee
  benefits..............................    672.0         61.9%       730.3         59.8%       836.2         60.5%
General and administrative expenses.....    356.5         32.8%       391.6         32.0%       463.9         33.6%
Recapitalization-related charges........       --          0.0%       315.4         25.8%          --          0.0%
Other operating charges.................     31.5          2.9%        17.2          1.4%        11.9          0.9%
                                          -------    ---------      -------    ---------      -------    ---------
Income (loss) from operations...........     25.5          2.3%      (232.3)       (19.0%)       70.7          5.1%
Net income (loss).......................  $   0.8          0.1%     ($238.3)       (19.5%)    ($ 23.9)        (1.7%)
                                          =======    =========      =======    =========      =======    =========
EBITDA..................................  $  73.0          6.7%     $ 147.2         12.0%     $ 139.4         10.1%

1997 COMPARED TO 1996

Consolidated worldwide revenues for 1997 increased by 13.1% to $1,382.7 million from $1,222.1 million in 1996. Consolidated U.S. revenues for 1997 increased by 15.8% to $661.3 million from $571.1 million in 1996. Consolidated international revenues for 1997 increased by 10.8% to $721.4 million from $651.0 million in 1996. Of the worldwide revenue increase, 13.6% was due to organic growth (including net new business gains and higher net revenues from existing clients) and 3.0% was due to the acquisition of majority interests in investments previously accounted for under the equity method. Such increases were partially offset by a 3.5% decline related to a strengthening (on average) of the U.S. dollar against foreign currencies. New business was generated from new client accounts such as Campbell's Soup, Citibank, Merck and United Airlines.

Compensation expense for 1997 increased by 14.5% to $836.2 million from $730.3 million in 1996. Compensation expense for 1997 increased as a percentage of revenues to 60.5% from 59.8% in 1996. The growth in compensation expense was generally in line with revenue growth and also included a $12.3 million charge primarily for deferred compensation awards granted to senior executives in 1997.

General and administrative expenses for 1997 increased by 18.5% to $463.9 million from $391.6 million in 1996. General and administrative expenses increased as a percentage of revenues to 33.6% in 1997 from 32.0% in 1996. The higher rate of growth in general and administrative expenses compared to revenues was primarily attributable to a $25.5 million write-off of accounts receivable, costs billable to clients and other capitalized costs recorded in 1997 with respect to the operations of Burson-Marsteller in Europe and Asia. The write-offs in Europe were primarily related to Burson-Marsteller's implementation of a new management information system in 1997 which resulted in delayed and inaccurate billing of certain clients and necessitated the creation of additional reserves against accounts receivable and costs billable to clients. The write-offs in Asia were attributable to the Company's evaluation of Burson-Marsteller's recent operating performance in Asia and the determination that Burson-Marsteller was unlikely to collect certain accounts receivable and costs billable to clients. As a result of its analysis of the circumstances which led to these write-offs, the Company has made management changes at Burson-Marsteller in Europe and Asia and implemented additional financial control and reporting requirements for these operations, including strengthening controls and procedures regarding regional billing and collection practices.

In 1997, the Company had income from operations of $70.7 million compared to a loss from operations of $232.3 million in 1996, primarily due to the Recapitalization-related charges of $315.4 million. Income from operations in 1997 included $47.6 million of depreciation expense, $9.1 million of goodwill amortization and $11.9 million of other operating charges for asset impairment write-downs principally related to certain

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operations in the United States, Africa, Latin America and Europe. As a result, EBITDA for 1997 was $139.4 million.

Net interest expense (interest expense net of interest income) increased by $16.1 million in 1997 compared to 1996. The increase was primarily due to higher average borrowing levels in 1997 as a result of the Recapitalization in December 1996. The net proceeds to the Company from the Offerings are expected to be used to repay a portion of the borrowings under the term loan portion of the Credit Facilities. Therefore, the Company expects to have lower average borrowing levels in 1998.

The effective income tax rate for 1997 was 160.6%. The primary difference between the U.S. statutory tax rate and Y&R's effective tax rate in 1997 resulted from incremental foreign taxes arising from losses outside the United States which provided little or no tax benefit. The effective income tax rate for 1996 was a benefit of 8.2%. This reflects the tax benefit from the Recapitalization-related charges partially offset by foreign income taxed at rates greater than the U.S. statutory rate. See Note 9 to the Consolidated Financial Statements.

Net income of unconsolidated companies was $0.3 million in 1997 compared to a loss of $9.8 million in 1996. A $9.3 million charge to write down an Australian equity investment was recorded in 1996.

Minority interest in net loss of consolidated subsidiaries increased $3.8 million in 1997 compared to 1996, primarily reflecting the minority interest share of charges for asset impairment write-downs relating to an Italian operation in 1996.

Net loss for 1997 was $23.9 million compared to a net loss of $238.3 million in 1996, primarily as a result of charges recorded in connection with the Recapitalization.

1996 COMPARED TO 1995

Consolidated worldwide revenues for 1996 increased by 12.6% to $1,222.1 million from $1,085.5 million in 1995. Consolidated U.S. revenues for 1996 increased by 16.0% to $571.1 million from $492.3 million in 1995. Consolidated international revenues for 1996 increased by 9.7% to $651.0 million from $593.2 million in 1995. Of the worldwide revenue increase, 12.9% was attributable to organic growth (including net new business gains and higher net revenues from existing clients) and 0.7% was due to businesses acquired. Such increases were partially offset by a 1.0% decline related to a strengthening (on average) of the U.S. dollar against foreign currencies. New business was generated from new client accounts such as Blockbuster Video, Equal, Ericsson, H&R Block and Novell.

Compensation expense for 1996 increased by 8.7% to $730.3 million from $672.0 million in 1995. Compensation expense decreased as a percentage of revenues to 59.8% in 1996 from 61.9% in 1995. Such decrease primarily reflects productivity improvements resulting from selected staff reductions in connection with a productivity improvement plan implemented by the Company at the end of 1995.

General and administrative expenses for 1996 increased by 9.8% to $391.6 million from $356.5 million in 1995. General and administrative expenses decreased as a percentage of revenues to 32.0% in 1996 from 32.8% in 1995, primarily due to improved cost controls.

Recapitalization-related expenses of $315.4 million were incurred in 1996, primarily related to the cancellation of the Company's former equity-based compensation and stock option plans. See Note 4 to the Consolidated Financial Statements.

In 1996, the Company recorded a $17.2 million charge for asset impairment write-downs for certain European and Latin American operations. In 1995, the Company recorded a restructuring charge of $24.4 million in connection with a productivity improvement plan and charges of $7.1 million, primarily to dispose of certain non-strategic European agencies.

In 1996, the Company had a loss from operations of $232.3 million compared to income from operations of $25.5 million in 1995. The loss from operations of $232.3 million in 1996 included $42.0 million of depreciation expense, $11.0 million of goodwill amortization, $315.4 million of Recapitalization-related

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charges and $11.1 million of non-cash, non-recurring operating charges principally for asset impairment write-downs for certain operations in Europe and Latin America. As a result, EBITDA for 1996 was $147.2 million.

Net interest expense (interest expense net of interest income) increased by $0.7 million in 1996 compared to 1995. The increase was primarily due to $2.9 million in prepayment penalties relating to the repayment, in connection with the Recapitalization, of $100 million of 7.01% senior notes and $40 million of 8.75% senior notes. Excluding these prepayment penalties, net interest expense in 1996 decreased by $2.2 million versus 1995, resulting from lower average interest rates combined with lower average borrowing levels in 1996. See Note 4 to the Consolidated Financial Statements.

The effective income tax rate for 1996 was a benefit of 8.2%. This reflects the tax benefit for the Recapitalization-related charges partially offset by foreign income taxed at rates greater than the U.S. statutory rate. The effective income tax rate for 1995 was 115.5%. The primary difference between the statutory tax rate and Y&R's effective tax rate in 1995 resulted from foreign income taxed at rates greater than the U.S. statutory rate. See Note 9 to the Consolidated Financial Statements.

Net loss of unconsolidated companies was $9.8 million in 1996 compared to income of $5.2 million in 1995. A $9.3 million charge to write down an Australian equity investment as well as lower earnings reported by the Company's joint ventures with Dentsu, Inc. contributed to the net loss in 1996.

Minority interest in net loss of consolidated subsidiaries decreased $4.7 million in 1996 compared to 1995, reflecting the minority interest share of charges for asset impairment write-downs relating to an Italian operation in 1996.

Net loss for 1996 was $238.3 million compared to net income of $0.8 million in 1995, primarily as a result of charges recorded in connection with the Recapitalization.

LIQUIDITY AND CAPITAL RESOURCES

The Company historically has financed its working capital, capital expenditures, acquisitions and equity repurchases from cash generated from operations and third party borrowings.

Cash and cash equivalents at December 31, 1997 increased by 45.5% to $160.3 million from $110.2 million at December 31, 1996. For 1997, the Company generated operating cash flows of $224.5 million which represented a 26.1% increase in operating cash flows versus 1996. The Company achieved an improvement in net cash flow from operating activities due, in part, to increased focus on cash flow management, including improvements in the timing of billings and the relationship between the collection of accounts receivable and the payment of obligations to media and other suppliers. Operating cash flows and third-party borrowings were used for capital expenditures, acquisition requirements and equity repurchases.

Investing activities in 1997 included $51.9 million for capital expenditures and $11.3 million for acquisitions. The majority of capital expenditures were for technology-related purchases, while the remaining expenditures were for leasehold improvements, furniture and equipment. The $11.3 million for acquisitions primarily consisted of increases in investments in equity affiliates in the United States, Europe, Latin America and Australia/New Zealand. Capital expenditures are estimated to be approximately $72.5 million for 1998 primarily for real estate and information technology, with the increase over 1997 primarily related to leasehold improvements in London and New York.

In December 1996, Y&R consummated the Recapitalization. Pursuant to the Recapitalization, all of the Company's outstanding equity and equity-related units and options to purchase such units were either acquired for cash consideration or cancelled and exchanged for new equity interests or options to purchase new equity interests. The Recapitalization was financed by $242 million contributed by the Recapitalization Investors and by borrowings under the Credit Facilities. The Credit Facilities consist of a six and one-half year $400 million term loan and a six and one-half year $300 million revolving credit facility. The Company's obligations under the Credit Facilities are secured by a security interest in certain domestic assets, including its headquarters building in New York, all of the capital stock of the direct and indirect domestic subsidiaries of the Company and 66.7% of the capital stock of the Company's first-tier non-U.S. subsidiaries. As a result of

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the timing of Recapitalization-related payments, net cash used in financing activities increased from $12.6 million in 1996 to $98.7 million in 1997.

At December 31, 1997, the Company had $330.6 million in outstanding indebtedness under the Credit Facilities. The Company expects to fund its payments of principal and interest under the Credit Facilities with internally generated funds and from various external sources including additional financings and the sale of Common Stock by the Company in the Offerings.

At December 31, 1997, the Company recorded a net deferred tax asset of $157.0 million, $75.1 million of which related to net operating loss ("NOL") carryforwards of approximately $140.4 million for U.S. tax purposes which expire in the year 2012 and approximately $69.2 million of NOL carryforwards for foreign tax purposes with carryforward periods ranging from one year to an indefinite time. The available net deferred tax assets principally resulted from compensation payments made in connection with the Recapitalization. Based upon an assumed initial public offering price of $22.50, the consummation of the Offerings will give rise to a non-recurring, non-cash, pre-tax charge of $207.7 million, which will generate additional tax benefits to the Company estimated at $85.2 million.

As required by the Credit Facilities, the Company has entered into interest rate exchange agreements with off-balance sheet risk in order to reduce its exposure to changes in interest rates on its variable rate long-term debt. As of December 31, 1997, the Company had obtained interest rate protection agreements with respect to $275.0 million of indebtedness, which effectively changed the Company's interest rate under the Credit Facilities to fixed rate borrowings. The interest rate protection agreements mature at various times through 2001.

The Company's Consolidated Financial Statements are denominated in U.S. dollars. In 1997, Y&R derived approximately 52.2% of its revenues from operations outside of the United States. Currency fluctuations may give rise to translation gains or losses when financial statements of foreign operating units are translated into U.S. dollars. Significant strengthening of the U.S. dollar against other major foreign currencies could have a material adverse effect on Y&R's results of operations. Most of the Company's revenues are billed in the same currency as the costs incurred to support the revenues, thereby reducing exposure to currency fluctuations. The Company typically does not hedge foreign currency profits into U.S. dollars, believing that over time the costs of a hedging program would outweigh any benefit of greater predictability in the Company's U.S. dollar-denominated profits. However, the Company selectively hedges some positions where management believes it is economically beneficial to do so, and bases its foreign subsidiary capitalization, debt and dividend policies on minimizing currency risk. The Company also seeks, through pricing and other means, to anticipate and avoid economic currency losses.

Management believes cash flows from operations coupled with availability under the New Facility are adequate to support its short-term cash requirements for capital expenditures, repayment of debt and maintenance of working capital. The Company anticipates that future cash flows from operations plus funds from various external sources including the New Facility and additional financings will be adequate to support the long-term cash requirements as presently contemplated.

The Company expects to prepay certain non-negotiable subordinated payment obligations of approximately $15.2 million on June 30, 1998 using available cash or borrowings under the New Facility. The non-negotiable subordinated payment obligations were incurred by the Company in connection with the termination of employment of certain former employee stockholders. Such payment obligations are repayable at the Company's election in four annual installments and bear interest at a rate equal to the applicable United States federal rate in effect under Section 1274(d) of the Internal Revenue Code of 1986, as amended.

The Company expects to commence the declaration and payment of a regular quarterly cash dividend in the last quarter of 1998. However, any determination to pay dividends will be at the discretion of the Company Board and will depend upon, among other factors, the Company's results of operations, financial condition, capital requirements and contractual restrictions pursuant to the Company's Credit Facilities. The covenants under the Company's existing Credit Facilities currently prohibit Y&R from declaring and paying cash dividends; any cash dividend is therefore contingent upon a renegotiation or refinancing of the existing Credit

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Facilities in order to remove such restriction. The Company has received a commitment letter in respect of the New Facility which would replace the Credit Facilities and the Company expects to enter into the New Facility effective upon the consummation of the Offerings. The New Facility is expected to contain certain financial and operating restrictions and covenant requirements, and is expected to permit the payment of cash dividends except in the event of a continuing default under the credit agreement. The New Facility is subject to execution of definitive documentation and a number of other closing conditions, and there can be no assurance that the Company will be successful in consummating the New Facility.

SEASONALITY

The Company's revenues generally reflect the media buying patterns of advertisers and are concentrated in the second and fourth quarters of the year.

YEAR 2000 COMPLIANCE

The Company is conducting a comprehensive review of its computer systems to identify all software applications that could be affected by the inability of many existing computer systems to process time-sensitive data accurately beyond the year 1999 (referred to as the "Year 2000" issue). The Company intends to modify or replace all affected systems for compliance with the Year 2000 issue. The Company is also monitoring the adequacy of the processes and progress of third-party vendors of systems that may be affected by the Year 2000 issue. Y&R is dependent on third-party computer systems and applications, particularly with respect to such critical tasks as accounting, billing and buying, planning and paying for media, as well as on its own computer systems. While Y&R believes its process is designed to be successful, because of the complexity of the Year 2000 issue and the interdependence of organizations using computer systems, it is possible that Y&R's efforts, or those of third parties with whom Y&R interacts, will not be satisfactorily completed in a timely fashion. Failure to satisfactorily address the Year 2000 issue could have a material adverse effect on Y&R's prospects, business, financial condition and results of operations.

The costs of Y&R's Year 2000 project have not been determined but are not expected to have a material adverse effect on the Company. However, there can be no assurance that Y&R will not experience cost overruns or delays in connection with its plan for replacing or modifying systems, which could have a material adverse effect on Y&R's prospects, business, financial condition and results of operations.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1997, Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130") and Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS 131"), were issued. In February 1998, Statement of Financial Accounting Standards No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" -- ("SFAS 132"), was issued. The Company anticipates that the adoption of SFAS 130, SFAS 131 and SFAS 132 will not have a significant effect on its 1998 financial statements. See Note 2 to the Consolidated Financial Statements.

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BUSINESS

GENERAL

Young & Rubicam Inc. is the fifth largest consolidated marketing and communications organization in the world. Since its founding 75 years ago, Y&R has evolved from a single New York-based advertising agency to a diversified global marketing and communications company operating in 128 cities in 76 countries worldwide as of December 31, 1997. The Company operates through such internationally recognized market leaders as Young & Rubicam Advertising (full-service advertising), Wunderman Cato Johnson (direct marketing and sales promotion), Burson-Marsteller (perception management and public relations), Landor Associates (branding consultation and design services) and Sudler & Hennessey (healthcare communications), along with smaller complementary business units, including The Bravo Group (multi-cultural marketing and communications), Brand Dialogue (digital interactive branding and digital commerce), The Chapman Agency (direct marketing) and The Media Edge (media planning, buying and placement services). Y&R's revenues in 1997 were approximately $1.4 billion, having grown at a compound annual rate of 12.9% from 1995 to 1997.

Through multi-disciplinary, client-focused teams, Y&R provides clients with global access to fully integrated marketing and communications solutions. Among Y&R's approximately 5,500 client accounts are a number of large multinational organizations, including AT&T, Citibank, Colgate-Palmolive, Ford and Philip Morris. Y&R has maintained long-standing relationships with many of its clients, with the average length of relationship for the top 20 clients exceeding 20 years.

Y&R's mission is to be its clients' most valued business partner in building, leveraging, protecting and managing clients' brands for both short-term results and long-term growth. Consistent with its mission, Y&R has developed an organizational and management structure designed to meet the diverse needs of its large global clients as well as the more specialized needs of its other clients. The Company's strategy combines this organizational and management structure with the aggressive pursuit of new business opportunities and continued investment in Y&R's business, personnel and superior consumer knowledge. Y&R further seeks to fulfill its mission by providing clients with superior creative services and extensive research capabilities, including access to Y&R's proprietary research tool, BrandAsset Valuator.

In late 1992, Y&R created the Key Corporate Account ("KCA") program to enhance the coordination of services sought by clients from both a global coverage as well as an integrated solutions perspective. KCAs are large global client accounts that, as a group, contribute the greatest share of Y&R's revenues and profits, and are served on a multinational basis by two or more of Y&R's businesses. Y&R currently designates 42 of its client accounts as KCAs. Revenues from the KCAs, as a group, increased by 14.6% in 1997, and accounted for approximately 45.5% and 46.1% of consolidated revenues in 1996 and 1997, respectively. In order to further strengthen client relationships and reward Y&R for meeting or exceeding certain performance targets, Y&R is working with KCAs to adopt incentive compensation arrangements that align Y&R's compensation with its performance and its clients' business performance.

As part of Y&R's client focus, Peter A. Georgescu, Chairman and Chief Executive Officer of Y&R, John P. McGarry, Jr., President of Y&R, Edward H. Vick, Chief Operating Officer of Y&R and Chairman and Chief Executive Officer of Young & Rubicam Advertising, and Thomas D. Bell, Jr., Executive Vice President of Y&R and President and Chief Executive Officer of Burson-Marsteller, all retain ongoing responsibilities for individual KCAs in addition to their managerial roles.

INDUSTRY OVERVIEW

The marketing and communications industry encompasses a wide range of services used to develop and deliver messages to both broad and targeted audiences through multiple communication channels. The industry includes traditional advertising services as well as other marketing and communications services such as direct marketing and sales promotion, public relations, branding consultation and design services, new media marketing and other specialized services.

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Traditional advertising services include the development and planning of marketing and branding campaigns; the creative design and production of advertisements; the planning and buying of time and/or space in a variety of media, including broadcast and cable television, radio, newspapers, general interest/ specialty magazines, billboards and the internet; and the provision of consumer, product and other market research to clients on an ongoing basis. According to industry sources, growth in advertising expenditures has accelerated in recent years following the economic recession in the early 1990s, and worldwide advertising expenditures totaled approximately $387 billion in 1996. Industry sources have predicted that worldwide advertising spending will grow approximately 6% in 1998.

Direct marketing and sales promotion incorporate a broad range of services, including direct mail and direct response television advertising (using toll-free 800 numbers), inbound and outbound telemarketing and database marketing. Sales promotion includes the planning, design and implementation of merchandising and sales promotions as well as design and implementation of targeted interactive campaigns. Industry sources have estimated a growth rate in 1998 of approximately 10% for both direct marketing and sales promotion.

Perception management and public relations address clients' external corporate or brand positioning, public image and relations with key external constituencies. Functions provided by public relations firms include corporate communications, public affairs, lobbying, crisis management, issue advertising and internal, consumer grassroots communications.

Branding consultation and design services encompass a range of services to create, build and revitalize clients' brands. Among these services are corporate identity, package design, retail design and branded environments, verbal branding and nomenclature systems, corporate literature and interactive branding.

New media marketing services include interactive marketing campaigns and strategic consulting services, the design of internet websites, banners and home pages, the development of corporate intranets and digital commerce applications.

INDUSTRY TRENDS

Several significant trends are changing the dynamics of the marketing and communications industries, including the following:

GROWTH IN UNITED STATES MARKETING AND COMMUNICATIONS MARKETS. According to industry sources, advertising expenditures in the United States have continued to grow, increasing from approximately $140 billion in 1993 to approximately $175 billion in 1996. In industries such as telecommunications, where regulatory developments have encouraged increased competition among industry participants, a growing number of companies have sought to establish and enhance their brand images through comprehensive marketing and communications programs. In the healthcare industry, recent regulatory changes that eased restrictions on direct-to-consumer communications by pharmaceutical companies have also resulted in significant additional marketing and communications expenditures.

GROWTH OF INTERNATIONAL MARKETING AND COMMUNICATIONS MARKETS. The globalization of markets and the deregulation of certain sectors of international markets have led to growth in demand for marketing and communications services by large corporate clients. An increasing number of companies are expanding globally and, where appropriate, are seeking consistent brand images and market positions for their products throughout the world. At the same time, however, companies continue to rely on their marketing and communications advisors to tailor their regional and local marketing approach to the demands, tastes and desires of the local marketplace. As international markets have expanded, particularly the markets in the Asia/Pacific and Latin American regions, non-U.S. advertising expenditures have grown more rapidly than U.S. expenditures. According to industry sources, non-U.S. advertising expenditures have increased from approximately 44% of worldwide expenditures in 1986 to approximately 55% in 1996.

INVESTMENT IN BRAND DEVELOPMENT. In the 1980s, many advertisers focused their marketing campaigns on promotional advertising that emphasized price competition, often reducing brand loyalty. Over the last several years, however, advertisers have focused on the image or brand identity of their organizations, products and services in an effort to differentiate themselves from competitors and increase brand loyalty. This

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emphasis on brand development has increased the demand for delivery of consistent messages and, as a result, companies are seeking marketing and communications organizations which are able to coordinate resources across multiple disciplines, geographies and media.

DEMAND FOR INTEGRATED SERVICE OFFERINGS. Increasingly, certain clients are turning to large marketing and communications organizations to provide integrated services across multiple disciplines. Such clients are seeking integrated services to ensure a consistent brand presence and maximize the effectiveness of their messages around the world, better coordinate their marketing activities and simplify and strengthen their relationships with their marketing partners. The demand for globally-integrated services has led to the creation of a small number of global marketing and communications companies, including Y&R, which strive to provide their clients with a full range of services in each of the local markets in which their clients operate. In addition, a substantial number of clients continue to require access to specialized service providers. Y&R has over 20 years of experience in organizing its companies to address this client need.

INCREASED EMPHASIS ON TARGETED MARKETING. The desire of companies to reach their target audiences and quantify the effectiveness of their communications has resulted in greater demand for customized direct marketing methods, such as database marketing, infomercials, in-store promotions and interactive programs. These techniques enable companies to quantify the success of their campaigns and monitor the return on investment of their marketing expenditures through such mechanisms as response rate tracking. The desire to create more targeted marketing has been enhanced by the emergence of new media which permits more interactive methods of customizing and delivering messages. In certain developing economies, the technology infrastructure is improving, indicating increased potential for database marketing and communications.

STRATEGY

Y&R's strategy consists of the following key components:

INCREASE PENETRATION OF KEY CORPORATE ACCOUNTS. Y&R believes that significant opportunities exist to increase its share of KCA marketing and communications expenditures by leveraging its global network to provide integrated services to KCAs. Y&R has successfully increased its share of the marketing and communications expenditures of certain KCAs over the past few years. For example, Y&R has significantly expanded its relationship with Ford, winning new assignments in Brazil, Germany, Canada and the United States for Young & Rubicam Advertising, Wunderman Cato Johnson, Landor Associates and Brand Dialogue. KCAs also have increased their use of multiple services offered by Y&R over the same period. During 1997, Y&R's 20 largest clients used the capabilities of an average of five of the Company's marketing and communications services.

Y&R has implemented a team concept for certain KCAs which utilize advertising, direct marketing and other marketing and communications services offered by Y&R. Each client team aligns Y&R employees from separate disciplines within the Company around KCAs and offers incentives to these employees to provide the highest quality service to the client without regard to Y&R's own internal corporate structure. In addition, Y&R seeks to improve KCA satisfaction by retaining independent consultants to conduct third-party audits with clients which measure Y&R's performance on a variety of criteria. Y&R intends to use this objective information to identify strengths, weaknesses and opportunities within KCA relationships.

DEVELOP NEW CLIENT RELATIONSHIPS. The Company believes that there are significant opportunities for future revenue and profit growth by providing services to new clients in targeted industry sectors and to those clients seeking to build and maintain global, regional and local brands. Y&R has successfully used its integrated and global approach as an effective tool in winning new business. Y&R's win of the global Citibank account in August 1997 exemplifies the success of this strategy. Management believes that the acquisition of this new business was due, in part, to Y&R's ability to coordinate advertising and direct marketing activities for Citibank around the world. The Company believes that Citibank consolidated its advertising and direct marketing accounts with Y&R in order to establish a consistent brand identity around the world. In addition to Citibank, during the last 18 months, Y&R has won new business from clients including United Airlines and Campbell's Soup, both of whom were designated as KCAs.

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LEVERAGE EXISTING GLOBAL NETWORK. With a worldwide presence in 76 countries (including 14 countries where Y&R is represented by non-equity affiliations with local partners), the Company believes that it is well positioned to continue to benefit from the trend towards the globalization of client marketing and communications needs and the consolidation of such needs with a single international service provider. For example, in late 1995, Colgate-Palmolive consolidated its global advertising with Y&R, enabling Colgate-Palmolive to replace multiple campaigns created by various local agencies with a single campaign coordinated by Y&R's global network, while providing substantial cost savings to Colgate-Palmolive.

CAPITALIZE ON EXISTING CAPABILITIES. Y&R intends to continue the development of its existing capabilities into more visible and accessible client services. For example, in 1997, Y&R launched a new unit, Brand Dialogue, to serve its clients in the areas of digital interactive branding and digital commerce and in the development and implementation of various interactive strategies, including website design, creation and production. To create this integrated unit, Y&R combined the existing interactive capabilities of Young & Rubicam Advertising and Wunderman Cato Johnson in the United States, Latin America, Europe and Asia/ Pacific. Management believes that Brand Dialogue represents a growth opportunity for Y&R, and the Company intends to make significant investments in new and emerging technologies to capitalize on these opportunities.

In addition, in July 1997, the Company consolidated the United States media planning, buying and placement capabilities of Young & Rubicam Advertising, Wunderman Cato Johnson and The Media Edge (a media company acquired by Y&R in 1996) under The Media Edge name. With this consolidation, Y&R created a major United States media agency with approximately $3 billion in media billings, thereby enhancing its ability to negotiate effectively and secure discounts for media purchases on behalf of its clients. The Company believes that The Media Edge will provide a variety of media alternatives in various markets to existing and future clients. Y&R plans to continue to identify and leverage strengths and capabilities that can provide further differentiation for the Company and that can evolve into businesses that generate incremental revenues and profits.

UTILIZE SUPERIOR CONSUMER KNOWLEDGE AND BRAND INSIGHTS. To assist its clients in building, leveraging, protecting and managing their brands, Y&R has developed and is maintaining extensive knowledge of consumer brand perceptions. In 1994, Y&R launched BrandAsset Valuator ("BAV"), a proprietary database of consumer perceptions for building and managing brands. In its first two phases, in 1994 and the second half of 1997, the BAV project involved the gathering of information on approximately 10,000 brands, including over 9,000 local and regional brands and 550 global brands. BAV provides an understanding of how consumers evaluate brands, how brands evolve over time and how brands are managed successfully. The Company believes that BAV, in which the Company has made significant investments over the past five years, is the first global consumer study that provides an empirically derived model for how brands gain and lose their strength. The Company further believes that BAV, which reflects the perceptions of over 95,000 consumers in 32 countries in the Americas, Europe, Asia, Australia and Africa, is the most extensive database of information concerning consumer perceptions of brands. Management believes that Y&R's comprehensive research capabilities, including BAV, have become a significant factor in attracting new clients and winning new assignments from existing clients. The Company plans to continue to invest in BAV, and believes that knowledge of consumers' changing perceptions of brands will continue to provide Y&R with a significant competitive advantage.

CULTIVATE CREATIVE EXCELLENCE. Y&R intends to continue emphasizing the importance of creative marketing and communications. The creative leadership of Y&R has been recognized over the years through the receipt of various industry awards, including Cannes Lions and Clio Awards for excellence in television and print advertising, EFFIES (awards for effective advertising) and a number of other awards for direct marketing and design services. Y&R also has created numerous memorable marketing and communications programs for clients, including "The Softer Side of Sears," "Everybody Needs a Little KFC," "It's All Within Your Reach" for AT&T, "The Document Company" for Xerox, and "Be All That You Can Be" for the United States Army, as well as identity and design assignments, including the creation of corporate identities, for Lucent Technologies, Netscape and the 2002 Salt Lake City Olympics.

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IMPROVE OPERATING EFFICIENCIES. The Company believes that opportunities exist to further improve operating efficiencies in order to expand margins and increase future profitability. For example, Y&R has implemented initiatives which have both improved productivity and reduced compensation expense as a percentage of consolidated revenues.

EXPAND CAPABILITIES THROUGH ACQUISITIONS. In order to add new capabilities, enhance its existing capabilities and expand the geographic scope of its operations, Y&R regularly evaluates and intends to pursue appropriate acquisition opportunities. Management believes that significant opportunities exist to expand its businesses. Historically, in order to expand capabilities beyond traditional advertising, Y&R has acquired well-established leaders in other marketing and communications disciplines. More recently, the Company has acquired smaller niche agencies or companies to enhance existing capabilities or expand geographic coverage.

OPERATIONS

The Company's operations are aligned under two senior executives. Young & Rubicam Advertising and Wunderman Cato Johnson, along with the smaller complementary business units, Brand Dialogue, The Bravo Group, The Chapman Agency and The Media Edge, report to Edward H. Vick, Chief Operating Officer of the Company, as well as Chairman and Chief Executive Officer of Young & Rubicam Advertising. As appropriate, Young & Rubicam Advertising and Wunderman Cato Johnson work in partnership to service those clients who demand integrated advertising and direct marketing capabilities. Burson-Marsteller, Landor Associates, Sudler & Hennessey and Cohn & Wolfe report to Thomas D. Bell, Jr., Executive Vice President of the Company, as well as President and Chief Executive Officer of Burson-Marsteller.

YOUNG & RUBICAM ADVERTISING. Young & Rubicam Advertising is one of the world's leading full-service consumer advertising agencies, offering expertise in creative development, consumer research and marketing, and media buying and planning. In 1996, Young & Rubicam Advertising was ranked by industry sources as the ninth largest advertising agency based in the United States.

Young & Rubicam Advertising has had a number of recent new business wins. In August 1997, Citibank consolidated its worldwide advertising and direct marketing business with Y&R. In addition, since 1995, Young & Rubicam Advertising has won substantial new business from Colgate-Palmolive, United Airlines and Campbell's Soup. In June 1997, Young & Rubicam Advertising extended its long-term relationship with the United States Army, an account which is subject to a government-mandated review every five years. In October 1997, Young & Rubicam Advertising won the assignment to develop a campaign for Census 2000, the first unified, paid advertising campaign undertaken by the United States Bureau of the Census. Young & Rubicam Advertising also continues to expand relationships with existing clients, including creating AT&T's corporate branding campaign, and together with Wunderman Cato Johnson, developing the campaign for the launches of Sears' Home Services Division, the Navigator sport-utility vehicle for Ford's Lincoln-Mercury division in the United States and the Puma, Ka and Galaxy automobiles for Ford in selected international markets.

Young & Rubicam Advertising has long been involved in various public interest and public service efforts. Young & Rubicam Advertising handles public service accounts for The National Urban League, The United Negro College Fund and, through its work with the Ad Council, is launching a series of programs to benefit children throughout the United States and, separately, to assist battered women.

Young & Rubicam Advertising operates in 91 cities in 61 countries worldwide, in the Americas, Europe and Africa. Young & Rubicam Advertising services clients through the Dentsu, Young & Rubicam Partnerships across Asia/Pacific.

DENTSU, YOUNG & RUBICAM PARTNERSHIPS. The Dentsu, Young & Rubicam Partnerships ("DY&R") are a network of full-service advertising agencies that provide Young & Rubicam Advertising with access to major markets across the Asia/Pacific region. DY&R was created as a joint venture between Y&R and Dentsu, Inc. ("Dentsu") in 1991. In 1996, Dentsu ranked as the fourth largest marketing and communications organization in the world and the largest marketing and communications organization based in Asia/Pacific. DY&R is a series of local ventures in which Y&R typically has a 50% interest, and is jointly managed and operated by

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Y&R and Dentsu. To maximize local brand equity and minimize conflicts, DY&R operates under different brand names and management in each of its three regions -- Asia, Australia/New Zealand and the United States. DY&R primarily services major clients of Dentsu and Y&R in Asia, including Y&R's KCAs, but also has its own local clients in each region. In Asia/Pacific, DY&R has recently won regional business from Fuji and Citibank and has been awarded additional work from Ford, Sony, Ericsson and Cadbury-Schweppes in specific markets. DY&R operates in 27 cities in 16 countries across Asia/Pacific and the United States, where it operates as The Lord Group.

WUNDERMAN CATO JOHNSON. Wunderman Cato Johnson ("WCJ") is one of the world's leading behavior-driven marketing and communications companies. Behavior-driven marketing and communications are designed to assist clients in producing immediate sales and building brand and customer equity. WCJ addresses its clients' marketing objectives through direct marketing, sales promotion, television commercials and infomercials, customer loyalty programs, relationship marketing programs, database development and management, merchandising, entertainment and sports marketing, lead generation and new product launches.

WCJ focuses on converting "consumers" to "customers" and mass markets to individual relationships. WCJ seeks to motivate behavior by focusing on identifying and acquiring the most valuable customer prospects for clients, building loyalty among its clients' most profitable customers and managing the customer's interactions with the brand, the trade and the sales force.

WCJ provides services to KCAs such as AT&T, DuPont, Ford, Taco Bell and the United States Postal Service. Recent new business projects include the creation of a global promotion for Ericsson, and, together with Young & Rubicam Advertising, the launches of the Sears Home Services Division and the Navigator for Ford's Lincoln-Mercury division.

WCJ was created by the 1992 merger of Wunderman Worldwide, a direct marketing company acquired by Y&R in 1973, and Cato Johnson Associates, a sales promotion company acquired by Y&R in 1976. Headquartered in New York, WCJ operates in 49 cities in 32 countries worldwide. WCJ also has major database facilities in Europe and Latin America.

OTHER CAPABILITIES. Brand Dialogue specializes in digital interactive branding and digital commerce. Brand Dialogue's primary offerings consist of:
(i) web advertising, including the design, creation and production of worldwide websites, banners, home pages and comprehensive interactive campaigns; (ii) digital commerce applications; (iii) the development of corporate intranets to improve communications and productivity within and among a defined set of users; and (iv) interactive marketing consulting services. Brand Dialogue has obtained new business from both existing Y&R KCAs and other clients, as well as new clients. During 1997, Brand Dialogue won notable and varied assignments from clients such as AT&T, Citibank, Ford, United Airlines, the United States Postal Service and Xerox.

The Bravo Group ("Bravo") creates multi-cultural marketing and communications programs targeted to the fast-growing U.S. Hispanic community. Bravo's multi-disciplinary services include advertising, promotion and event marketing, public relations, research and direct marketing. Bravo provides services for selected KCAs including American Home Products-Whitehall, AT&T, Campbell's Soup, Clorox, Kraft and the United States Postal Service.

The Chapman Agency ("Chapman") is a specialized direct marketing agency which provides a range of services in the United States primarily to the telecommunications, financial services, technology and healthcare industries. Chapman focuses on communications designed to build individual relationships with individual customers, and works with its clients to maximize customer profitability and build enduring brands over time. Chapman is also involved in both the development and application of database marketing and communications techniques. Chapman provides services to Bristol-Myers Squibb, Dow Jones, DuPont and SmithKline Beecham.

The Media Edge provides integrated media planning, buying and placement services for both Young & Rubicam Advertising and WCJ. In addition, The Media Edge provides planning and buying of both traditional and direct response media. Management believes that The Media Edge is positioned to act as an independent full-service media provider, offering a range of media-related services to clients other than those of Young & Rubicam Advertising and WCJ, as well as to smaller independent advertising and communica-

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tions agencies. The Company believes that these capabilities will enable The Media Edge to take advantage of opportunities presented by the trend of clients separating media responsibility assignments from other advertising services. During 1997, The Media Edge won significant new business, including a number of agency of record assignments (a preferred media provider designation) and media research and modeling assignments, from clients such as International Distillers and Vintners (Grand Metropolitan), Monsanto, Ore-Ida (Heinz), and Revlon. In addition, The Media Edge recently expanded its relationship with Sears and retained its long-term relationship with the Irish Tourist Board.

BURSON-MARSTELLER. Burson-Marsteller is one of the world's leading international perception management, public relations and public affairs companies. It provides a comprehensive range of perception management capabilities to its clients, including issues analysis, crisis management, consumer and business marketing and research, corporate communications, investor relations and public affairs advocacy. The perception management process begins with a statement of the desired business results and then identifies current and targeted perceptions, as well as different approaches to create the desired mindset with key audiences.

Burson-Marsteller believes a shift is occurring in the perception management and public relations field, away from a focus on executional delivery based upon a client's specific instructions and towards a more consultative and interactive relationship. To that end, in 1996 and 1997, Burson-Marsteller implemented a client-focused practice structure in the United States. This client-focused practice structure has replaced the traditional geographic organizational model in the United States and helps ensure the firm's professional client teams have the experience and insight required to provide clients with the in-depth capabilities and knowledge to meet their needs. In Europe and Asia, Burson-Marsteller intends to maintain a primarily geographic organizational model and to implement, where feasible, elements of a client-focused practice structure. Burson-Marsteller's functional and industry practice areas currently include corporate, healthcare, marketing, advertising, media, public affairs, strategic consulting and technology. Burson-Marsteller's resources include three kinds of specialists: (i) industry specialists who are experienced in specific fields; (ii) practice specialists who are experienced in specific perception management, public relations and public affairs disciplines; and (iii) creative and media specialists who are skilled in using a variety of techniques and different technologies to deliver messages with impact.

Burson-Marsteller serves as counselor to a diverse body of clients ranging from major corporations, business associations and professional organizations to governmental bodies and non-profit institutions. During the last 18 months, Burson-Marsteller has undertaken significant assignments for Qualcomm, Sun Microsystems and Unilever. In addition, Burson-Marsteller has expanded and strengthened relationships with existing clients such as Andersen Consulting, Johnson & Johnson and Philip Morris.

Burson-Marsteller was founded in 1953 and was acquired by Y&R in 1979. Burson-Marsteller is head-quartered in New York and operates in 46 cities in 36 countries around the world. The Burson-Marsteller network also includes Black, Kelly, Scruggs & Healey Inc., a lobbying and public affairs firm based in Washington D.C., Marsteller Advertising, which specializes in corporate, business-to-business and issues advertising campaigns, with offices in New York, Chicago, Pittsburgh and London, and The Mead Point Group, a small, strategic consulting firm located in Greenwich, Connecticut.

LANDOR ASSOCIATES. Landor Associates ("Landor") is one of the world's leading branding consultancies and strategic design firms. Landor creates, builds and revitalizes clients' brands and helps position these brands for continued success. Landor's branding and identity consultants, designers and researchers work with clients on a full range of branding and identity projects, including corporate identity, packaging and brand identity systems, retail design and branded environments, interactive branding and design, verbal branding and nomenclature systems, corporate literature, brand extensions and new brand development.

Landor has broad international experience across various industries, and clients include automobile manufacturers, banks and financial institutions, commercial airlines, communications and information companies, consumer products, entertainment industry concerns, hotels, major industrials, packaged goods companies and petroleum retailers.

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Landor has gained substantial new business momentum during the last 18 months, and has been awarded corporate identity assignments for the 2002 Salt Lake City Olympics, Lucent Technologies and Delta Airlines; package design assignments for Frito-Lay and Kellogg's; and branded environment assignments for Taco Bell, Pizza Hut and Sears. In addition, Landor has expanded relationships with existing clients. During 1996, Landor was retained by Coors Beer (as sole supplier) to design packaging, and more recently this assignment expanded to include verbal branding. In addition, during 1997, Landor worked to develop the name and corporate identity for Visteon, a Ford subsidiary that supplies component parts to the automotive industry.

Landor was founded in 1941 and was acquired by Y&R in 1989. Landor is headquartered in San Francisco and operates in 15 cities in 11 countries worldwide, including multidisciplinary consulting and design studios in New York, Seattle, Mexico City, Hamburg, London, Paris, Hong Kong and Tokyo.

SUDLER & HENNESSEY. Sudler & Hennessey ("S&H") is one of the world's leading healthcare communications firms, developing strategic promotional and educational programs for a wide spectrum of healthcare brands. S&H creates advertising, direct marketing and sales promotion programs for prescription drugs and over-the-counter medications. In addition, S&H provides strategic consultancy and communications support in the areas of managed care, medical devices and equipment, nutrition, veterinary medicine and general healthcare. Communications programs produced by S&H on behalf of its largely pharmaceutical industry client base are directed to a wide range of healthcare professionals as well as patients and their support networks.

S&H's medical education division, IntraMed, develops continuing educational programming on behalf of its pharmaceutical and consumer care clients. These educational efforts bring credible third-party support to healthcare professionals as well as patient educational communications.

The healthcare communications industry experienced significant growth during 1997, due both to a dramatic increase in direct-to-consumer healthcare communications and numerous new product introductions. S&H has capitalized on this growth, winning significant new business around the world, including product launch assignments from Abbott Laboratories, Merck, Roche and Zeneca.

S&H was founded in 1941 and was acquired by Y&R in 1973. S&H is headquartered in New York and operates in 16 cities in 11 countries in North America, Europe and Asia/Pacific.

COHN & WOLFE. Cohn & Wolfe is a full-service public relations firm that provides creative, results-driven services to its clients. Cohn & Wolfe helps its clients establish and communicate corporate and brand identity, launch new products and expand sales. Areas of expertise include consumer marketing, sports publicity and issues management, as well as healthcare, information technology and business-to-business communications. Current clients include Eli Lilly, Reebok, Deloitte & Touche, SmithKline Beecham, Phillip Morris, Sony, NEC and the United States Postal Service.

Cohn & Wolfe was founded in 1970 and was acquired by Burson-Marsteller in 1984. Cohn & Wolfe operates in 12 cities in 11 countries in North America, Europe and Australia.

COMPETITION

The marketing and communications industry is highly competitive. Y&R's principal competitors in the advertising, direct marketing and perception management and public relations businesses are large multinational marketing and communications companies, as well as numerous smaller agencies that operate only in the United States or in one or more countries or local markets. Y&R must compete with such other companies and agencies to maintain existing client relationships and to obtain new clients and assignments. Some clients, such as U.S. governmental agencies, require agencies to compete for business at mandatory intervals. Principal competitive factors include an agency's creative reputation, knowledge of media, financial controls, geographical coverage and diversity, relationships with clients and quality and breadth of services. Recently, traditional advertising agencies have also been competing with major consulting firms which have developed practices in marketing and communications, and with smaller companies such as systems integrators, database marketing and modeling companies and telemarketers, which offer technological solutions to marketing and communications issues faced by clients. In addition, the trend towards consolidation of global accounts requires companies seeking to compete effectively in the international marketing and

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communications industry to make significant investments in additional offices and personnel around the world and in new and improved technology for linking such offices and people.

United States clients typically may cancel contracts with agencies upon 90 days' notice, and non-U.S. clients typically also may cancel contracts with agencies on 90 to 180 days' notice. However, Y&R believes that clients may find it increasingly difficult to terminate relationships with agencies which represent their brands on a global basis because of the complexity of coordinating creative, media and non-media services. In addition, clients generally remain able to move from one agency to another with relative ease. As is typical in the marketing and communications industry, Y&R has lost or resigned client accounts and assignments for a variety of reasons, including due to conflicts with newly acquired clients. Although Y&R typically has replaced such losses with new clients and assignments, there can be no assurance that Y&R will continue to be successful in replacing clients that may leave Y&R or in replacing revenues when a client significantly reduces the amount of work given to Y&R.

Representation of a client does not necessarily mean that all advertising or public relations for that client are handled by one agency. Many large multinational companies are served by a number of agencies within the marketing and communications industry. In many cases, clients' conflicts policies or desire to be served by multiple agencies result in one or more global agency networks representing a client only for a portion of its marketing and communications needs or only in particular geographic areas. In addition, the ability of agencies within marketing and communications organizations to acquire new clients or additional assignments from existing clients may be limited by the conflicts policy followed by many clients not to permit agencies to perform similar services for competing products or companies. Y&R's principal international competitors are holding companies for more than one global advertising agency network, which, in some situations, may permit separate agency networks within such holding companies to perform services for competing products or for products of competing companies. The Company has one global advertising agency network, and accordingly, Y&R's ability to compete for new advertising assignments and, to a lesser extent, other marketing and communications assignments may be limited by these conflicts policies. Industry practices in other areas of the marketing and communications business reflect similar concerns with respect to client relationships.

REGULATION

The regulation of advertising takes several forms. The primary source of governmental regulation in the United States is the Federal Trade Commission ("FTC") which is charged with administering the Federal Trade Commission Act (the "FTC Act"). The FTC Act covers a wide range of practices involving false, misleading and unfair advertising. In the event of violations of federal laws and regulations, the FTC may seek cease and desist orders, may impose monetary penalties and may require other remedies. The Federal Food and Drug Administration, the Federal Communications Commission and other agencies also have regulatory authority that affects the advertising business. In addition, many state and local governments have adopted statutes and regulations similar in scope to the FTC Act and the regulations thereunder.

Self-regulatory activities have become significant in the advertising business. The Council of Better Business Bureaus has created the National Advertising Division and the National Advertising Review Board which review and process possible violations of proper business conduct through advertising. The national television networks and various other media have also adopted strict and extensive regulations governing the advertising that they will accept for broadcast or publication. Trade associations in certain industries publish advertising guidelines for their members and, in addition, various consumer groups have been and continue to be powerful advocates of increased regulation of advertising.

Advertising is also subject to regulation in countries other than the United States in which Y&R and its affiliates do business. Y&R has developed internal review procedures to help ensure that its work product, as well as that of its affiliates, is in compliance with standards of accuracy, fair disclosure and ethical proprieties, including those established by federal, state and local laws and regulations and the pre-clearance procedures of the broadcast media.

In addition, as an international organization Y&R is subject to the Foreign Corrupt Practices Act (the "FCPA"). The FCPA imposes civil and criminal fines and penalties on companies and individuals which violate its anti-bribery and other provisions.

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EMPLOYEES

Y&R has approximately 13,000 employees (including part-time employees) worldwide. None of Y&R's U.S. employees are covered by collective bargaining agreements. Management believes that the Company's relations with employees are good.

PRINCIPAL PROPERTIES

Y&R owns its headquarters office building at 285 Madison Avenue, New York, New York. Y&R has granted a mortgage on such property to the lenders under the Credit Facilities. Y&R leases other offices and space for its facilities in New York City and elsewhere throughout the world. The following table sets forth certain information relating to Y&R's principal properties:

                                                                     APPROXIMATE
                                                                       SQUARE         LEASE
         LOCATION                             USE                      FOOTAGE     EXPIRATION
285 Madison Avenue,          Young & Rubicam Advertising, Brand        370,000     N/A (owned)
  New York, New York         Dialogue and corporate headquarters
230 Park Avenue South,       Burson-Marsteller, Chapman, Bravo and     340,500         1/22/06
  New York, New York         Landor
Gallus Park,                 Young & Rubicam Advertising, WCJ,         154,000         4/26/04
  Frankfurt, Germany         Burson-Marsteller and Sudler &
                             Hennessey
Greater London House,        Young & Rubicam Advertising, WCJ and       80,000         5/31/13
  London, U.K.               Sudler & Hennessey
200 Renaissance Center,      Young & Rubicam Advertising and WCJ        96,000        11/30/99
  Detroit, Michigan
675 Avenue of the Americas,  WCJ                                        92,500         6/30/03
  New York, New York
49-59 Avenue Andre Morizet,  Young & Rubicam Advertising and WCJ        65,000        12/31/98
  Paris, France
One South Wacker Drive,      Young & Rubicam Advertising, WCJ and       63,000        11/30/99
  Chicago, Illinois          Landor
100 First Plaza,             Young & Rubicam Advertising, WCJ,          63,000         5/11/03
  San Francisco, California  Burson-Marsteller and Bravo
1801 K Street N.W.,          Burson-Marsteller and Cohn & Wolfe         60,000        10/31/06
  Washington, D.C.
295 Madison Avenue,          Young & Rubicam Advertising                51,500        12/31/03
  New York, New York

Y&R's planned capital expenditures for 1998 include expenditures for leasehold improvements of facilities which, when completed, are expected to result in a configuration of owned and leased facilities which Y&R believes will be adequate for its current and anticipated purposes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources."

LEGAL PROCEEDINGS

Y&R is involved from time to time in various claims and legal actions incident to its operations, both as plaintiff and defendant. In the opinion of management, none of these existing claims is expected to have a material adverse effect on the Company.

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information with respect to the executive officers and Directors of the Company:

         NAME            AGE                              POSITION
Peter A. Georgescu.....   58    Chief Executive Officer of the Company and Chairman of the
                                Board
Alan J. Sheldon........   56    Vice Chairman and Managing Director of the Company
John P. McGarry, Jr....   58    President of the Company
Edward H. Vick.........   53    Chief Operating Officer of the Company, Chairman and Chief
                                Executive Officer of Young & Rubicam Advertising and
                                Director
Thomas D. Bell, Jr. ...   48    Executive Vice President of the Company, President and Chief
                                Executive Officer of Burson-Marsteller and Director
Stephanie W.
  Abramson.............   53    Executive Vice President and General Counsel of the Company
Michael J. Dolan.......   51    Vice Chairman and Chief Financial Officer of the Company and
                                Director
F. Warren Hellman......   63    Director
Philip U.
  Hammarskjold.........   33    Director
Richard S. Bodman......   60    Director
Alan D. Schwartz.......   47    Director
John F. McGillicuddy...   67    Director

The business address of each of the Company's executive officers is 285 Madison Avenue, New York, New York 10017. The business address of Messrs. Hellman and Hammarskjold is One Maritime Plaza, San Francisco, California 94111. The business address of Mr. Schwartz is 245 Park Avenue, New York, New York 10167. The business address of Mr. Bodman is c/o AT&T Ventures, Chevy Chase Metro Building, 2 Wisconsin Circle, Suite 610, Chevy Chase, Maryland 20815-7003. The business address of Mr. McGillicuddy is 270 Park Avenue, 32nd Floor, New York, New York 10017.

PETER A. GEORGESCU Mr. Georgescu has been Chairman and Chief Executive Officer of Young & Rubicam Inc. since 1994. He has been a Director of the Company since 1980. Mr. Georgescu's career at Y&R spans 34 years with top management experience both in the United States and Europe. Prior to becoming Chairman, Mr. Georgescu was President of the Company for four years. Mr. Georgescu joined Young & Rubicam New York in 1963 as a trainee and has held various positions in research, account management and marketing in New York, Chicago and Amsterdam. Mr. Georgescu is a member of the Board of Directors of Briggs and Stratton Company.

ALAN J. SHELDON Mr. Sheldon has been Vice Chairman and Managing Director of Young & Rubicam Inc. since July 1996. Mr. Sheldon was a Director of the Company from 1988 to February 1998. From 1994 to 1996, he was Chief Operating Officer of Young & Rubicam Advertising. Mr. Sheldon was also Chief Financial Officer of Young & Rubicam Europe from 1993 to 1994, after serving as Executive Vice President and General Manager of Young & Rubicam Inc. since 1990. Mr. Sheldon joined Y&R in 1968 in Corporate Finance and subsequently served in several senior positions at Y&R and Young & Rubicam Advertising.

JOHN P. MCGARRY, JR. Mr. McGarry has been President of the Company since April 1996. Prior to assuming his present post, he held several positions at Y&R including Chairman and Chief Executive Officer of Young & Rubicam Advertising, President and Chief Executive Officer of Young & Rubicam Advertising North America, President and Chief Executive Officer of Young & Rubicam USA, and President of Young & Rubicam New York. Mr. McGarry joined Y&R in 1965.

EDWARD H. VICK Mr. Vick has been Chief Operating Officer of the Company since November 1997 and Chairman and Chief Executive Officer of Young & Rubicam Advertising since April 1996. He has been a Director of the Company since February 1998. Mr. Vick joined Young & Rubicam New York as its President and Chief Executive Officer in February 1994. He began his career with Benton & Bowles and was a Senior

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Vice President of Ogilvy & Mather. From 1985 to 1991, he was President of Ammirati & Puris and, in 1991, was President and Chief Executive Officer of Levine, Huntley, Vick and Beaver. In 1992, Mr. Vick came to Y&R as President and Chief Executive Officer of Landor.

THOMAS D. BELL, JR. Mr. Bell has been Executive Vice President of the Company since 1995 and President and Chief Executive Officer of Burson-Marsteller since 1995. He has been a Director of the Company since February 1998. From 1994 to 1995, Mr. Bell served as Vice Chairman of Gulfstream Aerospace Corporation. Prior thereto, Mr. Bell was Vice Chairman and Chief Operating Officer of Burson-Marsteller from 1991 to 1994. Before initially joining Burson-Marsteller in 1989, Mr. Bell held senior positions in business and government. Mr. Bell is a member of the Board of Directors of Gulfstream Aerospace Corporation, Lincoln National Corporation and Lincoln Life & Annuity of New York.

STEPHANIE W. ABRAMSON Ms. Abramson has been Executive Vice President and General Counsel of the Company since 1995. Ms. Abramson was a Director of the Company from 1995 until February 1998. From 1980 until joining Y&R in 1995, she was a partner with Morgan, Lewis & Bockius LLP.

MICHAEL J. DOLAN Mr. Dolan has been Vice Chairman and Chief Financial Officer and a Director of the Company since July 1996. Prior thereto, from 1991 to 1996, he was President and Chief Executive Officer of the joint venture, Snack Ventures Europe, between PepsiCo Foods International ("PFI") and General Mills. Mr. Dolan also served PFI as Senior Vice President, Operations. From 1987 to 1991, Mr. Dolan was with Peter Kiewet Sons, Inc. ("PKS"), a construction and mining conglomerate. While at PKS, he served as Corporate Executive Vice President for Continental Can Company when it was acquired and restructured by PKS.

F. WARREN HELLMAN Mr. Hellman has been a Director of the Company since December 1996. Mr. Hellman is Chairman of Hellman & Friedman LLC ("Hellman & Friedman"), a private investment company he founded in 1984. Prior thereto, Mr. Hellman was President and a Director of Lehman Brothers, as well as head of its Investment Banking Division, and Chairman of Lehman Corporation (a closed-end investment company). Mr. Hellman serves on the Company Board as a representative of the H&F Investors. Mr. Hellman is a member of the Board of Directors of Levi Strauss & Co., Franklin Resources, Inc., Il Fornaio (America) Corp., MobileMedia Corporation and PowerBar Inc., as well as a number of private and venture-backed companies.

PHILIP U. HAMMARSKJOLD Mr. Hammarskjold has been a Director of the Company since December 1996. Mr. Hammarskjold is a Managing Director of Hellman & Friedman. Prior to joining Hellman & Friedman in 1992, Mr. Hammarskjold was employed by Dominquez Barry Samuel Montagu in Australia and by Morgan Stanley & Co. in New York. Mr. Hammarskjold serves on the Company Board as a representative of the H&F Investors. Mr. Hammarskjold is a member of the Board of Directors of The Covenant Group, Inc.

RICHARD S. BODMAN Mr. Bodman has been a Director of the Company since April 1998. Mr. Bodman has been Managing General Partner of AT&T Ventures, LLC ("AT&T Ventures"), a company which manages a venture capital pool investing in early stage businesses related to telecommunications and information technology since May 1996. Prior to joining AT&T Ventures, from 1990 until May 1996, Mr. Bodman was Senior Vice President for Corporate Strategy & Development and a member of the Management Executive Committee of AT&T. Mr. Bodman is a member of the Board of Directors of Reed Elsevier plc, Tyco International, Inc. and ISS Group.

ALAN D. SCHWARTZ Mr. Schwartz has been a Director of the Company since December 1996. Mr. Schwartz is Executive Vice President and Head of the Investment Banking Department at Bear, Stearns & Co. Inc. He is also a member of the Executive Committee of the parent company, The Bear Stearns Companies Inc. Mr. Schwartz joined Bear Stearns in 1976. Mr. Schwartz is a member of the Board of Directors of Unique Casual Restaurants, Inc.

JOHN F. MCGILLICUDDY Mr. McGillicuddy has been a Director of the Company since May 1997. Mr. McGillicuddy was the Chairman and Chief Executive Officer of Chemical Banking Corporation from 1992 to 1993 and Chairman and Chief Executive Officer of Manufacturers Hanover Corporation and

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Manufacturers Hanover Trust Company from 1979 to 1991. Mr. McGillicuddy is a member of the Board of Directors of UAL Corporation, USX Corporation and Southern Peru Copper Corporation.

The Company intends that the Board will continue to be comprised of a majority of Directors who are independent of management.

Upon the completion of the Offerings, the Board will be divided into three classes, as nearly equal in number as is possible, serving staggered three-year terms so that the Directors' initial terms will expire at the annual meetings of the Company's stockholders held in 1999, 2000 and 2001, respectively. At each annual meeting of the Company's stockholders, successors to the class of Directors whose term expires at such meeting will be elected to serve for three-year terms and until their successors are elected and qualified. Messrs. Hellman, Schwartz and Vick will be Class I Directors, with terms expiring in 1999. Messrs. Dolan, Georgescu and Hammarskjold will be Class II Directors, with terms expiring in 2000. Messrs. Bell, Bodman and McGillicuddy will be Class III Directors, with terms expiring in 2001.

The H&F Investors will have the right to nominate and elect two members of the Board for so long as they continue to hold in the aggregate at least 10% of the Outstanding Shares (as defined in the Stockholders' Agreement) and one member of the Board for so long as they continue to hold in the aggregate at least 5% of the Outstanding Shares. See "Description of Capital Stock -- The Stockholders' Agreement."

COMMITTEES

The Compensation Committee of Y&R consists of Messrs. Georgescu, Hammarskjold and Schwartz, Chairman. The Compensation Committee reviews the compensation of officers of Y&R and makes recommendations to the Board regarding such compensation and reviews and administers the Restricted Stock Plan and the Stock Option Plans. Following the consummation of the Offerings, the Compensation Committee will be comprised entirely of Directors who are independent of management.

The Audit Committee of Y&R consists of Messrs. Georgescu, McGillicuddy and Hellman, Chairman. The Audit Committee is responsible for reviewing any transactions (other than compensation arrangements) between Y&R and its executive officers and Directors, the plans for and results of audits of Y&R, and the results of any internal audits, compliance with any written policies and procedures and the adequacy of Y&R's systems of internal accounting controls. The Audit Committee also considers annually the qualifications of Y&R's independent auditors. Following the consummation of the Offerings, the Audit Committee will be comprised entirely of Directors who are independent of management in accordance with New York Stock Exchange policy.

The Board may create such other committees as it may determine from time to time.

LIMITATION OF LIABILITY AND INDEMNIFICATION

Y&R's Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws contain provisions indemnifying the Directors and executive officers of Y&R to the fullest extent permitted by law. Section 102(b)(7) of the Delaware General Corporation Law provides that Delaware corporations may include in their certificates of incorporation a provision eliminating or limiting the personal liability of Directors to the corporation or its stockholders for monetary damages for breach of their fiduciary duty including acts constituting gross negligence, except under certain circumstances, including breach of the Director's duty of loyalty, acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law or any transaction from which the Director derived improper personal benefit. The Company's Amended and Restated Certificate of Incorporation provides that Y&R's Directors are not liable to it or its stockholders for monetary damages for breach of their fiduciary duties, subject to the exceptions specified by Delaware law.

COMPENSATION OF DIRECTORS

The Company compensates only those members of the Board who are not employees of the Company for their participation as Directors. During 1997, Alan D. Schwartz and John C. McGillicuddy each received

43

$50,000 as an annual stipend for serving as a member of the Board and each, along with Richard S. Bodman, will receive $50,000 in 1998. Messrs. Hellman and Hammarskjold each waived such fee in 1997 and have indicated that they intend to waive it in the future. Out-of-pocket expenses for attendance at meetings of the Board are reimbursed for all members.

EXECUTIVE COMPENSATION

The following table sets forth the compensation paid or accrued by the Company to the Chief Executive Officer and the four other most highly compensated executive officers who were serving as executive officers on December 31, 1997 (collectively, the "named executive officers").

SUMMARY COMPENSATION TABLE

                                                                        LONG-TERM
                                                                      COMPENSATION
                                       ANNUAL COMPENSATION               AWARDS
                                    --------------------------   -----------------------
                                                                 RESTRICTED   SECURITIES         ALL
             NAME AND                                              STOCK      UNDERLYING        OTHER
        PRINCIPAL POSITION          YEAR    SALARY    BONUS(1)   AWARDS(2)     OPTIONS     COMPENSATION(3)
Peter A. Georgescu................  1997   $950,000   $598,500      --           --            $8,000
  Chairman and Chief Executive
  Officer, Young & Rubicam Inc.
Edward H. Vick....................  1997   $700,000   $272,250    $740,000     172,500         $8,199
  Chairman and Chief Executive
  Officer, Young & Rubicam
  Advertising
John P. McGarry, Jr. .............  1997   $730,000   $297,000      --           --            $8,000
  President, Young & Rubicam Inc.
Thomas D. Bell, Jr. ..............  1997   $575,000   $168,750      --         176,550         $8,000
  President and Chief Executive
  Officer, Burson-Marsteller
Michael J. Dolan..................  1997   $550,000   $198,000    $555,000     150,000         $2,190
  Vice Chairman and Chief
  Financial Officer, Young &
  Rubicam Inc.


(1) The named executive officers were awarded annual cash bonuses under the Key Corporation Managers Bonus Plan, which bonuses were generally based on the Company's achievement of target levels of operating profit and EBITA (earnings before interest, taxes and amortization), each as defined in such plan, as well as the achievement of individual objectives. The Company intends to grant future annual cash bonuses under the 1997 ICP based on substantially similar Company and individual performance criteria.

(2) The total number and value of shares of Restricted Stock held by the named executive officers under the Restricted Stock Plan at December 31, 1997 (based on the value of the Common Stock as of December 31, 1997 as determined by the Company Board, based upon the valuation opinion of an independent investment bank, taking into account that prior to the Offerings, the Company was privately held and that the shares were subject to contractual transfer restrictions) are as follows: Mr. Georgescu -- 430,440 shares ($5,308,760); Mr. Vick -- 339,405 shares ($4,185,995); Mr. McGarry -- 155,850 shares ($1,922,150); Mr. Bell -- 284,790 shares ($3,512,410); and Mr. Dolan -- 305,865 shares ($3,772,335). The Company Board has elected to accelerate the vesting of the Restricted Stock to the date on which the Offerings are consummated, provided there is market demand for the sale by the Management Investors of a sufficient number of shares of Restricted Stock as is necessary to fund their personal tax liabilities associated with the vesting of the Restricted Stock. Accordingly, assuming sufficient demand for such shares exists, all Restricted Stock awarded to the named executive officers will vest and be distributed to the recipients or a deferral trust, as the case may be, upon the consummation of the Offerings. If the Restricted Stock does not vest upon the consummation of the Offerings, then it will vest upon the earliest of (i) the six-month anniversary of the consummation of the Offerings; (ii) if occurring during the six-month period following the Offerings, termination of employment without cause, voluntary termination of employment with the Company's written approval, death, permanent disability or, in certain cases, retirement from the Company; (iii) a change of control of the Company; or (iv) the occurrence of any other event determined by the Compensation Committee with the written consent of the Management Voting Trust. Dividends on Restricted Stock are paid on the same basis as ordinary dividends on the Common Stock and may be distributed to the holders of such Restricted Stock. 60,000 shares and 45,000 shares of Restricted Stock, respectively, of Messrs. Vick and Dolan's Restricted Stock awards were granted to them in December 1997 and are required to be placed in a deferral trust upon vesting thereof pursuant to the Deferred Compensation Plan. Such deferral trust will hold the shares prior to their distribution to Messrs. Vick and Dolan which will occur with respect to 33 1/3% of the shares on January 15, 2001, with respect to an additional 33 1/3% of the shares on January 15, 2002, and with respect to the remaining 33 1/3% of the shares on January 15, 2003. Certain of the named executive officers have voluntarily elected under the Deferred Compensation Plan to have their Restricted Stock placed in a deferral trust upon vesting thereof, and to have such shares distributed to them from such deferral trust at specified times in the future.

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(3) "All other compensation" for 1997 consisted of the Company's contribution of: (i) $8,000 on behalf of each of the named executive officers (other than Mr. Dolan) as matching contributions under the Young & Rubicam Employees' Savings Plan ("Savings Plan") and (ii) an additional $199 and $2,190 on behalf of Mr. Vick and Mr. Dolan, respectively, as matching contributions under the Company's Education Incentive Plan (pursuant to which U.S. employees may elect to have limited amounts of compensation, together with a Company match, invested in a group annuity insurance contract for purposes of meeting their children's future education costs). See "-- Savings Plan."

During 1997, stock option grants covering 11,469,150 shares in the aggregate were awarded to 442 employees under the Company's Stock Option Plans. The option grants in 1997 for the named executive officers are shown in the following table.

OPTION GRANTS IN LAST FISCAL YEAR

                                                                                       POTENTIAL REALIZABLE VALUE
                                                                                           AT ASSUMED ANNUAL
                                                                                             RATES OF STOCK
                                                                                         PRICE APPRECIATION FOR
                                                INDIVIDUAL GRANTS                             OPTION TERM
                              -----------------------------------------------------    --------------------------
                              NUMBER OF      PERCENT OF
                              SECURITIES    TOTAL OPTIONS
                              UNDERLYING     GRANTED TO
                               OPTIONS      EMPLOYEES IN     EXERCISE    EXPIRATION
            NAME               GRANTED       FISCAL YEAR      PRICE         DATE           5%             10%
Peter A. Georgescu..........        --            --              --            --             --             --
Edward H. Vick..............   172,500(1)        1.5%         $12.33      12/17/07     $1,337,973     $3,390,687
John P. McGarry, Jr.........        --            --              --            --             --             --
Thomas D. Bell, Jr..........   176,550(2)        1.5%         $12.33      12/17/07     $1,369,387     $3,470,295
Michael J. Dolan............   150,000(1)        1.3%         $12.33      12/17/07     $1,163,455     $2,948,424


(1) These represent non-qualified options granted under the 1997 ICP. Such options have a ten-year term and will become exercisable with respect to 33 1/3% of the shares subject to any such option on December 31, 2000, with respect to an additional 33 1/3% of such shares on December 31, 2001 and with respect to the remaining 33 1/3% of such shares on December 31, 2002. These options will become fully exercisable with respect to 100% of the shares subject thereto upon a change in control of the Company (as defined in the 1997 ICP) or termination of employment due to death or disability. Upon termination of employment for any other reason, the portion of any such option that was not exercisable at such time will expire.

(2) This represents a non-qualified option granted under the 1997 ICP. Such option has a ten-year term and will become exercisable nine years and nine months from the date of grant, unless Burson-Marsteller, Landor Associates, Sudler & Hennessey and Cohn & Wolfe achieve a targeted operating profit budget commitment for the year ending December 31, 1998, in which case it will become exercisable with respect to 33 1/3% of the shares subject to such option on December 31, 2000, with respect to an additional 33 1/3% of such shares on December 31, 2001 and with respect to the remaining 33 1/3% of such shares on December 31, 2002. This option will become fully exercisable with respect to 100% of the shares subject thereto upon a change in control of the Company (as defined in the 1997 ICP) or termination of employment due to death or disability. Upon termination of employment for any other reason, the portion of such option that was not exercisable at such time will expire.

The exercise of options during 1997, number of options held and their value at year-end for the named executive officers are shown in the following table:

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

                                                             NUMBER OF SECURITIES         VALUE OF UNEXERCISED
                                                            UNDERLYING UNEXERCISED       IN-THE-MONEY OPTIONS AT
                               SHARES                     OPTIONS AT FISCAL YEAR END         FISCAL YEAR END
                             ACQUIRED ON      VALUE       --------------------------    -------------------------
           NAME               EXERCISE       REALIZED     EXERCISABLE/UNEXERCISABLE     EXERCISABLE/UNEXERCISABLE
Peter A. Georgescu.........         --              --             --/--                         --/--
Edward H. Vick.............         --              --     895,245(1)/172,500(2)             $9,325,469/--
John P. McGarry, Jr........    241,110      $1,386,383             --/--                         --/--
Thomas D. Bell, Jr. .......         --              --    1,165,215(1)/176,550(3)            $12,137,656/--
Michael J. Dolan...........         --              --     104,340(4)/306,525(5)           $486,948/$730,422


(1) This represents a Rollover Option granted under the Management Stock Option Plan (see "-- Management Stock Option Plan").

(2) See footnote (1) to the option grant table on the preceding page.

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(3) See footnote (2) to the option grant table on the preceding page.

(4) This represents a Closing Option granted under the Management Stock Option Plan (see "-- Management Stock Option Plan").

(5) This represents (i) with respect to 150,000 shares, a non-qualified option granted under the 1997 ICP with the terms set forth in footnote (1) to the option grant table on the preceding page and (ii) with respect to 156,525 shares, a Closing Option granted under the Management Stock Option Plan (see "-- Management Stock Option Plan").

MANAGEMENT STOCK OPTION PLAN. At the time of the Recapitalization, the Compensation Committee granted an aggregate of 16,823,565 Rollover Options to certain members of management of Y&R in consideration of their surrender for cancellation of all or a portion of their outstanding options to purchase equity units of predecessor companies of Y&R, as well as an aggregate of 5,200,590 Closing Options pursuant to the Management Stock Option Plan. The Rollover Options were immediately vested and exercisable upon grant. Each Rollover Option has an exercise price of $1.92 per share of Common Stock subject to such Rollover Option, with certain limited exceptions outside the United States, and has a term of five years with respect to 50% of the shares subject thereto and a term of seven years with respect to the other 50%. Each Closing Option became exercisable immediately with respect to 40% of the shares subject thereto and will become exercisable (i) on the third anniversary of its grant date with respect to 30% of such shares and (ii) on the fifth anniversary of its grant date with respect to the remaining 30% of such shares. The exercise price for the Closing Options is $7.67 per share of Common Stock. Since the time of the Recapitalization, the Compensation Committee granted an aggregate of 1,891,200 additional options with the same terms and conditions as the Closing Options (such options, together with the Closing Options, the "Executive Options"). Through April 15, 1998, an aggregate of 754,185 Rollover Options were exercised and the underlying shares repurchased by the Company and an aggregate of 426,870 Executive Options were forfeited, all in connection with the termination of the employment of the option holder. In addition, through April 15, 1998, an aggregate of 4,078,695 shares of Common Stock were issued upon exercise of Rollover Options and an aggregate of 307,980 shares of Common Stock were issued upon exercise of Executive Options.

Executive Options will not be exercisable after the expiration of ten years from the date of grant of such Executive Option. Upon termination of employment for any reason, all Rollover Options and all Executive Options that are then exercisable will remain exercisable for 30 days and will then be canceled if not exercised. All Executive Options that have not yet become exercisable will be canceled immediately on termination of employment.

Among other powers, the Compensation Committee has the authority to accelerate the right to exercise any or all of the Executive Options, provided that with respect to the period during which the Recapitalization Investors own at least 20% of the Outstanding Shares (the "Extended Consent Period"), such action shall only be effective with the written consent of the Recapitalization Investors unless such acceleration involves only the waiver of any terms or conditions not expressly provided for by the Management Stock Option Plan.

No employee may be granted a Rollover Option or Executive Option under the Management Stock Option Plan unless he or she is or becomes a party to the Stockholders' Agreement and the Management Voting Trust Agreement, so long as those agreements are in effect. The Rollover Options and Executive Options are transferable only by will or intestate succession and upon such a transfer the transferee must agree to be bound by the Management Stock Option Plan and to execute any other agreement which the Compensation Committee may prescribe, including any supplements to the Stockholders' Agreement and Management Voting Trust Agreement

The Compensation Committee, with the written consent of the Recapitalization Investors during the Extended Consent Period, and the Management Voting Trust may at any time terminate the Management Stock Option Plan or any Rollover Options or Executive Options then outstanding. Upon the termination of an outstanding Rollover Option or Executive Option, Y&R would pay cash consideration for each share underlying such Rollover Option or Executive Option equal to the value of a share of Common Stock less the exercise price per share and any applicable withholding taxes or other similar charges. The Compensation Committee may amend the Management Stock Option Plan and the terms and conditions of the Rollover Options and the Executive Options with the written consent of the Recapitalization Investors (during the Extended Consent Period with respect to any amendment accelerating the right to exercise any or all of the Executive Options or any other amendment improving the terms of the Rollover Options or Executive Options

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unless such acceleration or amendment involves the waiver or amendment of any terms or conditions not expressly provided for by the Management Stock Option Plan) and the Management Voting Trust, provided that no amendment may impair the rights of a holder of a Rollover Option or Executive Option without such holder's consent and that no amendment may increase the aggregate number of shares of Common Stock which may be issued pursuant to Rollover Options and Executive Options granted under the Management Stock Option Plan or change the definition of employees eligible for grants without the approval of the stockholders of Y&R. However, the Compensation Committee is authorized to make certain adjustments to the Management Stock Option Plan and any outstanding Rollover Options or Executive Options in the event of a change in the capitalization of Y&R due to certain corporate events specified in the Management Stock Option Plan.

Under U.S. tax law, the exercise of any Rollover Option or Executive Option will be a taxable event for U.S. taxpayers, and Y&R will have withholding obligations. For purposes of U.S. federal income tax, upon exercise, a holder will be deemed to have received ordinary income in an amount equal to the difference between the exercise price of the Rollover Option or Executive Option, as the case may be, and the fair market value of the shares of Common Stock received on exercise, and, generally, the Company will be entitled to a tax deduction in an amount equal to the amount of ordinary income realized by the holder. In order to exercise either a Rollover Option or Executive Option, the employee will also need to pay the exercise price. Under the Management Stock Option Plan, upon exercise of a Rollover Option or Executive Option, the employee may pay the exercise price either in cash or, subject to the approval of the Compensation Committee, by (i) delivering a number of shares of Common Stock already owned by such employee with the appropriate value or (ii) a recourse note to Y&R with such terms and conditions as the Compensation Committee may require, including a pledge of the related shares. Further, upon such exercise of a Rollover or Executive Option, the employee may pay the withholding taxes or other similar charges which are incurred in connection with such exercise by the same methods and subject to the same approvals as for the payment of the exercise price or, in addition, subject to the approval of the Compensation Committee, by having Y&R withhold a number of shares of Common Stock of the appropriate value from those to be distributed upon such exercise. Moreover, if the Compensation Committee consents, the employee may have a number of shares of Common Stock either withheld from those to be distributed upon exercise or delivered to Y&R with the appropriate value to satisfy the estimated total taxes and charges that would be incurred by the employee as a result of such exercise.

The Company has adopted a new incentive compensation plan that has superseded the Management Stock Option Plan with respect to all future grants of options. See "-- 1997 ICP" below.

THE RESTRICTED STOCK PLAN AND TRUST AGREEMENT. Pursuant to the Restricted Stock Plan, upon consummation of the Recapitalization, Y&R issued a total of 11,086,950 shares of Common Stock to the Restricted Stock Trust. Common Stock held in the Restricted Stock Trust may be granted as Restricted Stock by the Compensation Committee pursuant to the Restricted Stock Plan. Immediately after closing of the Recapitalization, the Compensation Committee allocated an aggregate of 6,172,440 shares of Restricted Stock to certain key employees. Since the time of the Recapitalization, the Compensation Committee has further allocated an aggregate of 2,528,865 shares of Restricted Stock through December 31, 1997, including 1,832,235 shares of Restricted Stock in December 1997. An aggregate of 254,385 shares of Restricted Stock has been forfeited since the Recapitalization as a result of the termination of the employment of the Restricted Stock grantee. In January 1998, the Compensation Committee allocated an aggregate of 368,595 shares of Restricted Stock to members of senior management, including to each of the named executive officers. Such allocations were made to the recipients in lieu of target bonus increases and/or salary increases in 1997 and 1998. In 1998, the Compensation Committee also allocated an additional 415,590 shares of Restricted Stock under the Restricted Stock Plan. Upon any such award, an account is established in the Restricted Stock Trust for such employee and the appropriate number of shares of Restricted Stock is allocated to such account.

The Company Board has elected to accelerate the vesting of the Restricted Stock to the date on which the Offerings are consummated and the amounts held in each such employee's account in the Restricted Stock Trust will be distributed to such employees or to a deferral trust pursuant to the Deferred Compensation

47

Plan on such date, provided there is market demand for the sale by the Management Investors of a sufficient number of shares of Restricted Stock as is necessary to fund their personal tax liabilities associated with the vesting of the Restricted Stock. If the Restricted Stock does not vest upon the consummation of the Offerings, then it will vest upon the earliest of (i) the six-month anniversary of the consummation of the Offerings; (ii) if occurring during the six-month period following the Offerings, termination of employment without cause, voluntary termination of employment with the Company's written approval, death, permanent disability or, in certain cases, retirement from the Company; (iii) a change of control of the Company; or (iv) the occurrence of any other event determined by the Compensation Committee with the written consent of the Management Voting Trust. With respect to any award granted within six months of a vesting event outlined above, the Compensation Committee may provide that such award will not vest upon such vesting event. Restricted Stock awards may also be subject to other conditions as may be prescribed by the Compensation Committee in the agreement evidencing such awards.

Shares of Restricted Stock granted in December 1997 will vest as described above, and recipients of such 1,832,235 shares of Restricted Stock, as a condition to such grant, will be required to place such shares in a deferral trust upon vesting (subject to the claims of the creditors of the Company in the event of its insolvency) pursuant to the Deferred Compensation Plan. Such deferral trust will hold the shares prior to their distribution to such recipients which will occur with respect to 33 1/3% of the shares on January 15, 2001, with respect to an additional 33 1/3% of the shares on January 15, 2002 and with respect to the remaining 33 1/3% of the shares on January 15, 2003.

Upon termination of employment for any reason prior to vesting an employee will forfeit all unvested Restricted Stock granted to him or her without consideration on the date of such termination.

Dividends payable in cash with respect to Restricted Stock awarded to an employee may be remitted to such employee (less any applicable withholding tax or other similar changes) as the Compensation Committee, in its sole discretion, may determine. Any non-cash dividend with respect to Restricted Stock shall remain in the Restricted Stock Trust and shall be credited to the account of the employee to whom any such Restricted Stock has been awarded. While the Management Voting Trust Agreement is in effect, all Restricted Stock shall be delivered to the Management Voting Trust and voted in accordance with the provisions of the Management Voting Trust Agreement. After the Management Voting Trust Agreement is no longer in effect, each employee who has been awarded Restricted Stock shall be entitled to instruct the trustee of the Restricted Stock Trust as to the voting of such Restricted Stock held in his account. Restricted Stock as to which no voting instructions are received by the trustee or which have not been granted to any employee shall be voted by the trustee pro rata in accordance with the vote of the Restricted Stock which has been granted as to which voting instructions have been given.

Among other powers, the Compensation Committee shall have the authority to accelerate the vesting of all awards and the release of the related Restricted Stock.

No employee may be granted an award of Restricted Stock under the Restricted Stock Plan unless he or she is or becomes a party to the Stockholders' Agreement and the Management Voting Trust Agreement, so long as those agreements are in effect. Subject to the following sentence, Restricted Stock granted to an employee and held in the Restricted Stock Trust is not transferable and any attempt to transfer such Restricted Stock may lead to its forfeiture without consideration. Restricted Stock which vests as a result of the death of the employee during the six-month period after an initial public offering may be transferred by will or intestate succession and upon such a transfer the transferee must agree to be bound by the Restricted Stock Plan and to execute any other agreement which the Compensation Committee may prescribe, including any supplements to the Stockholders' Agreement and Management Voting Trust Agreement.

The Compensation Committee, with the written consent of the Management Voting Trust, may at any time terminate the Restricted Stock Plan or any awards of Restricted Stock then outstanding. Upon the termination of the Restricted Stock Plan or of an outstanding award of Restricted Stock, the Compensation Committee may, with the written consent of the Management Voting Trust, either declare that a vesting event has occurred and release Restricted Stock to employees or cause Y&R to pay an amount in cash equal to the value of the Restricted Stock subject to such terminated award minus any applicable withholding taxes or

48

other similar charges. Within two years of any such termination of the Restricted Stock Plan, the Compensation Committee shall distribute any unawarded Restricted Stock remaining in the Restricted Stock Trust to such employees as it may designate. In no event shall any Restricted Stock revert to Y&R as a result of the termination of the Restricted Stock Plan or any award of Restricted Stock. The Compensation Committee may amend the Restricted Stock Plan and the terms and conditions of any awards of Restricted Stock with the written consent of the Management Voting Trust, provided that no amendment may impair the rights of a holder of any such award without such holder's consent. However, the Compensation Committee is authorized to make certain adjustments to the Restricted Stock Plan and any outstanding awards of Restricted Stock in the event of a change in the capitalization of Y&R due to certain corporate events specified in the Restricted Stock Plan.

Under U.S. tax law, the vesting and distribution of the Restricted Stock will be a taxable event for U.S. taxpayers, and Y&R will have withholding obligations. For purposes of U.S. federal income tax, an award holder will be deemed to have received ordinary income in an amount equal to the fair market value of the shares of Common Stock received and, generally, the Company will be entitled to a tax deduction in an amount equal to the amount of ordinary income realized by the award holder. Under the Restricted Stock Plan, upon the vesting and receipt of Restricted Stock, the employee may pay the withholding taxes or other similar charges either in cash or, subject to the approval of the Compensation Committee, by (i) delivering a number of shares of Common Stock already owned by such employee with the appropriate value, (ii) a recourse note to Y&R with such terms and conditions as the Compensation Committee may require, including a pledge of the related shares or (iii) having a number of shares of Restricted Stock of the appropriate value withheld from those to be distributed. Moreover, if the Compensation Committee consents, the employee may have a number of shares of Common Stock either withheld from those to be distributed or delivered to Y&R with the appropriate value to satisfy the estimated total taxes and charges that would be incurred by the employee as a result of such vesting and distribution.

The Company has adopted a new incentive compensation plan that has amended and restated the Restricted Stock Plan with respect to all grants made subsequent to March 31, 1998. See "-- 1997 ICP" below. In order to assist the Company and its affiliates in meeting various cash compensation obligations of the Company and its affiliates, the Company has amended the agreement governing the Restricted Stock Trust to provide for cash distributions to be made from the Restricted Stock Trust to pay salaries and for the benefit of participants in various annual bonus programs as the Compensation Committee may direct, and to permit the trustee of the Restricted Stock Trust to require the Company to purchase unallocated shares of Common Stock held therein such that proceeds from the sale are sufficient to make such salary and bonus payments. Pursuant to such amendment, the Company will repurchase the remaining 1,855,845 unallocated shares of Common Stock in the Restricted Stock Trust upon the consummation of the Offerings.

1997 ICP. In December 1997, the Company adopted the 1997 Incentive Compensation Plan (the "1997 ICP"). The 1997 ICP has superseded the Management Stock Option Plan and has amended and restated the Restricted Stock Plan (the Management Stock Option Plan and the Restricted Stock Plan (prior to such amendment and restatement), the "Preexisting Plans"), although all awards granted prior to the adoption of the 1997 ICP, and any grants of Restricted Stock made after such adoption but on or prior to March 31, 1998, will remain outstanding in accordance with their terms and be subject to the terms of the Preexisting Plans.

The Board believes that attracting and retaining key employees is essential to the Company's growth and success. In addition, the Board believes that the long-term success of the Company is enhanced by a competitive and comprehensive compensation program, which may include tailored types of incentives designed to motivate and reward such persons for outstanding service, including awards that link compensation to applicable measures of the Company's performance and the creation of stockholder value. Such awards should enable the Company to attract and retain key employees and enable such persons to acquire and/or increase their proprietary interest in the Company and thereby align their interests with the interests of the Company's stockholders. In addition, the Board believes that the Compensation Committee should be given as much flexibility as possible to provide for annual and long-term incentive awards contingent on performance.

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The Company granted non-qualified options to employees to purchase an aggregate of 9,577,950 shares of Common Stock in December 1997 under the 1997 ICP. Such options have an exercise price equal to $12.33 per share, which represents the fair market value of the Common Stock as of the date of grant (which takes into account that prior to the Offerings, the Company was privately held and that the shares were subject to contractual transfer restrictions, but does not give effect to the applicable put and call provisions of the Stockholders' Agreement). These options will expire if not exercised ten years after the date of grant and will be fully exercisable with respect to 33 1/3% of the shares subject to such option on December 31, 2000, with respect to an additional 33 1/3% of such shares on December 31, 2001, and with respect to the remaining 33 1/3% of such shares on December 31, 2002. Out of the options granted in December 1997, options to purchase 975,600 and 176,550 shares of Common Stock, respectively, granted to employees of Burson-Marsteller will not become exercisable until nine years and nine months from the date of their grant, unless Burson-Marsteller or the group of Burson-Marsteller, Landor Associates, Sudler & Hennessey and Cohn & Wolfe, as the case may be, achieves a targeted operating profit budget commitment for the year ending December 31, 1998, in which case the vesting schedule set forth in the previous sentence will apply to such options. All of these options will become fully exercisable with respect to 100% of the shares subject thereto upon a change in control of the Company (as defined in the 1997 ICP) or termination of employment due to death or disability. Upon termination of employment for any other reason, the portion of any such option that was not exercisable at such time will expire.

The following is a description of the material features of the 1997 ICP.

Types of Awards. The terms of the 1997 ICP provide for grants of stock options, stock appreciation rights ("SARs"), restricted stock, deferred stock, other stock-related awards, and performance or annual incentive awards that may be settled in cash, stock or other property ("Awards").

Shares Subject to the 1997 ICP; Annual Per-Person Limitations. Under the 1997 ICP, the total number of shares of the Common Stock reserved and available for delivery to participants in connection with Awards is (i) 19,125,000, plus
(ii) the number of shares of Common Stock subject to awards under Preexisting Plans that become available (generally due to cancellation or forfeiture) after the effective date of the 1997 ICP; provided, however, that the total number of shares of Common Stock with respect to which incentive stock options ("ISOs") may be granted shall not exceed one million. Any shares of Common Stock delivered under the 1997 ICP may consist of authorized and unissued shares or treasury shares.

The 1997 ICP imposes individual limitations on the amount of certain Awards in order to comply with Section 162(m) of the Internal Revenue Code (the "Code"). Under these limitations, during any fiscal year the number of options, SARs, shares of restricted stock, shares of deferred stock, shares of Common Stock issued as a bonus or in lieu of other obligations, and other stock-based Awards granted to any one participant must not exceed 200,000 shares for each type of such Award, subject to adjustment in certain circumstances. In addition, the maximum cash amount that may be earned as a final annual incentive award or other annual cash Award in respect of any fiscal year by any one participant and the maximum cash amount that may be earned as a final performance award or other cash Award in respect of a performance period other than an annual period by any one participant may not exceed $10 million. The Company intends for Awards granted to "covered employees (as defined in Section 162(m)) under the 1997 ICP to qualify as "performance-based compensation" (as defined in Section 162(m) and regulations thereunder) for purposes of Section 162(m) to the extent such Awards may otherwise be subject thereto.

The Compensation Committee is authorized to adjust the number and kind of shares subject to the aggregate share limitations and annual limitations under the 1997 ICP and subject to outstanding Awards (including adjustments to exercise prices and number of shares of options and other affected terms of Awards) in the event that a dividend or other distribution (whether in cash, shares, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event affects the Common Stock so that an adjustment is determined by the Compensation Committee to be appropriate. The Compensation Committee is also authorized to adjust performance conditions and other terms and conditions of Awards in response to these kinds of events or in response to changes in applicable laws, regulations, or accounting principles or in view of

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any other circumstances deemed relevant by the Compensation Committee; provided that no such adjustment may be made if and to the extent if would cause Awards to "covered employees" intended to so qualify to fail to qualify as "performance-based compensation" for purposes of Section 162(m) of the Code.

Eligibility. Executive officers and other officers and employees of the Company or any affiliate, including any such person who may also be a director of the Company, and each other person who provides services to the Company or any affiliate shall be eligible to be granted Awards under the 1997 ICP. An affiliate of the Company for this purpose includes any entity required to be aggregated with the Company under Section 414 of the Code and any 10% owned joint venture or partnership of the Company or an affiliate.

Administration. The 1997 ICP is administered by the Compensation Committee except to the extent the Board elects to administer the 1997 ICP. Subject to the terms and conditions of the 1997 ICP, the Compensation Committee is authorized to select participants, determine the type and number of Awards to be granted and the number of shares of Common Stock to which Awards will relate, specify times at which Awards will be exercisable or settleable (including performance conditions that may be required as a condition thereof), set other terms and conditions of such Awards, prescribe forms of Award agreements, interpret and specify rules and regulations relating to the 1997 ICP, and make all other determinations that may be necessary or advisable for the administration of the 1997 ICP. The 1997 ICP provides that Compensation Committee members shall not be personally liable, and shall be fully indemnified, in connection with any action, determination, or interpretation taken or made in good faith under the 1997 ICP.

Stock Options and SARs. The Compensation Committee is authorized to grant stock options, including both ISOs that can result in potentially favorable tax treatment to the participant and non-qualified stock options (i.e., options not qualifying as ISOs), and SARs entitling the participant to receive the excess of the fair market value of a share of Common Stock on the date of exercise over the grant price of the SAR. The exercise price per share subject to an option and the grant price of an SAR is determined by the Compensation Committee, but must not be less than the fair market value of a share of Common Stock on the date of grant (except to the extent of in-the-money awards or cash obligations surrendered by the participant at the time of grant). The maximum term of each option or SAR, the times at which each option or SAR will be exercisable, and provisions requiring forfeiture of unexercised options or SARs at or following termination of employment generally is fixed by the Compensation Committee, except no option or SAR may have a term exceeding ten years. Options may be exercised by payment of the exercise price in cash, Common Stock, outstanding Awards, or other property (possibly including notes or obligations to make payment on a deferred basis) having a fair market value equal to the exercise price, as the Compensation Committee may determine from time to time. Methods of exercise and settlement and other terms of the SARs are determined by the Compensation Committee.

Restricted and Deferred Stock. The Compensation Committee is authorized to grant restricted stock and deferred stock. Restricted stock is a grant of Common Stock which may not be sold or disposed of, and which may be forfeited in the event of certain terminations of employment and/or failure to meet certain performance requirements prior to the end of a restricted period as specified by the Compensation Committee. A participant granted restricted stock generally has all of the rights of a shareholder of the Company, including the right to vote the shares and to receive dividends thereon, unless otherwise determined by the Compensation Committee. An Award of deferred stock confers upon a participant the right to receive shares or cash (or a combination) at the end of a specified deferral period, subject to possible forfeiture of the Award in the event of certain terminations of employment and/or failure to meet certain performance requirements prior to the end of a specified period (which period need not extend for the entire duration of the deferral period). Prior to settlement, an Award of deferred stock carries no voting or dividend rights or other rights associated with share ownership, although dividend equivalents may be granted, as discussed below.

Dividend Equivalents. The Compensation Committee is authorized to grant dividend equivalents conferring on participants the right to receive cash, shares, other Awards, or other property equal in value to dividends paid on a specific number of shares, or other periodic payments. Dividend equivalents may be granted on a free-standing basis or in connection with another Award, may be paid currently or on a deferred

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basis, and, if deferred, may be deemed to have been reinvested in additional shares, Awards, or other investment vehicles specified by the Compensation Committee.

Bonus Stock and Awards in Lieu of Cash Obligations. The Compensation Committee is authorized to grant shares as a bonus free of restrictions, or to grant shares or other Awards in lieu of obligations to pay cash or deliver other property under the 1997 ICP or other plans or compensatory arrangements, subject to such terms as the Compensation Committee may specify.

Other Stock-Based Awards. The 1997 ICP authorizes the Compensation Committee to grant Awards that are denominated or payable in, valued by reference to, or otherwise based on or related to shares. Such Awards might include convertible or exchangeable debt securities, other rights convertible or exchangeable into shares, purchase rights for shares, Awards with value and payment contingent upon performance of the Company or any other factors designated by the Compensation Committee, and Awards valued by reference to the book value of shares or the value of securities of or the performance of specified affiliates. The Compensation Committee determines the terms and conditions of such Awards, including consideration to be paid to exercise Awards in the nature of purchase rights, the period during which Awards will be outstanding, and forfeiture conditions and restrictions on Awards.

Performance Awards, Including Annual Incentive Awards. The right of a participant to exercise or receive a grant or settlement of an Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Compensation Committee (measurable over performance periods of up to 10 years). In addition, the 1997 ICP authorizes specific annual incentive awards, which represent a conditional right to receive cash, shares or other Awards upon achievement of preestablished performance goals during a specified one-year period. Performance awards and annual incentive awards granted to persons the Compensation Committee expects will, for the year in which a deduction arises, be among the Chief Executive Officer and four other most highly compensated executive officers, will, if so intended by the Compensation Committee, be subject to provisions that should qualify such Awards as "performance-based compensation" not subject to the limitation on tax deductibility by the Company under Code Section 162(m).

The performance goals to be achieved as a condition of payment or settlement of a performance award or annual incentive award will consist of (i) one or more business criteria and (ii) a targeted level or levels of performance with respect to each such business criteria as specified by the Committee. In the case of performance awards intended to meet the requirements of Code Section
162(m), the business criteria used must be one of those specified in the 1997 ICP, although for other participants the Compensation Committee may specify any other criteria. The business criteria specified in the 1997 ICP are: (1) earnings per share; (2) increase in revenues; (3) cash flow; (4) cash flow return on investment; (5) return on net assets, return on assets, return on investment, return on capital, return on equity; (6) economic value added; (7) operating margin; (8) net income, net income before taxes, operating profits, earnings before interest, taxes and amortization, earnings before interest, taxes, depreciation and amortization; (9) total shareholder return; (10) ratio of staff cost to revenues or gross margin; and (11) any of the above goals as compared to the performance of a published or special index deemed applicable by the Compensation Committee including, but not limited to, the Standard & Poor's 500 Stock Index or a group of comparator companies.

In granting annual incentive or performance awards, the Compensation Committee shall establish a performance goal or goals and may establish unfunded award "pools," the amounts of which will be based upon the achievement of such performance goal or goals using one or more of the business criteria described in the preceding paragraph. During the first 90 days of a fiscal year or performance period, the Compensation Committee will determine who will potentially receive annual incentive or performance awards for that fiscal year or performance period, either out of the pool or otherwise, and the amounts potentially payable with respect thereto. After the end of each fiscal year or performance period, the Compensation Committee will determine the amount, if any, of the pool and the maximum amount of potential annual incentive or performance awards payable to each participant in the pool, or the amount of any potential annual incentive or performance award otherwise payable to a participant. The Compensation Committee may, in its discretion, determine that the amount payable as a final annual incentive or performance award will be increased or

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reduced from the amount of any potential Award, but may not exercise discretion to increase any such amount in the case of an Award intended to qualify under Code Section 162(m).

Subject to the requirements of the 1997 ICP, the Compensation Committee will determine other performance award and annual incentive award terms, including the required levels of performance with respect to the business criteria, the corresponding amounts payable upon achievement of such levels of performance, termination and forfeiture provisions, and the form of settlement.

Other Terms of Awards. Awards may be settled in the form of cash, Common Stock, other Awards, or other property, in the discretion of the Compensation Committee. The Compensation Committee may require or permit participants to defer the settlement of all or part of an Award in accordance with such terms and conditions as the Compensation Committee may establish, including payment or crediting of interest or dividend equivalents on deferred amounts, and the crediting of earnings, gains, and losses based on deemed investment of deferred amounts in specified investment vehicles. The Compensation Committee is authorized to place cash, shares, or other property in trusts or make other arrangements to provide for payment of the Company's obligations under the 1997 ICP. The Compensation Committee may condition any payment relating to an Award on the withholding of taxes and may provide that a portion of any shares or other property to be distributed will be withheld (or previously acquired shares or other property surrendered by the participant) to satisfy withholding and other tax obligations. Awards granted under the 1997 ICP generally may not be pledged or otherwise encumbered and are not transferable except by will or by the laws of descent and distribution, or to a designated beneficiary upon the participant's death, except that the Compensation Committee may, in its discretion, permit transfers for estate planning or other purposes.

Awards under the 1997 ICP are generally granted without a requirement that the participant pay consideration in the form of cash or property for the grant (as distinguished from the exercise), except to the extent required by law. The Compensation Committee may, however, grant Awards in exchange for other Awards under the 1997 ICP, awards under other plans of the Company, or other rights to payment from the Company, and may grant Awards in addition to and in tandem with such other Awards, awards, or rights as well.

The Compensation Committee may cancel or rescind Awards, or require repayment of any profits resulting from Awards, if the participant fails to comply with certain restrictive or other covenants set forth in the 1997 ICP and/or an Award agreement.

Acceleration of Vesting. The Compensation Committee may, in its discretion, accelerate the exercisability, the lapsing of restrictions, or the expiration of deferral or vesting periods of any Award, and such accelerated exercisability, lapse, expiration and vesting shall occur automatically in the case of a "change in control" of the Company except to the extent otherwise provided in the Award agreement. In addition, the Compensation Committee may provide that the performance goals relating to any performance-based award will be deemed to have been met upon the occurrence of any change in control. "Change in control" is defined in the 1997 ICP to include (i)(x) any person (other than the Company, certain companies owned by the stockholders of the Company or any employee benefit plans of the Company) becoming the beneficial owner of securities representing 40% or more of the combined voting power of the Company's then outstanding securities and (y) so long as the Management Voting Trust is still in existence, representing a greater percentage of the combined voting power of the Company's then outstanding securities than is represented by securities held by the Management Voting Trust, provided, that all shares of Common Stock subject to vested options under the 1997 ICP and the Management Stock Option Plan (not including options which would vest on such change in control) are counted as outstanding securities of the Company; (ii) during a two-year period, individuals who constitute the Board at the start of such period, and any new director whose election or nomination for election to the Board was approved by a vote of at least two-thirds of the directors then in office who either were directors at the start of such period or whose election or nomination was previously so approved (excluding directors whose elections were as a result of certain proxy contests or who were designated by any entity who had entered into a change in control agreement with the Company), ceasing to constitute a majority of the Board; (iii) the consummation of a merger or consolidation of the Company with another entity which would result in either (A) the voting securities of the Company outstanding immediately

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prior to such merger or consolidation failing to represent (either by remaining outstanding or being converted into voting securities of the surviving or resulting entity) 40% or more of the combined voting power of the surviving or resulting entity outstanding immediately after such merger or consolidation or (B)(I) the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent at least 40% but less than 60% of the combined voting power of the surviving or resulting entity outstanding immediately after such merger or consolidation and (II) as a result of such merger or consolidation, there is an acceleration of the vesting or exercisability of any material amount of, or material percentage of, outstanding stock options or other stock awards granted by the entity with which such merger or consolidation is taking place or any of its affiliates; (iv) the stockholders of the Company approve a plan or agreement for the sale or disposition of all or substantially all of the consolidated assets of the Company (other than a sale or disposition immediately after which such assets will be owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of common stock of the Company immediately prior thereto) in which case the Board shall determine the effective date of the change in control; or (v) any other event which the Board determines, in its discretion, would materially alter the structure of the Company or its ownership. A change in control will also be deemed to have occurred immediately prior to the consummation of (i) a tender offer for securities of the Company representing more than 50% of the combined voting power of the Company's then outstanding securities in which there is not disclosed an intention to follow the consummation of the tender offer with a merger, reorganization, consolidation, share exchange or similar transaction or (ii) a tender offer for securities of the Company representing any percentage of the combined voting power of the Company's then outstanding securities in which there is disclosed an intention to follow the consummation of the tender offer with a merger, reorganization, consolidation, share exchange or similar transaction in which the value of the consideration to be offered for such securities is lower than the value of the consideration offered for such securities in the tender offer (as determined by the Board at the time) in order to allow holders of previously unexercisable Options the opportunity to participate therein with respect to shares underlying such Options.

Amendment and Termination of the 1997 ICP. The Board may amend, alter, suspend, discontinue, or terminate the 1997 ICP or the Compensation Committee's authority to grant Awards without the consent of shareholders or participants, except shareholder approval must be obtained for any amendment or alteration if required by law or regulation or under the rules of any stock exchange or automated quotation system on which the shares are then listed or quoted and participant consent must be obtained if such action would materially and adversely affect the rights of a participant under an outstanding Award. Shareholder approval will not be deemed to be required under laws or regulations, such as those relating to ISOs, that condition favorable treatment of participants on such approval, although the Board may, in its discretion, seek shareholder approval in any circumstance in which it deems such approval advisable. Thus, shareholder approval will not necessarily be required for amendments that might increase the cost of the 1997 ICP or broaden eligibility. The Committee may amend, alter, suspend, discontinue or terminate any outstanding Award or Award agreement, except as otherwise provided in the 1997 ICP. Participant consent must be obtained if such action would materially and adversely affect the rights of a participant under such Award. Notwithstanding the foregoing, the Compensation Committee may terminate any outstanding Award in whole or in part, provided that upon such termination the Company pays to such Participant (i) with respect to an option (whether or not exercisable) or portion thereof, an amount in cash for each share of Common Stock subject to such option or portion thereof being terminated equal to the excess, if any, of
(a) the value at which a share of Common Stock received pursuant to the exercise of such option would have been valued by the Company at that time for purposes of determining applicable withholding taxes or other similar charges, over
(b) the sum of the exercise price per share of such option and applicable withholding taxes and other similar charges, and (ii) with respect to any other type of Award, an amount in Common Stock or cash (as determined by the Compensation Committee in its sole discretion) equal to the value of such Award or portion thereof being terminated as of the date of termination (assuming the acceleration of the exercisability of such Award or portion thereof, the lapsing of any restrictions on such Award or portion thereof or the expiration of any deferral or vesting period of such Award or portion thereof) as determined by the Compensation Committee in its sole discretion.

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Federal Income Tax Implications. The following is a summary description of the federal income tax consequences generally arising with respect to Awards under the 1997 ICP.

The grant of an option or SAR will create no tax consequences for the participant or the Company. A participant will not generally recognize taxable income upon exercising an ISO (except that the alternative minimum tax may apply). Upon exercising an option other than an ISO, the participant must generally recognize ordinary income equal to the difference between the exercise price and fair market value of the freely transferable and nonforfeitable shares acquired on the date of exercise. Upon exercising an SAR, the participant must generally recognize ordinary income equal to the cash or the fair market value of the freely transferable and nonforfeitable shares received.

Upon a disposition of shares acquired upon exercise of an ISO before the end of the applicable ISO holding periods, the participant must generally recognize ordinary income equal to the lesser of (i) the fair market value of the shares at the date of exercise of the ISO minus the exercise price, or (ii) the amount realized upon the disposition of the ISO shares minus the exercise price. Otherwise, a participant's disposition of shares acquired upon the exercise of an option (including an ISO for which the ISO holding periods are met) or SAR generally will result in short-term or long-term capital gain or loss measured by the difference between the sale price and the participant's tax basis in such shares (the tax basis generally being the exercise price plus any amount previously recognized as ordinary income in connection with the exercise of the option or SAR).

The Company generally will be entitled to a tax deduction equal to the amount recognized as ordinary income by the participant in connection with an option or SAR. The Company generally is not entitled to a tax deduction relating to amounts that represent a capital gain to a participant. Accordingly, the Company will not be entitled to any tax deduction with respect to an ISO if the participant holds the shares for the ISO holding periods prior to disposition of the shares.

With respect to Awards granted under the 1997 ICP that result in the payment or issuance of cash or shares or other property that is either not restricted as to transferability or not subject to a substantial risk of forfeiture, the participant must generally recognize ordinary income equal to the cash or the fair market value of shares or other property received. Thus, deferral of the time of payment or issuance will generally result in the deferral of the time the participant will be liable for income taxes with respect to such payment or issuance. The Company generally will be entitled to a deduction in an amount equal to the ordinary income recognized by the participant.

With respect to Awards involving the issuance of shares or other property that is restricted as to transferability and subject to a substantial risk of forfeiture, the participant must generally recognize ordinary income equal to the fair market value of the shares or other property received at the first time the shares or other property becomes transferable or is not subject to a substantial risk of forfeiture, whichever occurs earlier. A participant may elect to be taxed at the time of receipt of shares or other property rather than upon lapse of restrictions on transferability or substantial risk of forfeiture, but if the participant subsequently forfeits such shares or property, the participant would not be entitled to any tax deduction, including as a capital loss, for the value of the shares or property on which he previously paid tax. The participant must file such election with the Internal Revenue Service within 30 days of the receipt of the shares or other property. The Company generally will be entitled to a deduction in an amount equal to the ordinary income recognized by the participant.

Awards that are granted, accelerated or enhanced upon the occurrence of a change in control may give rise, in whole or in part, to "excess parachute payments" within the meaning of Section 280G of the Code and, to such extent, will be non-deductible by the Company and subject to a 20% excise tax by the participant.

DEFERRED COMPENSATION PLAN. In December 1997, the Company also adopted the Deferred Compensation Plan in order to permit certain members of a select group of management or highly compensated employees of the Company and its affiliates to defer receipt of specified portions of compensation (either cash, stock or stock-based compensation) and to have such deferred amounts treated as if invested in specified investment vehicles, all in accordance with the terms of the Deferred Compensation Plan. Amounts deferred under the Deferred Compensation Plan will be distributed to a participant as soon as practicable after the date or dates (including upon the occurrence of specified events), and in such number of installments, as may be

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elected by the participant or earlier in the case of Retirement, Disability or a Change in Control (as defined in the 1997 ICP). The Deferred Compensation Plan will be "unfunded". However, the Compensation Committee has authorized the creation of a trust to aid in meeting the Company's obligations thereunder. Such trust will be subject to the claims of the creditors of the Company in the event of the Company's insolvency.

CAREER CASH BALANCE PLAN (THE "CCB PLAN"). The CCB Plan is a defined benefit plan available to all employees of the Company and its participating affiliates. Subject to certain limitations, most vested retirement benefits available under the CCB Plan are insured by the Pension Benefit Guaranty Corporation. The Company pays the full cost of the benefit provided under the CCB Plan. Eligible retired employees may begin receiving full CCB Plan benefits at or after age 60 if he or she had at least five years of service. Alternatively a reduced benefit is payable at age 55 at the election of the participant. Under the CCB Plan, effective July 1, 1996, the Company annually credits to each participant's account 3.2% of the participant's salary. Salary is defined to include base salary or wages and excludes bonus, overtime, commissions and other special compensation. The Company will credit to each account interest equal to the average 1-year U.S. Treasury Bill interest rate for the month of November for the previous calendar year, rounded up to the nearest tenth of a percent, up to a maximum average of $150,000, multiplied by the number of benefit years (equal to twelve months of service or 2,280 hours). If the present value of the earned benefit at the time of termination is less than $3,500, the participant receives a lump sum distribution from the Company. If the earned benefit is greater than $3,500, the cash balance account is payable as a lump sum in cash or as an annuity (under certain circumstances) to the participant for reinvestment in other qualified plans prior to retirement at the participant's election, or for distribution upon retirement. CCB Plan benefits are not reduced by Social Security benefits. Loans cannot be taken from the CCB Plan.

The estimated annual benefits payable upon retirement at normal retirement age for the named executive officers are as follows: Mr. Georgescu -- $18,756, Mr. Vick -- $3,384, Mr. McGarry -- $18,756, Mr. Bell -- $4,632, and Mr. Dolan -- $1,152.

SAVINGS PLAN. The Savings Plan is a defined contribution plan to which employees may make contributions after one hour of service with the Company and to which the Company will make matching contributions on behalf of employees who have completed at least 1,000 hours of service with the Company. Eligible employees may choose to save up to 15% of their base pay and up to 10% of their additional pay (e.g., overtime, bonus, etc.) in any calendar year. Eligible employees can elect the amount of base pay they want to contribute to the Savings Plan through payroll deductions and can elect to save with before-tax and/or after-tax dollars. The Company matches employee contributions dollar-for-dollar at year-end up to the first 5% of annual base pay, provided the eligible participant is employed at year-end. Savings Plan accounts (consisting of employee contributions, Company contributions and earnings) grow on a tax-deferred basis. Such accounts can be invested by the participant in any of the investment options made available by the Company from time to time.

SELECTED EXECUTIVE RETIREMENT INCOME PLAN ("SERIP"). The SERIP is a supplemental executive retirement arrangement for selected members of senior management under separate contracts with the Company. Subject to certain non-competition and non-solicitation provisions, cash payments in a fixed annual amount varying as to each individual will be made to a participant whose rights have vested in accordance with his agreement when such participant's employment terminates or when he reaches a specified age (typically 60), whichever occurs later. Payments are made for the balance of the participant's life and, if fewer than ten annual payments are made during the participant's life, his beneficiary will receive the balance of the payments until ten annual payments are made. The Company's obligations to participants under the SERIP are subordinate in right of payment to its obligations to senior lenders and certain other creditors.

The estimated annual benefits payable upon retirement at normal retirement age for the named executive officers are as follows: Mr.
Georgescu -- $1,050,000, Mr. Vick -- $300,000, Mr. McGarry -- $200,000, Mr. Bell -- none, and Mr. Dolan -- none.

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THE YOUNG & RUBICAM PROFIT SHARING PLAN (INACTIVE) (THE "PROFIT SHARING PLAN"). The Profit Sharing Plan is a defined contribution plan which has been inactive since 1975 and is being continued only for the benefit of current and former employees (and their beneficiaries) who still have Profit Sharing Plan account balances. Participants can direct the investment of their Profit Sharing Plan account balances in any of the investment options made available by the Company from time to time. Certain named executive officers have accrued benefits under the Profit Sharing Plan but no additional accruals have been made for their accounts since 1975. The Company recently merged the Profit Sharing Plan into the Savings Plan.

EMPLOYMENT AND TERMINATION OF EMPLOYMENT ARRANGEMENTS. The Company and Michael Dolan entered into a letter agreement, as amended, regarding Mr. Dolan's principal terms of employment with the Company as Vice Chairman and Chief Financial Officer. This letter agreement entitles Mr. Dolan to an annual base salary and eligibility for a bonus under the Key Corporation Managers Bonus Plan as well as to the same perquisites and benefits under Company policies as other employees of the same rank. This letter agreement also provides that if Mr. Dolan should die while in the employ of the Company prior to the consummation of an initial public offering, the Company will treat as vested all shares of Restricted Stock and options to purchase Common Stock to the extent necessary to realize a value of $1,500,000 to Mr. Dolan.

Under the Management Voting Trust Agreement, Y&R has agreed to give each Management Investor, including each named executive officer, six months severance pay upon termination of employment for any reason other than for cause, but each Management Investor is required to waive any possible right to more than six months severance pay (and any claims for damages under any employment agreement). Upon termination of the Management Voting Trust, in the event of termination of employment, the named executive officers may be eligible to receive severance pay of up to 13 weeks base salary (based upon length of service) pursuant to a severance plan previously established for U.S. employees of the Company.

The Management Voting Trust has the unqualified right and power to vote and to execute consents with respect to all shares of Common Stock held by the Management Voting Trust. The voting rights of the Management Voting Trust will be exercised by certain members of senior management of Y&R, as Voting Trustees. The Voting Trustees are Peter A. Georgescu, Stephanie W. Abramson, Thomas D. Bell, Jr., Michael J. Dolan, Mitchell Kurz, John P. McGarry, Jr., Alan J. Sheldon and Edward H. Vick. So long as Peter A. Georgescu (or a successor Chief Executive Officer elected with the approval of the Management Voting Trust) is a Voting Trustee, his (or such successor's) decision will be binding unless he is outvoted by a super majority of the other Voting Trustees. If at any time there is no Chief Executive Officer, or if the Chief Executive Officer was not approved in advance by the Management Voting Trust, a majority vote of the Voting Trustees will constitute the action of the Management Voting Trust. The foregoing voting procedures will also apply to the election of Voting Trustees.

Executive officers are appointed by, and serve at the discretion of, the Company Board.

CERTAIN TRANSACTIONS

Upon consummation of the Recapitalization, certain of the Recapitalization Investors were granted an approval right over a number of specified fundamental corporate actions, and were granted the right to nominate and have elected three members of the Company Board. After the Offerings, such approval right will terminate, and the H&F Investors will retain the right to nominate and have elected (i) two members of the Board for so long as such investors continue to hold, in the aggregate, at least 10% of the Outstanding Shares and (ii) one member of the Board for so long as the H&F Investors continue to hold, in the aggregate, at least 5% of the Outstanding Shares.

In addition, certain of the Recapitalization Investors have demand and piggyback registration rights with respect to the Common Stock they hold. Such Recapitalization Investors have the right to have shares they hold included in any public offering of Common Stock made by the Company, and after the Offerings, such Recapitalization Investors will have certain demand registration rights to require the Company to register for resale shares of Common Stock held by the Recapitalization Investors. See "Shares Eligible for Future Sale."

57

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial ownership of the Common Stock and options to purchase Common Stock as of April 15, 1998 and as adjusted to reflect the sale of 16,600,000 shares of Common Stock in the Offerings, including beneficial ownership by (i) each person who is known by the Company to own beneficially 5% or more of the outstanding shares of any class of the Common Stock, (ii) each of the Company's Directors and named executive officers, (iii) all Directors and executive officers as a group and
(iv) the Selling Stockholders. The information in the table assumes that all shares of Restricted Stock vest within 60 days. The information in the table below has been calculated in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended. Except as indicated in the footnotes to the table, the persons named in the table have sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by them, subject to community property laws where applicable. The address of each of the Selling Stockholders other than the H&F Investors is c/o the Company at 285 Madison Avenue, New York, New York 10017. The address of the H&F Investors is c/o Hellman & Friedman LLC, One Maritime Plaza, San Francisco, California 94111.

                                         BENEFICIAL OWNERSHIP
                                          PRIOR TO OFFERINGS
                               -----------------------------------------
                                 SHARES AND                                SHARES BEING
            NAME               VESTED OPTIONS   VESTED OPTIONS   PERCENT     OFFERED
Management Voting Trust(1)...    45,294,150      14,104,845       60.0%     2,101,860
Hellman & Friedman Capital
  Partners III, L.P..........    28,961,100       2,311,590       45.4      7,002,762
H&F Orchard Partners III,
  L.P........................     2,109,060         168,270        3.4        509,969
H&F International Partners
  III, L.P...................       631,770          50,400        1.0        152,761
BearTel Corp. ...............       260,880              --          *         63,160
Peter A. Georgescu(2)........     1,783,560              --        2.9             --
Edward H. Vick (2)...........     1,495,290         895,245        2.4        156,465
Thomas D. Bell, Jr.(2).......     1,463,655       1,165,215        2.3        167,130
John P. McGarry, Jr.(2)......     1,155,450              --        1.9        141,810
Michael J. Dolan(2)..........       419,631         104,346          *             --
Richard S. Bodman............            --              --          *             --
Philip U. Hammarskjold(3)....            --              --          *
F. Warren Hellman(3).........            --              --          *
John F. McGillicuddy.........        13,035              --          *             --
Alan D. Schwartz(4)..........            --              --          *
All directors and executive
  officers as a group........     7,708,509       2,190,894       12.1%       517,665
Stephanie W. Abramson(2).....       475,353          26,088          *          7,260
American Media Management,
  Inc. ......................       141,750          11,310          *         34,275
Frank Anfield................       368,520          21,465          *         40,005
Matt Asinari.................       156,525          26,085          *         73,050
Jean-Marc Bara...............       304,080              --          *         73,455
Stephen Baum.................        21,600              --          *         12,090
Ted Bell.....................       827,820         334,065        1.3%        79,635
Bill Borrelle................        17,025              --          *          7,305
Roger Chiocchi...............        79,140          25,875          *          2,160
Michael Claes................        47,550          24,360          *          7,305
Neil Clark...................        91,305          52,170          *         21,915
Don Cogman...................       425,745         191,775          *         16,665
Janet Coombs.................       178,770         104,355          *         31,590
Cindy Giller.................         9,780              --          *          5,475
H. Irving Grousbeck..........       283,485          22,620          *         68,546
Barbara Jack.................       600,750         395,565        1.0%         3,960
Paul Jandreau-Smith..........       153,525          85,725          *         15,915
William Johnston.............        82,605          60,000          *          1,875
Christopher Komisarjevsky....       153,420         109,575          *          2,640
Philippe Krakowsky...........        64,560          26,085          *         18,270
Kurt Krauss..................        21,600              --          *         12,090
Stephanie Kugelman...........       473,355          88,485          *         25,530
Mitchell Kurz(2).............     1,397,745         589,455        2.3%       210,825

                                           BENEFICIAL OWNERSHIP
                                             AFTER OFFERINGS
                               --------------------------------------------
                                 SHARES AND
            NAME               VESTED OPTIONS   VESTED OPTIONS      PERCENT
Management Voting Trust(1)...    43,192,290       14,104,845         53.8%
Hellman & Friedman Capital
  Partners III, L.P..........    21,958,338        2,311,590         32.0%
H&F Orchard Partners III,
  L.P........................     1,599,091          168,270          2.4%
H&F International Partners
  III, L.P...................       479,009           50,400            *
BearTel Corp. ...............       197,720               --            *
Peter A. Georgescu(2)........     1,783,560               --          2.7%
Edward H. Vick (2)...........     1,338,825          895,245          2.0%
Thomas D. Bell, Jr.(2).......     1,296,525        1,165,215          1.9%
John P. McGarry, Jr.(2)......     1,013,640               --          1.5%
Michael J. Dolan(2)..........       419,631          104,346            *
Richard S. Bodman............            --               --            *
Philip U. Hammarskjold(3)....            --               --            *
F. Warren Hellman(3).........            --               --            *
John F. McGillicuddy.........        13,035               --            *
Alan D. Schwartz(4)..........            --               --            *
All directors and executive
  officers as a group........     7,190,844        2,190,894         10.5%
Stephanie W. Abramson(2).....       468,093           26,088            *
American Media Management,
  Inc. ......................       107,475           11,310            *
Frank Anfield................       328,515           21,465            *
Matt Asinari.................        83,475           26,085            *
Jean-Marc Bara...............       230,625               --            *
Stephen Baum.................         9,510               --            *
Ted Bell.....................       748,185          334,065          1.1%
Bill Borrelle................         9,720               --            *
Roger Chiocchi...............        76,980           25,875            *
Michael Claes................        40,245           24,360            *
Neil Clark...................        69,390           52,170            *
Don Cogman...................       409,080          191,775            *
Janet Coombs.................       147,180          104,355            *
Cindy Giller.................         4,305               --            *
H. Irving Grousbeck..........       214,939           22,620            *
Barbara Jack.................       596,790          395,565            *
Paul Jandreau-Smith..........       137,610           85,725            *
William Johnston.............        80,730           60,000            *
Christopher Komisarjevsky....       150,780          109,575            *
Philippe Krakowsky...........        46,290           26,085            *
Kurt Krauss..................         9,510               --            *
Stephanie Kugelman...........       447,825           88,485            *
Mitchell Kurz(2).............     1,186,920          589,455          1.8%

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                                         BENEFICIAL OWNERSHIP
                                          PRIOR TO OFFERINGS
                               -----------------------------------------
                                 SHARES AND                                SHARES BEING
            NAME               VESTED OPTIONS   VESTED OPTIONS   PERCENT     OFFERED
Jay Kushner..................       100,500          42,000          *         25,200
Anthony Manson...............        21,030              --          *          9,135
Thomas McQueeney.............       201,060              --          *         36,525
William Melzer...............       532,605         434,790          *         47,220
Craig Middleton..............       242,310          26,085          *         77,010
Fernan Montero...............       980,535              --        1.6%        64,065
James O'Malley...............        26,610          13,560          *          7,305
Steve Oroho..................       217,590         112,605          *            825
Stewart Owen.................       268,365         119,265          *         67,335
Graham Phillips..............        52,170              --          *         29,220
Dan Plouffe..................         7,500              --          *          4,200
Tim Pollak...................       981,165              --        1.6%        91,305
Hans-Henrik Rasmussen........       118,110              --          *         52,230
Ken Rietz....................       135,150         117,390          *          9,945
Ilene Rosenthal..............        21,360              --          *          2,130
Michael Samet................       328,740          14,625          *        101,145
Carol Schautz................       117,315              --          *         15,450
Matthew Schetlick............       118,485          60,870          *         32,265
Nico Schou...................        22,965              --          *          9,210
Alan Sheldon(2)..............       902,535              --        1.5%        45,000
Barbara Smith................        62,625          10,440          *          7,305
Stanley Stefanski............       675,285         111,675        1.1%       150,690
Clay Timon...................       603,735         521,745        1.0%        40,875
Joanne Zaiac.................       179,010              --          *         41,850

                                           BENEFICIAL OWNERSHIP
                                             AFTER OFFERINGS
                               --------------------------------------------
                                 SHARES AND
            NAME               VESTED OPTIONS   VESTED OPTIONS      PERCENT
Jay Kushner..................        75,300           42,000            *
Anthony Manson...............        11,895               --            *
Thomas McQueeney.............       164,535               --            *
William Melzer...............       485,385          434,790            *
Craig Middleton..............       165,300           26,085            *
Fernan Montero...............       916,470               --          1.4%
James O'Malley...............        19,305           13,560            *
Steve Oroho..................       216,765          112,605            *
Stewart Owen.................       201,030          119,265            *
Graham Phillips..............        22,950               --            *
Dan Plouffe..................         3,300               --            *
Tim Pollak...................       889,860               --          1.3%
Hans-Henrik Rasmussen........        65,880               --            *
Ken Rietz....................       125,205          117,390            *
Ilene Rosenthal..............        19,230               --            *
Michael Samet................       227,595           14,625            *
Carol Schautz................       101,865               --            *
Matthew Schetlick............        86,220           60,870            *
Nico Schou...................        13,755               --            *
Alan Sheldon(2)..............       857,535               --          1.3%
Barbara Smith................        55,320           10,440            *
Stanley Stefanski............       524,595          111,675            *
Clay Timon...................       562,860          521,745            *
Joanne Zaiac.................       137,160               --            *


* Less than one percent.

(1) "Beneficial Ownership Prior to Offerings" includes 11,086,950 shares held in the Restricted Stock Trust and "Beneficial Ownership After Offerings" includes 9,231,105 shares held in the Restricted Stock Trust, which shares are also subject to the Management Voting Trust. Beneficial ownership by the Management Voting Trust includes an aggregate of 2,101,860 shares offered hereby by Management Investors who are Selling Stockholders, which shares are held by the Management Voting Trust. Other than the shares offered by the H&F Investors, BearTel Corp., H. Irving Grousbeck and American Media Management, Inc., all shares offered by Selling Stockholders are held by the Management Voting Trust. Such shares will be delivered out of the Management Voting Trust upon consummation of the Offerings.

(2) This amount does not include any of the 45,294,150 shares held in the Management Voting Trust in excess of the amount reported above, which the stockholder may be deemed to beneficially own as a result of such stockholder's position as a Voting Trustee of the Management Voting Trust. The stockholder disclaims beneficial ownership of any such shares in excess of the amount reported above.

(3) Excludes 31,701,930 shares beneficially owned by the H&F Investors. The sole general partner of the H&F Investors is H&F Investors III ("Investors III"). The managing general partner of Investors III is Hellman & Friedman Associates III, L.P. ("Associates III"), and the general partners of Associates III are H&F Management III, L.L.C. ("Management III LLC") and H&F Investors III, Inc. ("H&F Inc."). The sole shareholder of H&F Inc. is The Hellman Family Revocable Trust (the "Trust"). Mr. Hammarskjold is a member of Management III LLC. Mr. Hellman is a managing member of Management III LLC, a director of H&F Inc. and a trustee of the Trust. Investors III, Associates III, Management III LLC, H&F Inc., the Trust and Messrs. Hammarskjold and Hellman exercise, directly or indirectly, voting and investment discretion with respect to the shares held by the H&F Investors and could be deemed to beneficially own such shares, but each of them disclaims such beneficial ownership except to the extent of its or his indirect pecuniary interest in such shares.

(4) Excludes 260,880 shares held by BearTel Corp., a company affiliated with Bear, Stearns & Co. Inc., of which Mr. Schwartz is an executive officer.

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DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company is authorized to issue 250,000,000 shares of Common Stock, par value $0.01 per share (the "Common Stock"), and 10,000,000 shares of Preferred Stock, par value $0.01 per share (the "Preferred Stock"). As of April 15, 1998, and after giving effect to the Stock Split, the Company's issued and outstanding capital stock consisted of 59,561,655 shares of issued and outstanding Common Stock and 87 shares of issued and outstanding Money Market Preferred Stock. Based upon shares outstanding as of April 15, 1998, the Company estimates that immediately after the closing of the Offerings there will be an aggregate of 66,228,322 shares of Common Stock issued and outstanding, 31,442,985 shares of Common Stock will be issuable upon exercise of outstanding options, 87 shares of Money Market Preferred Stock will be issued and outstanding and no other shares of Preferred Stock will be issued and outstanding. All of the Company's issued and outstanding capital stock has been fully paid.

The following description of the Company's capital stock does not purport to be complete and is subject to and qualified in its entirety by the Company's Charter and By-Laws, which are included as exhibits to the Registration Statement of which this Prospectus forms a part, and by the provisions of applicable Delaware law.

The Company's Charter and By-Laws contain certain provisions that are intended to enhance the likelihood of continuity and stability in the composition of the Board and which may have the effect of delaying, deferring, or preventing a future takeover or change in control of the Company unless such takeover or change in control is approved by the Board.

COMMON STOCK

The holders of Common Stock will be entitled to one vote for each share on all matters voted on by stockholders, and the holders of such shares, together with the holders of shares of Money Market Preferred Stock (as described herein), will possess all voting power, except as otherwise required by law or as provided in the Company's Charter. Holders of Common Stock who are employees of Y&R or its affiliates are subject to the provisions of the Management Voting Trust and the Stockholders' Agreement and will be subject to the provisions of the Amended Stockholders' Agreement upon consummation of the Offering. See "-- The Management Voting Trust Agreement" and "The Stockholders' Agreement." The holders of Common Stock will not have cumulative voting rights. Holders of Common Stock will not have any preemptive right to subscribe for or purchase any kind or class of securities of the Company. Holders of Common Stock will have no subscription, conversion or redemption rights, and will not be subject to further calls or assessments. Subject to any preferential or other rights of any outstanding series of Preferred Stock that may be designated by the Company Board, the holders of Common Stock will be entitled to such dividends, if any, as may be declared from time to time by the Company Board. The Company's Credit Facilities contain restrictive covenants that limit the Company's ability to pay cash dividends or make certain stock repurchases above certain permitted limits without the prior written consent of the lenders. The New Facility, which the Company expects to enter into effective upon the consummation of the Offerings, is expected to permit the payment of cash dividends except in the event of a continuing default under the credit agreement. See "Dividend Policy." In the event of the liquidation, dissolution or winding up of the Company, holders of Common Stock will be entitled to receive on a pro rata basis any assets of the Company remaining after provision for payment of creditors and after payment of any liquidation preferences to holders of Preferred Stock.

PREFERRED STOCK

The Company is authorized to issue 10,000,000 shares of Preferred Stock. The Board has the authority to establish and designate series of the Preferred Stock and, except with respect to the Money Market Preferred Stock, to fix the number of shares constituting each such series, to fix the designations and the relative rights, preferences and limitations of the shares of each such series and the variations in the relative rights,

60

preferences and limitations as between such series, and to increase and decrease the number of shares constituting each such series. See "-- Authorized But Unissued Capital Stock" and "-- Anti-Takeover Effects of Certain Provisions of the Charter, the By-Laws, the Rights Plan and Delaware Law -- Preferred Stock."

The Company's Charter designates an initial series of Preferred Stock, consisting of 50,000 shares, as the Money Market Preferred Stock. Holders of Money Market Preferred Stock are entitled to receive, subject to declaration by the Board, certain cumulative cash dividends which are payable quarterly and calculated with reference to the interest rate for the three-month London interbank deposit market. On or after December 12, 2001, any Money Market Preferred Stock issued and outstanding for five years may, at the option of the Board and subject to providing holders with notice of redemption, be redeemed by the Company at a redemption price per share of $115.00 (together with all accrued and unpaid dividends thereon). Redeemed Money Market Preferred Stock may be reissued by the Board as shares of such series or as shares of any other series of Preferred Stock. Money Market Preferred Stock are not convertible, have a liquidation preference of $115.00 per share (together with all accrued and unpaid dividends thereon) and have voting rights equal to one-tenth of one vote for each share of Money Market Preferred Stock.

Effective upon the closing of the Offerings, in connection with the Rights Plan, the Company's Charter will authorize a series of Preferred Stock designated Cumulative Participating Junior Preferred Stock (the "Junior Preferred Stock"), consisting of 2,500,000 shares. For a description of the Rights Plan and the Junior Preferred Stock, see "-- Rights Plan" and "-- Anti-Takeover Effects of Certain Provisions of the Charter, the By-Laws, the Rights Plan and Delaware Law."

AUTHORIZED BUT UNISSUED CAPITAL STOCK

Based on the calculations set forth above, the Company estimates that, following the completion of the Offerings, it will have approximately 183,133,293 shares of authorized but unissued Common Stock (including an aggregate of 28,964,130 shares reserved for issuance upon the exercise of options under the Stock Option Plans and 2,598,105 shares reserved for issuance upon the exercise of options issued to certain of the Recapitalization Investors and 9,999,913 shares of authorized but unissued Preferred Stock (including the 2,500,000 shares designated as Junior Preferred Stock and 49,913 shares designated as Money Market Preferred Stock). Delaware law does not require stockholder approval for the issuance of authorized shares. However, the listing requirements of the New York Stock Exchange, which apply so long as the Common Stock remains listed on such exchange, require prior stockholder approval of certain issuances, including issuances of shares bearing voting power equal to or exceeding 20% of the pre-issuance outstanding voting power or pre-issuance outstanding number of shares of Common Stock. These additional shares could be used for a variety of corporate purposes, including future public offerings to raise additional capital or to facilitate corporate acquisitions. The Company currently does not have any plans to issue additional shares of Common Stock or Preferred Stock other than in connection with employee compensation plans. See "Management -- Executive Compensation." One of the effects of the existence of unissued and unreserved Common Stock and Preferred Stock may be to enable the Board of the Company to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of the Company's management and possibly deprive the stockholders of the opportunity to sell their shares of Common Stock at prices higher than prevailing market prices. Such additional shares also could be used to dilute the stock ownership of persons seeking to obtain control of the Company pursuant to the operation of the Rights Plan, which is discussed below. See "-- Anti-Takeover Effects of Certain Provisions of the Charter, the By-Laws, the Rights Plan and Delaware Law."

THE MANAGEMENT VOTING TRUST AGREEMENT

Pursuant to the Management Voting Trust Agreement, the Management Investors and the Restricted Stock Trust are required to deposit with the Management Voting Trust all shares of Common Stock and all shares of Money Market Preferred Stock acquired by them prior to the termination of the Management Voting Trust (including Common Stock acquired upon the exercise of options, distributions from the

61

Restricted Stock Trust or otherwise). Common Stock sold in the public market by Management Investors and the Restricted Stock Trust will be withdrawn from, and delivered free of, the Management Voting Trust.

The Management Voting Trust will have the unqualified right and power to vote and to execute consents with respect to all shares of Common Stock and all shares of Money Market Preferred Stock held by the Management Voting Trust. The voting rights of the Management Voting Trust are exercised by certain members of senior management of Y&R, in their capacities as voting trustees (the "Voting Trustees"). The current Voting Trustees are Peter A. Georgescu, Stephanie W. Abramson, Thomas D. Bell, Jr., Michael J. Dolan, Mitchell Kurz, John P. McGarry, Jr., Alan J. Sheldon and Edward H. Vick (each of whom is currently a member of the senior management of Y&R). So long as Peter A. Georgescu (or a successor Chief Executive Officer elected with the approval of the Management Voting Trust) is a Voting Trustee, any action (i) approved in writing or at a meeting by Peter A. Georgescu (or such successor) and any two other Voting Trustees and
(ii) any action approved over the objection of Peter A. Georgescu (or such successor) at a meeting of the Voting Trustees by an aggregate vote of Voting Trustees equal to not less than the total number of Voting Trustees then in office minus two, shall constitute the action of, and shall be binding upon, the Management Voting Trust (unless there shall be fewer than seven Voting Trustees then in office, in which event any action under clause (ii) shall require the vote of all the Voting Trustees other than Peter A. Georgescu (or such successor)). The foregoing voting procedures will also apply to the election and removal of Voting Trustees, to proposals to increase or decrease the number of Voting Trustees and to proposals to amend the foregoing voting procedures.

The Management Voting Trust will terminate at such time that (i) no person (including the Recapitalization Investors and the Management Voting Trust) is the owner of more than 20% of the Outstanding Shares, (ii) the number of shares of Common Stock held by the Management Voting Trust is less than 10% of the Outstanding Shares or (iii) the Voting Trustees determine to terminate the Management Voting Trust. Pursuant to an irrevocable unanimous written consent of the Voting Trustees, the Management Voting Trust will terminate 24 months after the consummation of the Offerings, assuming no earlier termination in accordance with its terms.

The Management Voting Trust has issued and will issue voting trust certificates ("Voting Trust Certificates") representing the shares of Common Stock and Money Market Preferred Stock deposited with it. The Voting Trust Certificates will be subject to the transfer restrictions set forth in the Amended Stockholders' Agreement. See "-- The Stockholders' Agreement."

Y&R has agreed to assume all liability and indemnify and defend all Voting Trustees and their successors, assigns, agents and servants from any and all losses incurred or asserted against any Voting Trustees relating to their administration of the Management Voting Trust, unless there is clear and convincing evidence that such losses were proximately caused by an act or omission that was not taken in good faith or not reasonably believed to be in the best interest of Y&R and the Management Investors as a group. See "Management -- Limitation of Liability and Indemnification."

Under the Management Voting Trust Agreement and certain stock option and restricted stock agreements, each of the Management Investors is subject to certain non-competition, non-solicitation, confidentiality and notice requirements in connection with the termination of such person's employment. They include the following: (i) for one year after termination of employment, a Management Investor may not work for any competitor of Y&R on the account of any client of Y&R or any of its affiliates with whom such Management Investor had a direct relationship or as to which such Management Investor had a significant supervisory responsibility or otherwise was significantly involved at any time during the two years prior to termination; (ii) for six months after termination of employment, (a) a Management Investor with principally corporate type job responsibilities that do not principally involve client service related functions may not work for a principal competitor of Y&R or any of its affiliates in any substantially similar role as that held with Y&R or any of its affiliates during the two years prior to termination, and (b) a Management Investor with principally client service related responsibilities may not work for a competitor of Y&R or its affiliates on the account of any substantial competitor (or directly for such competitor) of any client of Y&R or any of its affiliates for whom such Management Investor had substantial responsibility during the two years prior to

62

termination; (iii) for one year after termination of employment, a Management Investor may not (a) directly or indirectly solicit or hire, or assist in the soliciting or hiring of, any person employed by Y&R or any of its affiliates as of the date of termination or any person who was then being recruited by Y&R or any of its subsidiaries or (b) induce any such employee to terminate his or her employment with Y&R or any of its affiliates; (iv) a Management Investor shall keep confidential information of Y&R, its affiliates and their clients learned during his or her employment and (v) a Management Investor shall give six weeks written notice prior to voluntary termination unless a shorter period is approved by the Company.

Y&R has agreed, under the Management Voting Trust Agreement, to give each Management Investor six months severance pay upon termination of employment for any reason other than for cause (as defined), and each Management Investor is required to waive any possible right to more than six months' severance pay (or similar compensation) (and any claims for damages under any employment agreement). Y&R has the right under the Stockholders' Agreement to offset against any payments to be made in connection with the purchase of securities from a Management Investor in connection with his or her termination of employment (i) any severance or similar obligations to be paid to such Management Investor in excess of or in addition to six months severance pay required to be made under applicable law despite such Management Investor's waiver of entitlement thereto, as provided in the Management Voting Trust Agreement) and (ii) any damages or expenses incurred as a result of any malfeasance by such Management Investor or a breach by such Management Investor of the covenants described in the preceding paragraph.

THE STOCKHOLDERS' AGREEMENT

In connection with the Recapitalization, the Recapitalization Investors, the Management Investors, the Restricted Stock Trust, the Management Voting Trust and Y&R entered into a stockholders' agreement (the "Stockholders' Agreement") with respect to the restrictions on transferability of shares of Common Stock and related Voting Trust Certificates, and with respect to the management of Y&R.

Upon consummation of the Offerings, the Stockholders' Agreement will be terminated as to certain parties and the H&F Investors, the Management Investors, the Restricted Stock Trust, the Management Voting Trust and Y&R will enter into an amended and restated stockholders' agreement (the "Amended Stockholders' Agreement").

RIGHT TO NOMINATE DIRECTORS. Under the Amended Stockholders' Agreement, the H&F Investors will have the right to nominate and have elected two members of the Company Board for so long as they continue to hold, in the aggregate, at least 10% of the Outstanding Shares, and one member of the Board for so long as they continue to hold, in the aggregate, at least 5% of the Outstanding Shares. Outstanding Shares is defined in the Stockholders' Agreement to include all shares of Common Stock subject to vested options (not including options which would vest on a change in control).

TRANSFER RESTRICTIONS. Under the Amended Stockholders' Agreement, the transfer restrictions described below will apply. Purported transfers in violation of these restrictions will be null and void.

H&F Investors may not transfer shares of Common Stock, options to purchase Common Stock or other voting capital stock, (i) prior to termination of the Management Voting Trust (which will occur no later than the second anniversary of the consummation of the Offerings), if at least 20% of the Outstanding Shares are then subject to the Management Voting Trust, to any party who as a result thereof would (together with its affiliates) own a percentage of the Outstanding Shares which is greater than the percentage then subject to the Management Voting Trust, or (ii) after such termination of the Management Voting Trust and (A) prior to the first anniversary of such termination, to any party who as a result thereof would (together with its affiliates) own a percentage of the Outstanding Shares which is greater than the greater of (1) 20% and (2) the percentage of the Outstanding Shares subject to the Management Voting Trust upon termination thereof (the "Termination Percentage") less 5% and (B) from and after the first anniversary of such termination until December 12, 2002, to any party who as a result thereof would (together with its affiliates) own a percentage of the Outstanding Shares which is greater than the greater of (1) 20% and (2) the Termination Percentage less 10%, unless, in any such case (A) Y&R fails to arrange for the sale of such shares to a third party for the benefit of the H&F Investors at a price to the H&F Investors not less than the

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price proposed to be paid by the proposed transferee and (B) the Management Voting Trust (or, following its termination, the Company) consents to the proposed transfer, which consent may not be unreasonably withheld.

Prior to termination of the Management Voting Trust, proposed transfers of shares of Common Stock, options to purchase Common Stock or other voting capital stock by Management Investors (other than transfers by will or intestate succession) to any party who as a result thereof (together with its affiliates) would own more than 20% of the Outstanding Shares are subject to a right of first refusal by each of Y&R and the H&F Investors, exercisable in that order.

CERTAIN TRANSFER RESTRICTIONS

The following transfer restrictions apply to shares of Common Stock issued to Management Investors pursuant to Regulation S under the Securities Act, but will not apply to shares of Common Stock sold in the Offerings. Under the Company's By-Laws, any direct or indirect sale, transfer, assignment, pledge, hypothecation or other encumbrance or disposition (a "Transfer") of legal or beneficial ownership of any stock heretofore or hereafter issued and sold by the Company pursuant to Regulation S under the Securities Act of 1933, as amended (the "Securities Act"), may be made only (i) pursuant to an effective registration statement under the Securities Act or (ii) pursuant to a transaction that is exempt from, or not subject to, the registration requirements of the Securities Act. Neither the Company nor any employee or agent of the Company shall record any Transfer prohibited by the preceding sentence, and the purported transferee of such a prohibited Transfer (the "Purported Transferee") shall not be recognized as a securityholder of the Company for any purpose whatsoever in respect of the security or securities that are the subject of the prohibited Transfer. The Purported Transferee shall not be entitled, with respect to such securities, to any rights of a securityholder of the Company, including without limitation, in the case of securities that are Common Stock, the right to vote such Common Stock or to receive dividends or distributions in respect thereof, if any. All certificates representing securities subject to the transfer restrictions set forth in this Article V shall bear a legend to the effect that the securities represented by such certificates are subject to such restrictions, unless and until the Company determines in its sole discretion that such legend may be removed consistent with applicable law.

NO PREEMPTIVE RIGHTS

No holder of any class of stock of the Company has any preemptive right to subscribe for or purchase any kind or class of securities of the Company.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is The Bank of New York.

RIGHTS PLAN

The Company has adopted the Rights Plan and expects to enter into a Rights Agreement (the "Rights Agreement") between the Company and The Bank of New York, as Rights Agent (the "Rights Agent"), prior to consummation of the Offerings. In connection with the Rights Plan, the Board has declared a dividend distribution of one Right for each share of Common Stock outstanding immediately prior to consummation of the Offerings and after the Stock Split (the "Record Date"). The dividend is payable immediately prior to consummation of the Offerings. The Company will distribute one associated Right with each share of Common Stock distributed in the Offerings. The terms of the Rights are set forth in the Rights Agreement. The Company's Charter authorizes the Board to adopt a stockholder rights plan such as the Rights Plan.

Each Right entitles the registered holder under certain circumstances to purchase from the Company one one-hundredth of a share of Junior Preferred Stock at a purchase price of $ , subject to adjustment (the "Purchase Price"). The Purchase Price shall be payable in cash or by certified check or bank draft.

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Junior Preferred Stock purchasable upon exercise of the Rights will not be redeemable. Each share of Junior Preferred Stock will be entitled to a minimum preferential quarterly dividend payment of $1.00 per share but will be entitled to an aggregate dividend of 100 times the dividend declared per share of Common Stock. In the event of liquidation, the holders of shares of Junior Preferred Stock will be entitled to a minimum preferential liquidation payment of $1 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment. Each share of Junior Preferred Stock will have 100 votes, voting together with the Common Stock and the Money Market Preferred Stock and, in the event of certain dividend arrearages, will also have the right to elect one director voting as a class. In the event of any merger, consolidation or other transaction in which shares of Common Stock are exchanged, each share of Junior Preferred Stock will be entitled to receive 100 times the amount received per share of Common Stock. These rights are protected by customary anti-dilution provisions. Because of the nature of their dividend, liquidation and voting rights, the value of the one-one-hundredth interest in a share of Junior Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of Common Stock.

Until the close of business on the earlier of (i) the tenth business day after the Stock Acquisition Date (as defined below) and (ii) the tenth business day (or such later day as may be determined by action of the Company Board prior to such time as any person becomes an Acquiring Person (as defined below)) after the date of the commencement by any person (other than any Company Entity (as defined below)) of, or the first public announcement of the intent of any person (other than any Company Entity) to commence (which intention to commence remains in effect for five business days after such announcement), a tender or exchange offer the consummation of which would result in any person becoming an Acquiring Person (the earlier of the dates referred to in clauses (i) and (ii) above being herein referred to as the "Distribution Date"), the Rights will be evidenced by the certificates representing shares of Common Stock and no separate Right Certificates (as defined below) will be issued or distributed. All shares of Common Stock outstanding as of the Record Date or issued prior to the earlier of the Distribution Date or the Expiration Date will be issued with Rights.

The term "Stock Acquisition Date" means the time and day of the first public announcement (which includes, without limitation, the filing of a report pursuant to the Exchange Act) by the Company or an Acquiring Person indicating that an Acquiring Person has become such.

The term "Acquiring Person" means (i) any person (other than the H&F Investors and other than any Permitted H&F 15% Transferee (as defined below)) who or which, together with all affiliates and associates of such person, acquires beneficial ownership (as defined in the Rights Agreement) of 15% or more of the then outstanding shares of Common Stock (other than as a result of an Approved Offer (as defined below)), or (ii) the H&F Investors if, after the Offerings, the H&F Investors, together with all of their affiliates and associates, acquire beneficial ownership of any additional shares of Common Stock such that following such acquisition (A) the H&F Investors beneficially own in excess of 15% of the then outstanding shares of Common Stock and (B) if the Management Voting Trust is then in existence, following such acquisition the H&F Investors beneficially own a greater percentage of the Diluted Shares Outstanding than the percentage of the Diluted Shares Outstanding subject to the Management Voting Trust at the time of such acquisition (it being understood that neither sales by, nor termination of, the Management Voting Trust will trigger this provision absent a subsequent acquisition of beneficial ownership of additional shares by the H&F Investors or any of their affiliates or associates) or (iii) any Permitted H&F 15% Transferee if contemporaneously with or subsequent to the transfer from the H&F Investors that resulted in such person becoming a Permitted H&F 15% Transferee, such Permitted H&F 15% Transferee, together with all affiliates and associates of such Permitted H&F 15% Transferee, acquires beneficial ownership of any additional shares; provided, however, that (1) a person shall not become an Acquiring Person if such person, together with all of its affiliates and associates, becomes the beneficial owner of 15% or more (in the case of clause (i) above) of the then outstanding shares of Common Stock as a result of a reduction in the number of shares of Common Stock outstanding due to the repurchase of shares of Common Stock by the Company, unless and until such time as such person purchases or otherwise becomes (as a result of actions taken by such person or any of its affiliates or associates) the beneficial owner of any additional shares of Common Stock; (2) the term "Acquiring

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Person" shall not include any Company Entity; and (3) the term "Acquiring Person" shall not include any person who or which, together with all affiliates and associates of such person, becomes the beneficial owner of 15% or more of the then outstanding shares of Common Stock (in the case of clause (i) above) or any additional shares of Common Stock (in the case of clauses (ii) and (iii) above) but who acquired beneficial ownership of shares of Common Stock inadvertently, and such person promptly (and in any event within 10 business days after being so requested by the Company) enters into an irrevocable commitment satisfactory to the Company Board promptly (and in any event within 20 business days or such shorter period as shall be determined by the Company Board) to divest, and thereafter promptly divests as required by such commitment, sufficient shares of Common Stock so that such person, together with all of its affiliates and associates, ceases to be a beneficial owner of 15% or more of the then outstanding shares of Common Stock (in the case of clause (i) above) or any additional shares of Common Stock (in the case of clauses (ii) and
(iii) above).

The term "Company Entity" means any of the Company, any wholly owned subsidiary of the Company, any employee benefit plan or employee stock plan of the Company or any wholly owned subsidiary of the Company, any person or entity holding shares of Common Stock which was organized, appointed or established by the Company or any such wholly owned subsidiary for or pursuant to the terms of any such plan, the Management Voting Trust, the Restricted Stock Trust, the trustees under the Management Voting Trust or the Restricted Stock Trust, any affiliate or associate of the Management Voting Trust or the Restricted Stock Trust or any trustee under either such trust and any group that includes the Management Voting Trust, the Restricted Stock Trust, any trustee under either such trust or any affiliate or associate thereof.

The term "Permitted H&F 15% Transferee" means any person who is a Permitted H&F Transferee (as defined below) who or which, immediately after the transfer from the H&F Investors that resulted in such person becoming a Permitted H&F Transferee, together with all affiliates and associates of such person, is the beneficial owner of 15% or more of the then outstanding shares of Common Stock.

The term "Permitted H&F Transferee" means any person that acquires beneficial ownership of shares of Common Stock from the H&F Investors pursuant to a transfer that is either not restricted under, or occurs in compliance with, the transfer restrictions applicable to the H&F Investors set forth in the Amended Stockholders' Agreement.

The term "Approved Offer" means a tender offer or exchange offer for all the outstanding shares of Common Stock which is at a price and on terms approved, prior to the acceptance for payment of shares under such tender or exchange offer, by the Company Board.

The term "Diluted Shares Outstanding" as of any given time means the sum of
(a) the number of shares of Common Stock then issued and outstanding (including all shares of Common Stock held in the Restricted Stock Trust) and (b) the number of shares of Common Stock issuable upon exercise of the (1) HFCP Options (as defined in the Amended Stockholders' Agreement) and the Rollover Options and
(2) all other options, warrants and rights to acquire, and the conversion of any securities convertible into, shares of Common Stock, to the extent such rights to acquire shares of Common Stock are then exercisable. For purposes of clause
(ii)(B) of the definition of "Acquiring Person" above, when calculating the percentage of the Diluted Shares Outstanding owned by the H&F Investors or the Management Voting Trust, as the case may be, the H&F Investors or the Management Voting Trust, as the case may be, shall be deemed to own all shares of Common Stock beneficially owned by them assuming the exercise of all of their options, warrants and rights to acquire, and the conversion by them of any securities convertible into, shares of Common Stock to the extent, but only to the extent, such rights to acquire shares of Common Stock are then exercisable by them. For purposes of calculating the percentage of Diluted Shares Outstanding owned by the Management Voting Trust, the Management Voting Trust shall be deemed to own all shares of Common Stock (including all shares of Common Stock required to be deposited thereunder upon exercise of vested options) then subject to the Management Voting Trust.

The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with the Common Stock. Certificates representing shares of Common Stock issued after the Record Date

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and prior to the earlier of the Distribution Date and the Expiration Date will contain a legend incorporating the Rights Agreement by reference. Until the Distribution Date, the surrender for transfer of any of the certificates representing shares of Common Stock outstanding as of the Record Date or issued prior to the Distribution Date will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate and the number of Rights associated with each share of Common Stock will be proportionately adjusted in the event of any dividend in Common Stock on the Common Stock or subdivision, combination or reclassification of the Common Stock. In the event that the Company purchases or acquires any shares of Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such shares of Common Stock shall be deemed canceled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock which are no longer outstanding. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights ("Rights Certificates") will be mailed to holders of record of Common Stock as of the close of business on the Distribution Date and such separate Rights Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date. The Rights will expire at the close of business on May 31, 2008, unless they have previously expired in connection with an Approved Offer (as described in the Rights Agreement) or they are exchanged for shares of Common Stock or have been previously redeemed by the Company as described below.

Immediately upon the Stock Acquisition Date, proper provision shall be made so that each holder of a Right will thereafter have the right to receive, upon exercise, Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a preexisting market value (as of shortly before the Stock Acquisition Date), equal to two times the then current Purchase Price of the Right. Notwithstanding any of the foregoing, following the occurrence of the Stock Acquisition Date, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person and certain related parties will become null and void.

To illustrate the rights described in the preceding paragraph, at a Purchase Price of $ per Right, each Right not owned by an Acquiring Person (or by certain related parties) following an event set forth in the preceding paragraph would entitle its holder to purchase Common Stock (or other consideration, as noted above) with a preexisting market value of $ for $ . Assuming that the Common Stock has a preexisting market value of $ at such time, the holder of each Right would be entitled to purchase six shares of Common Stock for $ .

In the event that, at any time following the Stock Acquisition Date, (i) the Company is acquired in a merger or other business consolidation transaction,
(ii) the Company is the surviving corporation in a merger or other business consolidation with any person and the Common Stock is changed into or exchanged for stock or other securities of any other person or cash or any other property (other than, in the case of any transaction described in (i) or (ii), a merger or consolidation which would result in all of the voting securities of the Company outstanding immediately prior thereto continuing to represent all of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and holders of such securities not having changed as a result of such merger or consolidation) or (iii) 50% or more of the Company's assets or earning power is sold or transferred, each holder of a Right (except Rights that previously have been voided as set forth above) shall thereafter have the right to receive, upon exercise, common stock of the acquiring company having a market value equal to two times the then current Purchase Price of the Right.

The Purchase Price payable, and the fraction of a share of Junior Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Junior Preferred Stock (prior to the Distribution Date) or the Common Stock,
(ii) if holders of the Junior Preferred Stock are granted certain rights or warrants to subscribe for Junior Preferred Stock or convertible securities at less than the current market price of the Junior Preferred Stock, or (iii) upon the distribution to holders of the Junior Preferred Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends below certain levels or dividends payable in shares of Junior Preferred Stock) or of subscription rights or warrants (other than those referred to above).

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With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments amount to at least 1% of the Purchase Price. In addition, to the extent that the Company does not have sufficient shares of Common Stock issuable upon exercise of the Rights following the Stock Acquisition Date, the Company may, under certain circumstances, reduce the Purchase Price. No fractional shares of Junior Preferred Stock (other than fractions which are integral multiples of one one-hundredth) will be issued and, in lieu thereof, an adjustment in cash will be made based on the market price of the Junior Preferred Stock or the Common Stock on the last trading date prior to the date of exercise.

At any time until the Stock Acquisition Date, the Company may redeem the Rights in whole, but not in part, at a price of $0.01 per Right (payable in cash, shares of Common Stock or other consideration deemed appropriate by the Board). Immediately upon the action of the Board ordering redemption of the Rights, the Rights will terminate and thereafter the only right of the holders of Rights will be to receive the $0.01 redemption price. In addition, at any time after the Stock Acquisition Date, the Board may elect to exchange all or part of the then-outstanding and exercisable Rights (other than Rights that have become null and void as described above) for one share of Company Common Stock. Both the redemption price and the exchange rate are subject to adjustment.

Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to stockholders or to the Company, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for Common Stock (or other consideration) or for common stock of an acquiring company as set forth above.

Any of the provisions of the Rights Agreement may be amended by the Board prior to the Stock Acquisition Date. After the Stock Acquisition Date, the provisions of the Rights Agreement may be amended by the Board in order to cure any ambiguity, to correct any defects or inconsistencies, to make changes which do not adversely affect the interests of holders of Rights (excluding the interests of any Acquiring Person) or to shorten or lengthen any time period under the Rights Agreement; provided, however, that no amendment to adjust the time period governing redemption or to modify the ability (or inability) of the Board to redeem the Rights shall be made at such time when the Rights are not redeemable.

As long as the Rights are attached to the Common Stock, the Company will issue one Right for each share of Common Stock issued prior to the Distribution Date so that all such shares will have attached Rights. Two million five hundred thousand shares of Junior Preferred Stock will initially be reserved for issuance upon exercise of the Rights.

The Rights have certain anti-takeover effects. See "-- Anti-Takeover Effects of Certain Provisions of the Charter, the By-Laws, the Rights Plan and Delaware Law."

The foregoing summary of certain terms of the Rights is qualified in its entirety by reference to the Rights Agreement, which is filed as an exhibit to the Registration Statement and is incorporated herein by reference.

ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CHARTER, THE BY-LAWS, THE RIGHTS PLAN AND DELAWARE LAW

The Company's Charter, the Company's By-Laws, the Rights Plan and the DGCL contain certain provisions that could make more difficult the acquisition of control of the Company by means of a tender offer, open market purchases, a proxy contest or otherwise. Set forth below is a description of such provisions in the Company's Charter, the Company's By-Laws, the Rights Plan and the DGCL. The following description is intended as a summary only and is qualified in its entirety by reference to the Company's Charter, the Company's By-Laws and the Rights Agreement, the forms of which are included as exhibits to the Registration Statement of which this Information Statement forms a part, and to the DGCL. Upon consummation of the Offerings, the Management Voting Trust will hold approximately 54.2% of the outstanding shares of Common Stock (assuming the exercise of all currently vested options), which could discourage potential acquisition proposals and could delay or prevent a change in control of the Company. See "Description of Capital Stock -- The Management Voting Trust Agreement."

CLASSIFIED BOARD OF DIRECTORS; REMOVAL OF DIRECTORS. The Company's Charter provides that the number of Directors shall be not less than five nor more than fifteen, with the exact number of Directors to be

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determined from time to time by a majority of the entire Board. The Directors shall be divided into three classes, as nearly equal in number as is possible, serving staggered three-year terms so that Directors' initial terms will expire at the annual meeting of the Company's stockholders held in 1999, 2000 and 2001, respectively. Starting with the 1999 annual meeting of the Company's stockholders, one class of Directors will be elected each year for a three-year term. See "Management."

The Company believes that a classified Board will help to assure the continuity and stability of the Board and the Company's business strategies and policies, since a majority of the Directors at any given time will have had prior experience as Directors of the Company. The Company believes that this in turn will permit the Board to represent more effectively the interests of stockholders.

With a classified Board, at least two annual meetings of stockholders, instead of one, will generally be required to effect a change in a majority of the members of the Board. As a result, the classification of the Board of the Company may discourage proxy contests for the election of Directors, unsolicited tender offers or purchases of a substantial block of the Common Stock because it could prevent an acquirer from obtaining control of the Board in a relatively short period of time. In addition, pursuant to the DGCL and the Company's Charter, a Director may be removed only for cause and only by the affirmative vote of holders of not less than 80% of the outstanding shares of Common Stock entitled to vote thereon. As a result, a classified Board delays stockholders who do not agree with the policies of the Board from replacing Directors, unless they can demonstrate that the Directors should be removed for cause and obtain the requisite vote. Such a delay may help ensure that the Company Board, if confronted with a proxy contest or an unsolicited proposal for an extraordinary corporate transaction, will have sufficient time to review the proposal and appropriate alternatives to the proposal and to act in what it believes is the best interest of the Company's stockholders.

FILLING VACANCIES ON THE BOARD. The Company's Charter provides that, subject to the rights of holders of any shares of Preferred Stock, any vacancy in the Board that results from an increase in the number of Directors may be filled only by a majority of the Directors then in office, provided that a quorum is present, and any other vacancy may be filled by a majority of the Directors then in office, even if less than a quorum, or by the sole remaining Director. Accordingly, these provisions could temporarily prevent any stockholder from obtaining majority representation on the Board by enlarging the Board and filling the new Directorships with its own nominees.

WRITTEN CONSENTS AND SPECIAL MEETINGS. The Company's Charter provides that no action required or permitted to be taken at any annual or special meeting of stockholders may be taken by stockholders of the Company except at such a meeting of stockholders. The Company's By-Laws provide that special meetings of stockholders may be called only by the Chairman of the Board or the Company Board. Stockholders are not permitted to call a special meeting or to require that the Board call a special meeting of stockholders. Moreover, the business permitted to be conducted at any special meeting of stockholders is limited to the purpose or purposes specified in the written notice of such meeting. The provisions of the Company's Charter prohibiting action by written consent without a meeting and the provisions of the Company's By-Laws governing the calling of and matters considered at special meetings may have the effect of delaying consideration of a stockholder proposal until the next annual meeting. These provisions would also prevent the holders of a majority of the voting power of the outstanding shares of stock entitled to vote generally in the election of Directors from using the written consent procedure to take stockholder action and from taking action by written consent without giving all the stockholders entitled to vote on a proposed action the opportunity to participate in determining such proposed action at a meeting.

ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND PROPOSALS. The Company's By-Laws establish an advance notice provision with regard to the nomination, other than by or at the direction of the Board, of candidates for election as Directors, or the bringing before any annual meeting of any stockholder proposal (the "Notice of Meeting Provision").

The Notice of Meeting Provision provides that, subject to any rights of holders of any Preferred Stock, business other than that proposed by the Board may be transacted and candidates for Director other than those selected by the Board may be nominated at the annual meeting only if the Secretary of the Company has received a written notice identifying such business or candidates and providing specified additional information not less than ninety nor more than one hundred twenty days before the first Tuesday in June (or, if the Board

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has set a different date for the annual meeting, not less than ninety nor more than one hundred twenty days before such other date or, if such other date has not been publicly disclosed or announced at least one hundred five days in advance, then not less than fifteen days after such public disclosure or announcement). In addition, not more than ten days after receipt by the sponsoring stockholder of the Secretary's written request, the sponsoring stockholder must provide the Secretary with such additional information as the Secretary may reasonably require.

By requiring advance notice of nominations by stockholders, the Notice of Meeting Provision will afford the Board a meaningful opportunity to consider the qualifications of the proposed nominees and, to the extent deemed necessary or desirable by the Board, to inform the stockholders about such qualifications. By requiring advance notice of proposed business, the Notice of Meeting Proposal Provision will provide the Board with a meaningful opportunity to inform stockholders, prior to such meeting, of any business proposed to be conducted at such meeting, together with any recommendation or statement of the Board's position as to action to be taken with respect to such business, so as to enable stockholders better to determine whether they desire to attend such a meeting or to grant a proxy to the Board as to the disposition of any such business. Although the Company's By-Laws do not give the Board any power to approve or disapprove stockholder nominations for the election of Directors or proposals for action, they may have the effect of precluding a contest for the election of Directors or the consideration of stockholder proposals if the proper procedures are not followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of Directors or to approve its proposal without regard to whether consideration of such nominees or proposals might be harmful or beneficial to the Company and its stockholders.

RESTRICTIONS ON AMENDMENT. The Company's Charter provides that the approval of holders of at least 80% of the voting power entitled to vote generally in the election of Directors, voting together as a single class, is required to adopt any charter provision inconsistent with or to alter, amend or repeal the provisions of the Company's Charter classifying the Board; governing the removal of directors; establishing the minimum and maximum number of members of the Board; eliminating the ability of stockholders to act by written consent; authorizing the Board to consider the interests of clients and other customers, creditors, employees and other constituencies of the Corporation and its subsidiaries and the effect upon communities in which the Corporation and its subsidiaries do business, in evaluating proposed corporate transactions; establishing the Board's authority to issue, without a vote or any other action of the stockholders, any or all authorized shares of stock of the Corporation, securities convertible into or exchangeable for any authorized shares of stock of the Corporation and warrants, options or rights to purchase, subscribe for or otherwise acquire shares of stock of the Corporation for any such consideration and on such terms as the Board in its discretion lawfully may determine; and authorizing that the By-Laws of the Corporation may establish procedures regulating the submission by stockholders of nominations and proposals for consideration at meetings of stockholders of the Corporation. In addition, the Company's Charter provides that the approval of the Board or the affirmative vote of the holders of 80% of the voting power entitled to vote generally in the election of Directors, voting together as a single class, is required to alter, amend or repeal the above provisions of the Company's Charter or to adopt any provision of the Charter inconsistent with such provisions or to alter, amend or repeal certain provisions of the Company's By-Laws or to adopt any provision of the By-Laws inconsistent with such provisions.

PREFERRED STOCK. Subject to the Company's Charter and applicable law, the authority of the Company Board with respect to each series of Preferred Stock, excluding the Money Market Preferred Stock, includes but is not limited to the authority to generally determine the following: the designation of such series, the number of shares initially constituting such series and whether to increase or decrease such number of shares, dividend rights and rates, terms of redemption and redemption prices, liquidation preferences, voting rights, conversion rights, whether a sinking fund will be provided for the redemption of the shares of such series (and, if so, the terms and conditions thereof) and whether a purchase fund shall be provided for the shares of such series (and, if so, the terms and conditions thereof).

The Company believes that the availability of the Preferred Stock will provide increased flexibility in structuring possible future financings and acquisitions and in meeting other corporate needs that might arise. Having such authorized shares available for issuance will allow the Company to issue shares of Preferred Stock without the expense and delay of a special stockholders' meeting. The authorized shares of Preferred Stock, as

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well as shares of Common Stock, will be available for issuance without further action by the stockholders, unless such action is required by applicable law or the rules of any stock exchange on which the Company's securities may be listed. Although the Board has no current intention to do so, it would have the power (subject to applicable law) to issue a series of Preferred Stock that could, depending on the terms of such series, impede the completion of a merger, tender offer or other takeover attempt. For instance, subject to applicable law, such series of Preferred Stock might impede a business combination by including class voting rights that would enable the holder to block such a transaction. The Board will make any determination to issue such shares based on its judgment as to the best interests of the Company and its stockholders. The Board, in so acting, could issue Preferred Stock having terms which could discourage an acquisition attempt or other transaction that some, or a majority, of the stockholders might believe to be in their best interest or in which stockholders might receive a premium for their stock over the then market price of such stock. See "-- Rights Plan."

OTHER CONSIDERATIONS. Article XII of the Company's Charter generally provides that, in determining whether to take or refrain from taking corporate action on any matter, including proposing any matter to the stockholders of the Company, the Company Board may, but shall not be obligated to, take into account the interests of clients and other customers, creditors, employees and other constituencies of the Company and its subsidiaries and the effect upon communities in which the Company and its subsidiaries do business.

CERTAIN EFFECTS OF THE RIGHTS PLAN. The Rights Plan is designed to protect stockholders of the Company in the event of unsolicited offers to acquire the Company and other coercive takeover tactics which, in the opinion of the Board, could impair its ability to represent stockholder interests. The provisions of the Rights Agreement may render an unsolicited takeover of the Company more difficult or less likely to occur or might prevent such a takeover, even though such takeover may offer the Company's stockholders the opportunity to sell their stock at a price above the then prevailing market rate and may be favored by a majority of the Company's stockholders. See "-- Rights Plan." The Company's Charter authorizes the Board to adopt a stockholder rights plan.

DELAWARE BUSINESS COMBINATION STATUTE. The terms of Section 203 of the DGCL apply to the Company. With certain exceptions, Section 203 generally prohibits an "interested stockholder" from engaging in a broad range of "business combination" transactions, including mergers, consolidations and sales of 10% or more of a corporation's assets, with a Delaware corporation for three years following the date on which such person became an interested stockholder unless (i) the transaction that results in the person's becoming an interested stockholder or the business combination is approved by the board of directors of the corporation before the person becomes an interested stockholder, (ii) upon consummation of the transaction which results in the stockholder becoming an interested stockholder, the interested stockholder owns 85% or more of the voting stock of the corporation outstanding at the time the transaction commenced, excluding shares owned by persons who are directors and also officers and shares owned by certain employee stock plans, or (iii) on or after the date the person becomes an interested stockholder, the business combination is approved by the corporation's board of directors and by holders of at least two-thirds of the corporation's outstanding voting stock, excluding shares owned by the interested stockholder, at a meeting of stockholders. Under Section 203, an "interested stockholder" is generally defined as any person (and the affiliates and associates of any such person), other than the corporation and any direct or indirect majority-owned subsidiary, that is (a) the owner of 15% or more of the outstanding voting stock of the corporation or (b) an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within the three-year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder. The restrictions contained in
Section 203 do not apply to a corporation that so provides in an amendment to its certificate of incorporation or by-laws passed by a majority of its outstanding voting shares, but such stockholder action generally does not become effective for 12 months following its adoption and would not apply to persons who were already interested stockholders at the time of the amendment. The Company's Charter and Company's By-Laws do not exclude the Company from the restrictions imposed under Section 203, but the Company's Charter provides that in no case shall the H&F Investors or any person who is a Permitted H&F Transferee, regardless of the total percentage of the Company's Common Stock or other voting stock owned by the H&F Investors or such person, be deemed an interested stockholder for any purpose under Section 203 whatsoever.

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Under certain circumstances, Section 203 makes it more difficult for a person who would be an "interested stockholder" to effect various business combinations with a corporation for a three-year period. The provisions of
Section 203 may encourage companies interested in acquiring the Company to negotiate in advance with the Company Board, because the stockholder approval requirement would be avoided if the Board approves either the business combination or the transaction which results in the stockholder becoming an interested stockholder. Such provisions also may have the effect of preventing changes in the Board. It is further possible that such provisions could make it more difficult to accomplish transactions which stockholders may otherwise deem to be in their best interests.

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to the Offerings, there has been no market for the Common Stock and there is no assurance that a significant public market for the Common Stock will develop or be sustained after the Offerings. Sales of substantial amounts of Common Stock in the public market following the Offerings could adversely affect the market price of the Common Stock and could impair the Company's future ability to raise capital through the sale of its equity securities.

Upon the closing of the Offerings, the Company will have outstanding 66,228,322 shares of Common Stock. Of these shares, approximately (i) 20,239,045 shares will be freely tradeable by persons, other than "affiliates" of the Company, without restriction under the Securities Act of 1933, as amended (the "Securities Act"); (ii) 44,952,822 shares will be "restricted" securities, within the meaning of Rule 144 under the Securities Act, and may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available, including the exemption provided by Rule 144; and
(iii) 1,036,455 shares originally issued pursuant to Regulation S under the Securities Act will be subject to transfer restrictions thereunder.

In general, under Rule 144 as currently in effect, beginning 90 days after the date of this Prospectus, a person (or persons whose shares are aggregated), including any affiliate of the Company, who has beneficially owned restricted securities for at least one year (including the holding period of any prior owner except an affiliate of the Company) would be entitled to sell within any three-month period, a number of shares that does not exceed the greater of: (i) one percent of the number of Common Stock then outstanding (approximately 662,283 shares immediately after the Offerings); or (ii) the average weekly trading volume of the Common Stock during the four calendar weeks preceding the filing of a Form 144 with respect to such sale. Sales under Rule 144 are also subject to certain manner of sale and notice requirements and to the availability of current public information about the Company. Under Rule 144(k), a person who is not deemed to have been an affiliate of the Company at any time during the 90 days preceding a sale, and who has beneficially owned restricted securities for at least two years (including the holding period of any prior owner except an affiliate of the Company), is entitled to sell such shares without complying with the manner of sale, public information requirements, volume limitations or notice requirements of Rule 144. Sale of shares by affiliates of the Company will continue to be subject to such volume limitations, and manner of sale, notice and public information requirements.

Each of the Company, all of the Management Investors, the Directors, and the Recapitalization Investors, including the Selling Stockholders, who, upon consummation of the Offerings, will collectively be the beneficial owners of an aggregate of 49,628,322 shares of Common Stock and hold vested options to acquire an aggregate of 16,702,950 shares of Common Stock have agreed not to (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any Common Stock (regardless of whether any of the transactions described in clause (i) or (ii) is to be settled by the delivery of Common Stock, or such other securities, in cash or otherwise), without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation and Bear, Stearns & Co. Inc. (and, in the case of Management Investors, the Company), for a period of 180 days after the date of this Prospectus (except that (i) the Company may grant stock options or stock awards pursuant to the Company's existing benefit or compensation plans, (ii) the Company may issue shares of Common Stock upon the exercise of options, warrants or Rights or the conversion of currently outstanding securities, (iii) the H&F Investors may transfer shares of Common Stock to partners or affiliates thereof in transactions not involving a public offering provided that each transferee agrees in writing to be bound by the restrictions set forth in this paragraph and (iv) the Company may issue, offer and sell shares of Common Stock or securities convertible, exercisable or exchangeable therefor in transactions not involving a public offering as consideration for the acquisition (pursuant to merger or otherwise) of one or more entities provided that each recipient of such securities agrees in writing to be bound by the restrictions set forth in this paragraph). In addition, during such period, the Company has also agreed not to file any registration statement with respect to, and the Company's executive officers and Directors, and certain other stockholders, including the Selling Stockholders, have agreed not to make any demand for, or exercise any right with respect

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to, the registration of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, without the prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation and Bear, Stearns & Co. Inc., except that the Company may file a registration statement on Form S-8 under the Act to register the shares of Common Stock issuable upon the exercise of options and the sale by certain employees of shares of Common Stock issuable upon the exercise of currently outstanding options (which sales will be subject to the 180-day lock-up agreements described above). The Company intends to file a registration statement on Form S-8 under the Act on or shortly after the date of consummation of the Offerings. See "Underwriting."

REGISTRATION RIGHTS AGREEMENT

In connection with the Recapitalization, Y&R, the Recapitalization Investors and the Management Voting Trust entered into a Registration Rights Agreement in favor of the Recapitalization Investors and, to the extent necessary to permit a Management Investor to pay taxes when such sales would not otherwise be permitted, the Management Investors, under which registration rights are available after the consummation of the Offerings. Pursuant to the Registration Rights Agreement, effective upon consummation of the Offerings, the Company has granted (i) the Recapitalization Investors the right to require, subject to the terms and conditions set forth therein, the Company to register shares of Common Stock held by them for sale in accordance with their intended method of disposition thereof and (ii) the Management Voting Trust the right to require, subject to the terms and conditions set forth therein, the Company to register such number of shares of Common Stock as is necessary to permit Management Investors to pay taxes as a result of the exercise by such Management Investors of Rollover Options or Closing Options or the vesting of Restricted Stock awarded to such Management Investors (each a "demand registration"), provided that in the case of the Management Voting Trust no such request may be made without the consent of the Company. Subject to certain limitations, the Recapitalization Investors may request up to four demand registrations and the Management Voting Trust may request up to two demand registrations. The Company will not be required to effect any demand registration if (i) the aggregate market value of the shares of Common Stock proposed to be registered is less than $100 million or (ii) such demand registration is requested by the Recapitalization Investors or the Management Voting Trust within six months of the effective date of a prior demand registration requested by the Recapitalization Investors or the Management Voting Trust, respectively. The Company may postpone the filing of a demand registration for up to 60 days in certain circumstances.

In addition, the Company has granted the Recapitalization Investors and the Management Voting Trust (to the extent of such number of shares of Common Stock as is necessary to permit Management Investors to pay taxes as a result of the exercise by such Management Investors of Rollover Options or Closing Options or the vesting of Restricted Stock awarded to such Management Investors) the right, subject to certain exceptions, to participate in registrations of Common Stock initiated by the Company on its own behalf or on behalf of any other stockholder (a "piggy-back registration"). The Recapitalization Investors and the Management Voting Trust (on behalf of those Management Investors that are Selling Stockholders) have exercised these piggy-back registration rights in connection with the Offerings.

The Registration Rights Agreement provides that if requested by the managing underwriter(s) of any underwritten offering of shares of Common Stock, the Recapitalization Investors and the Management Voting Trust will agree, on the same terms applicable to officers and directors of the Company, not to effect any public sale or distribution of any shares of Common Stock for a period of up to 180 days following and 15 days prior to the date of the final prospectus contained in the registration statement filed in connection with such offering. See "Underwriting."

The Company is required to pay expenses incurred by it and the reasonable fees and disbursements of one counsel to the selling stockholders under the Registration Rights Agreement in connection with the demand and piggy-back registrations under the Registration Rights Agreement. In connection with any registration under the Registration Rights Agreement, the Company has agreed to indemnify five of the Recapitalization Investors against certain liabilities, including liabilities under the Securities Act, and to contribute to certain payments they may be required to make. The Registration Rights Agreement will terminate on December 12, 2011.

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CERTAIN U.S. TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

The following is a general discussion of certain U.S. federal income and estate tax consequences of the ownership and disposition of Common Stock by a person that, for U.S. federal income tax purposes, is not a U.S. Person (a "non-U.S. holder"). For purposes of this Section a "U.S. Person" means a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States or any political subdivision thereof, an estate the income of which is subject to United States federal income taxation regardless of its source or a trust if (i) a U.S. court is able to exercise primary supervision over the trust's administration and (ii) one or more United States persons have the authority to control all of the trust's substantial decisions, and the term "United States" means the U.S. of America (including the States and the District of Columbia). The discussion does not consider specific facts and circumstances that may be relevant to a particular non-U.S. holder's tax position. Accordingly, each non-U.S. holder is urged to consult its own tax advisor with respect to the U.S. tax consequences of the ownership and disposition of Common Stock, as well as any tax consequences that may arise under the laws of any state, municipality, foreign country or other taxing jurisdiction.

DIVIDENDS

Dividends paid to a non-U.S. holder of Common Stock ordinarily will be subject to withholding of U.S. federal income tax at a 30 percent rate, or at a lower rate under an applicable income tax treaty that provides for a reduced rate of withholding. However, if the dividends are effectively connected with the conduct by the holder of a trade or business within the United States, then the dividends will be exempt from the withholding tax described above and instead will be subject to U.S. federal income tax on a net income basis.

GAIN ON DISPOSITION OF COMMON STOCK

A non-U.S. holder generally will not be subject to U.S. federal income tax in respect of gain realized on a disposition of Common Stock, provided that (a) the gain is not effectively connected with a trade or business conducted by the non-U.S. holder in the United States and (b) in the case of a non-U.S. holder who is an individual and who holds the Common Stock as a capital asset, such holder is present in the United States for less than 183 days in the taxable year of the sale and other conditions are met.

FEDERAL ESTATE TAXES

Common Stock owned or treated as being owned by a non-U.S. holder at the time of death will be included in such holder's gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise.

U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX

U.S. information reporting requirements and backup withholding tax will not apply to dividends paid on Common Stock to a non-U.S. holder address outside the United States, except that with regard to payments made after December 31, 1998, a Non-U.S. Holder will be entitled to such an exemption only if it provides a Form W-8 (or satisfies certain documentary evidence requirements for establishing that it is a non-United States person) or otherwise establishes an exemption. As a general matter, information reporting and backup withholding also will not apply to a payment of the proceeds of a sale of Common Stock effected outside the United States by a foreign office of a foreign broker. However, information reporting requirements (but not backup withholding) will apply to a payment of the proceeds of a sale of Common Stock effected outside the United States by a foreign office of a broker if the broker (i) is a U.S. person, (ii) derives 50 percent or more of its gross income for certain periods from the conduct of a trade or business in the United States, or (iii) is a "controlled foreign corporation" as to the United States, or (iv) with respect to payments made after December 31, 1998, is a foreign partnership that, at any time during its taxable year is 50 percent or more (by income or capital interest) owned by U.S. persons or is engaged in the conduct of a U.S. trade or business, unless the broker has documentary evidence in its records that the holder is a non-U.S. holder and certain conditions are met, or the holder otherwise establishes an exemption. Payment by a United States office of a broker of the proceeds of a sale of Common Stock will be subject to both backup withholding and information reporting unless the holder certifies its non-United States status under penalties of perjury or otherwise establishes an exemption.

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UNDERWRITING

Subject to the terms and conditions of an Underwriting Agreement, dated , 1998 (the "Underwriting Agreement"), the U.S. Underwriters named below (the "U.S. Underwriters"), who are represented by Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), Bear, Stearns & Co. Inc. ("Bear Stearns"), Furman Selz LLC, Goldman, Sachs & Co. and Smith Barney Inc. (the "U.S. Representatives"), and the International Managers named below (the "International Managers" and, together with the U.S. Underwriters, the "Underwriters"), who are represented by Donaldson, Lufkin & Jenrette International ("DLJ International"), Bear, Stearns International Limited, Furman Selz LLC, Goldman Sachs International and Smith Barney Inc. are acting as representatives (the "International Representatives" and, together with the U.S. Representatives, the "Representatives"), have severally agreed to purchase from the Company and the Selling Stockholders the respective number of shares of Common Stock set forth opposite their names below.

                                                                NUMBER
                     U.S. UNDERWRITERS                        OF SHARES
Donaldson, Lufkin & Jenrette Securities Corporation.........
Bear, Stearns & Co. Inc. ...................................
Furman Selz LLC.............................................
Goldman, Sachs & Co. .......................................
Smith Barney Inc............................................
                                                              ----------
     Subtotal...............................................  13,280,000
                                                              ==========

                                                              NUMBER OF
                   INTERNATIONAL MANAGERS                      SHARES
Donaldson, Lufkin & Jenrette International..................
Bear, Stearns International Limited.........................
Furman Selz LLC.............................................
Goldman Sachs International.................................
Smith Barney Inc............................................
                                                              ---------
     Subtotal...............................................
                                                              =========
          Total.............................................  3,320,000
                                                              =========

The Underwriting Agreement provides that the obligations of the several Underwriters to purchase and accept delivery of the shares of Common Stock offered hereby are subject to approval by their counsel of certain legal matters and to certain other conditions. The Underwriters are obligated to purchase and accept delivery of all the shares of Common Stock offered hereby (other than those shares covered by the over-allotment option described below) if any are purchased.

The Underwriters initially propose to offer the shares of Common Stock in part directly to the public at the initial public offering price set forth on the cover page of this Prospectus and in part to certain dealers (including the Underwriters) at such price less a concession not in excess of $ per share. The Underwriters may allow, and such dealers may re-allow, to certain other dealers a concession not in excess of $ per share. After the initial offering of the Common Stock, the public offering price and other selling terms may be changed by the Representatives at any time without notice. The Underwriters do not intend to confirm sales to any accounts over which they exercise discretionary authority.

The H&F Investors, H. Irving Grousbeck and American Media Management, Inc. have granted to the U.S. Underwriters an option, exercisable within 30 days after the date of this Prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of 2,490,000 additional shares of Common Stock at the initial public offering price less underwriting discounts and commissions. The U.S. Underwriters may exercise such option solely to cover over-allotments, if any, made in connection with the Offerings. To the extent that the U.S. Underwriters exercise such option, each U.S. Underwriter will become obligated, subject to certain

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conditions, to purchase its pro rata portion of such additional shares based on such U.S. Underwriter's percentage underwriting commitment in the U.S. portion of the Offerings as indicated in the preceding table.

The Company and the Selling Stockholders have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the Underwriters may be required to make in respect thereof.

Each of the Company, all of the Management Investors, the Directors and the Recapitalization Investors (including the Selling Stockholders) has agreed not to (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any Common Stock (regardless of whether any of the transactions described in clause (i) or (ii) is to be settled by the delivery of Common Stock, or such other securities, in cash or otherwise) for a period of 180 days after the date of this Prospectus without the prior written consent of DLJ and Bear Stearns (and, in the case of Management Investors, the Company) (except that (i) the Company may grant stock options or stock awards pursuant to the Company's existing benefit or compensation plans, (ii) the Company may issue shares of Common Stock upon the exercise of options, warrants or Rights or the conversion of currently outstanding securities, (iii) the H&F Investors may transfer shares of Common Stock to partners or affiliates thereof in transactions not involving a public offering provided that each transferee agrees in writing to be bound by the restrictions set forth in this paragraph and (iv) the Company may issue, offer and sell shares of Common Stock or securities convertible, exercisable or exchangeable therefor in transactions not involving a public offering as consideration for the acquisition (pursuant to merger or otherwise) of one or more entities provided that each recipient of such securities agrees in writing to be bound by the restrictions set forth in this paragraph). In addition, during such period, the Company has also agreed not to file any registration statement with respect to, and each of its executive officers, directors and certain stockholders of the Company (including the Selling Stockholders) has agreed not to make any demand for, or exercise any right with respect to, the registration of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock without the prior written consent of DLJ and Bear Stearns, except that the Company may file a registration statement on Form S-8 under the Act to register the shares of Common Stock issuable upon the exercise of options and the sale by certain employees of shares of Common Stock issuable upon the exercise of currently outstanding options (which sales will be subject to the 180-day lock-up agreements described above). The Company intends to file a registration statement on Form S-8 under the Act on or shortly after the date of consummation of the Offerings.

Prior to the Offerings, there has been no established trading market for the Common Stock. The initial public offering price for the shares of Common Stock offered hereby will be determined by negotiation between the Company and the Representatives. The factors to be considered in determining the initial public offering price include the history of and the prospects for the industry in which the Company competes, the past and present operations of the Company, the prospects for future earnings of the Company, the recent market prices of securities of generally comparable companies and the general condition of the securities markets at the time of the Offerings.

Application has been made to list the Common Stock on the New York Stock Exchange (the "NYSE"). In order to meet the requirements for listing the Common Stock on the NYSE, the U.S. Underwriters have undertaken to sell lots of 100 or more shares to a minimum of 2,000 beneficial owners.

Pursuant to an Agreement Between U.S. Underwriters and International Managers (the "Intersyndicate Agreement"), each U.S. Underwriter has represented and agreed that, with certain exceptions, (i) it is not purchasing any shares of Common Stock offered hereby for the account of anyone other than a United States or Canadian Person (as defined below) and (ii) it has not offered or sold, and will not offer or sell, directly or indirectly, any shares of Common Stock offered hereby or distribute any prospectus relating to such shares of Common Stock outside the United States or Canada or to anyone other than a United States or Canadian Person. Pursuant to the Intersyndicate Agreement, each International Manager has represented and agreed

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that, with certain exceptions, (i) it is not purchasing any shares of Common Stock offered hereby for the account of any United States or Canadian Person and
(ii) it has not offered or sold, and will not offer or sell, directly or indirectly, any shares of Common stock offered hereby or distribute any prospectus relating to such shares of Common Stock in the United States or Canada or to any United States or Canadian Person. With respect to any Underwriter that is both a U.S. Underwriter and an International Manager, the foregoing representations and agreements (i) made by it in its capacity as a U.S. Underwriter apply only to it in its capacity as a U.S. Underwriter and (ii) made by it in its capacity as an International Manager apply only to it in its capacity as an International Manager. The foregoing limitations do not apply to stabilization transactions and to certain other transactions specified in the Intersyndicate Agreement. As used herein, "United States or Canadian Person" means any individual who is resident in the United States or Canada, or any corporation, pension, profit-sharing or other trust or other entity organized under or governed by the laws of the United States or Canada or of any political subdivision thereof (other than the foreign branch of any United States or Canadian Person), and includes any United States or Canadian branch of a person other than a United States or Canadian Person.

Pursuant to the Intersyndicate Agreement, sales may be made between the syndicates of U.S. Underwriters and International Managers of such number of shares of Common Stock offered hereby as may be mutually agreed. Unless otherwise determined by the Representatives, the per share price of any shares of Common Stock so sold shall be the initial public offering price set forth on cover page hereof, in United States dollars, less an amount not greater than the per share amount of the concession to dealers set forth above.

Pursuant to the Intersyndicate Agreement, each U.S. Underwriter has represented and agreed that (i) it has not offered or sold and will not offer or sell, directly or indirectly, any shares of Common Stock offered hereby in any province or territory of Canada or to, or for the benefit of, any resident of any province or territory of Canada in contravention of the securities laws thereof and (ii) without limiting the generality of the foregoing, any offer or sale of such shares of Common Stock in Canada will be made only pursuant to an exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer or sale is made. Each U.S. Underwriter has further agreed to send to any dealer who purchases from it any shares of Common Stock offered hereby a notice stating in substance that by purchasing such shares of Common Stock such dealer represents and agrees that (i) it has not offered or sold and will not offer or sell, directly or indirectly, any of such shares of Common Stock in any province or territory of Canada or to, or for the benefit of, any resident of any province or territory of Canada in contravention of securities laws thereof, (ii) any offer or sale of such shares of Common Stock in Canada will be made only pursuant to an exemption from the requirement to file a prospectus in the province or territory of Canada in which such offer or sale is made and (iii) it will send to any other dealer to whom it sells any of such shares of Common Stock a notice containing substantially the same statement as is contained in this sentence.

Pursuant to the Intersyndicate Agreement, each International Manager has represented and agreed that (i) it has not offered or sold and, prior to the date six months after the closing date for the sale of shares of Common Stock to the International Managers pursuant to the Underwriting Agreement, will not offer or sell, any shares of Common Stock offered hereby to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the shares of Common Stock offered hereby in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the Offerings to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom the document may otherwise lawfully be issued or passed on.

Pursuant to the Intersyndicate Agreement, each International Manager has further represented and agreed that it has not offered or sold and will not offer or sell, directly or indirectly, any shares of Common

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Stock acquired in connection with the distribution contemplated hereby in Japan or to or for the account of any resident thereof, except for offers or sales to Japanese International Managers or dealers and except pursuant to an exemption from the registration requirements of the Securities and Exchange Law of Japan and otherwise in compliance with applicable provisions of Japanese law. Each International manager has further agreed to send to any dealer who purchases from it any shares of Common Stock offered hereby a notice stating in substance that by purchasing such shares of Common Stock such dealer represents and agrees that (i) it has not offered or sold and will not offer or sell, directly or indirectly, any of such shares on Common Stock in Japan or to or for the account of any resident thereof, except for offers or sales to Japanese International Managers or dealers and except pursuant to an exemption from the registration requirements of the Securities and Exchange Law of Japan and otherwise in compliance with applicable provisions of Japanese law and (ii) it will send to any other dealer to whom it sells any of such shares of Common Stock a notice containing substantially the same statement as is contained in this sentence.

Other than in the United States, no action has been taken by the Company, the Selling Stockholders or the Underwriters that would permit a public offering of the shares of Common Stock offered hereby in any jurisdiction where action for that purpose is required. The shares of Common Stock offered hereby may not be offered or sold, directly or indirectly, nor may this Prospectus or any other offering material or advertisements in connection with the offer and sale of any such shares of Common Stock be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of such jurisdiction. Persons into whose possession this Prospectus comes are advised to inform themselves about and to observe any restrictions relating to the Offerings and the distribution of this Prospectus. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any shares of Common Stock offered hereby in any jurisdiction in which such an offer or a solicitation is unlawful.

In connection with the Offerings, the Underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Common Stock. Specifically, the Underwriters may overallot the Offerings, creating a syndicate short position. The Underwriters may bid for and purchase shares of Common Stock in the open market to cover such syndicate short position or to stabilize the price of the Common Stock. In addition, the underwriting syndicate may reclaim selling concessions from syndicate members, if DLJ repurchases previously distributed Common Stock in syndicate covering transactions, in stabilization transactions or otherwise or if DLJ receives a report that indicates that the clients of such syndicate members have "flipped" the Common Stock. These activities may stabilize or maintain the market price of the Common Stock above independent market levels. The Underwriters are not required to engage in these activities, and may end any of these activities at any time.

830,000 of the shares offered hereby have been reserved for sale to certain employees of the Company and its majority-owned subsidiaries, certain clients and certain other persons designated by the Company ("Eligible Participants"), in each case to the extent permitted by applicable law. The price per share of the shares to be sold to Eligible Participants will be the same as the price to the public in the Offerings. The maximum investment of any Eligible Participant may be limited by the Company in its sole discretion. This program is being administered by DLJ or DLJ International or, where required by applicable law, a locally licensed or authorized broker-dealer. It is currently anticipated that the number of shares to be sold under this program will not exceed 5% of the number of shares of Common Stock offered in connection with the Offerings.

Bear Stearns from time to time performs investment banking and other financial services for the Company and its affiliates for which Bear Stearns may receive advisory or transaction fees, as applicable, plus out-of-pocket expenses, of the nature and in amounts customary in the industry for such services. Alan D. Schwartz, an Executive Vice President and Head of the Investment Banking Department of Bear Stearns, is a member of the Company Board. BearTel Corp., a company affiliated with Bear Stearns, is a Selling Stockholder in the Offerings. See "Principal and Selling Stockholders."

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LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed upon for the Company by Cleary, Gottlieb, Steen & Hamilton, New York, New York. Certain legal matters in connection with the Offerings will be passed upon for the Underwriters by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York.

EXPERTS

The consolidated financial statements as of December 31, 1996 and 1997 and for each of the three years in the period ended December 31, 1997 included in this Prospectus have been so included in reliance on the report of Price Waterhouse LLP, independent accountants, given on authority of said firm as experts in auditing and accounting.

AVAILABLE INFORMATION

The Company has filed with the Commission a Registration Statement on Form S-1 (including all amendments thereto, the "Registration Statement"), of which this Prospectus forms a part, covering the Common Stock offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement and the exhibits thereto, certain items of which are omitted as permitted by the rules and regulations of the Commission. Statements made in this Prospectus as to the contents of any contract or other document are not necessarily complete and, in each instance, reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in its entirety by such reference.

Following the Offerings, the Company will become subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith will be required to file reports and other information with the Commission. The Registration Statement (including exhibits), as well as such reports and other information, when so filed, can be inspected without charge and copied, at prescribed rates, at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549; and at the regional offices of the Commission at 7 World Trade Center, Suite 1300, New York, New York 10048 and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates or at the Commission's web site at http.//www.sec.gov. Such reports and other information may also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005, once the Common Stock have been approved for listing.

The Company will furnish its stockholders annual reports and unaudited quarterly reports for the first three quarters of each fiscal year. Annual reports will include audited consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles. The financial statements included in the annual reports will be examined and reported upon, with an opinion expressed, by the Company's independent auditors.

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[ADDITIONAL PAGE FOR INTERNATIONAL PROSPECTUS]

ADDITIONAL INFORMATION

The following information is required pursuant to the United Kingdom Public Offers of Securities Regulations 1995. A copy of this document, which comprises a prospectus prepared in accordance with the Public Offers of Securities Regulations 1995, has been delivered to the Registrar of Companies in England and Wales in accordance with Regulation 4(2) of those Regulations.

RESPONSIBILITY

The Directors of the Company accept responsibility for the information contained in this document. To the best knowledge and belief of such persons (who have taken all reasonable care to ensure that such is the case), such information is in accordance with the facts and does not omit anything likely to affect the import of such information. The business address of Messrs. Georgescu, Vick, Bell and Dolan is 285 Madison Avenue, New York, New York 10017. The business address of Messrs. Hellman and Hammarskjold is One Maritime Plaza, San Francisco, California 94111. The business address of Mr. Schwartz is 245 Park Avenue, New York, New York 10167. The business address of Mr. Bodman is c/o AT&T Ventures, Chevy Chase Metro Building, 2 Wisconsin Circle, Suite 610, Chevy Chase, Maryland 20815-7003. The business address of Mr. McGillicuddy is 270 Park Avenue, 32nd Floor, New York, New York 10017.

DIRECTORS' SERVICE CONTRACTS

Any service contracts with Directors are determinable by the Company upon less than one year's notice without payment of compensation.

INCORPORATION AND PURPOSE

The Company was incorporated as a corporation with limited liability under the laws of the State of Delaware in October 1996 under the name "Young & Rubicam Inc." The Company's Charter provides that the purposes for which the Company is formed are to engage in any lawful act or activity for which corporations may be organized and incorporated under the General Corporation Law of the State of Delaware. The principal offices of the Company in the United Kingdom are Young & Rubicam Holdings (U.K.) Ltd., Greater London House, Hampstead Road, London NW1 7QP, United Kingdom.

CONSENT

Price Waterhouse LLP have given and have not withdrawn their written consent to the inclusion of their report and, for the purposes of paragraph 45(2)(a)(iv) of Schedule 1 of The Public Offers of Securities Regulations 1995, accept responsibility for the report and have not become aware, since the date of the audit report, of any matter affecting the validity of the report at that date. The address of Price Waterhouse LLP is 1177 Avenue of the Americas, New York, New York 10036.

THE OFFER

The Offering in the United Kingdom will commence on April , 1998 and will remain open until the date on which the Registration Statement is declared effective by the Commission, which is expected to occur on or about May , 1998. DLJ International will contact Eligible Participants in the United Kingdom to arrange for the sale of shares of Common Stock offered hereby. Eligible Participants may choose which specified number of shares of Common Stock they wish to purchase on the share reservation form to be provided to them by DLJ International. DLJ International will provide information on setting up the appropriate account with them for payment and delivery of shares of Common Stock, which is expected to occur on or about , 1998. Payment for such shares shall be upon their delivery.

IF YOU ARE IN ANY DOUBT ABOUT THE CONTENTS OF THIS DOCUMENT YOU SHOULD CONSULT A PERSON AUTHORIZED UNDER THE FINANCIAL SERVICES ACT 1986 WHO SPECIALIZES IN ADVISING ON THE ACQUISITION OF SHARES AND OTHER SECURITIES.

81

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                              PAGE
Report of Independent Accountants...........................  F-2
Consolidated Balance Sheets as of December 31, 1996 and
  1997......................................................  F-3
Consolidated Statements of Operations for the three years
  ended December 31, 1997...................................  F-4
Consolidated Statements of Cash Flows for the three years
  ended December 31, 1997...................................  F-5
Consolidated Statements of Changes in Equity (Deficit) for
  the three years ended December 31, 1997...................  F-6
Notes to Financial Statements...............................  F-7

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Young & Rubicam Inc.

The stock dividend described in Note 20 to the financial statements has not been consummated at April 20, 1998. When it has been consummated, we will be in a position to furnish the following report:

"In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of cash flows and of changes in equity (deficit) present fairly, in all material respects, the financial position of Young & Rubicam Inc. and its subsidiaries at December 31, 1996 and 1997, and the results if their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above."

Price Waterhouse LLP
New York, New York
February 19, 1998

F-2

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS

                                                                                         DECEMBER 31,
                                                                    DECEMBER 31,             1997
                                                              ------------------------   ------------
                                                                                          PRO FORMA
                                                                 1996          1997      (SEE NOTE 2)
                                                                                         (UNAUDITED)
                                                                 (IN THOUSANDS, EXCEPT SHARE DATA)
CURRENT ASSETS
  Cash and cash equivalents.................................  $  110,180    $  160,263    $  160,263
  Accounts receivable, net of allowance for doubtful
    accounts of $9,849 and $14,125 at December 31, 1996 and
    1997, respectively......................................     847,653       790,342       790,342
  Costs billable to clients.................................      78,723        50,479        50,479
  Other receivables.........................................      50,302        35,218        35,218
  Deferred income taxes.....................................      78,732        32,832        32,832
  Prepaid expenses and other assets.........................      17,102        16,891        16,891
  Due from employees........................................       2,340         1,098         1,098
                                                              ----------    ----------    ----------
        Total Current Assets................................   1,185,032     1,087,123     1,087,123
                                                              ----------    ----------    ----------
NONCURRENT ASSETS
  Property and equipment, net...............................     129,088       125,014       125,014
  Deferred income taxes.....................................      79,411       124,192       124,192
  Goodwill, less accumulated amortization of $64,062 and
    $80,166 at December 31, 1996 and 1997, respectively.....     131,511       116,637       116,637
  Equity in net assets of and advances to unconsolidated
    companies...............................................      25,219        26,393        26,393
  Due from employees........................................         705           300           300
  Other assets..............................................      47,846        48,360        48,360
                                                              ----------    ----------    ----------
        Total Noncurrent Assets.............................     413,780       440,896       440,896
                                                              ----------    ----------    ----------
        Total Assets........................................  $1,598,812    $1,528,019    $1,528,019
                                                              ==========    ==========    ==========
CURRENT LIABILITIES
  Loans payable.............................................  $   36,282    $   10,765    $   10,765
  Accounts payable..........................................     805,710       811,162       811,162
  Installment notes payable -- related parties..............      24,874         3,231         3,231
  Accrued expenses and other liabilities....................     247,816       273,011       273,011
  Accrued payroll and bonuses...............................     252,487        65,458        65,458
  Income taxes payable......................................      14,372        29,665        29,665
                                                              ----------    ----------    ----------
        Total Current Liabilities...........................   1,381,541     1,193,292     1,193,292
                                                              ----------    ----------    ----------
NONCURRENT LIABILITIES
  Loans payable.............................................     206,082       330,552       330,552
  Installment notes payable -- related parties..............          --         6,503         6,503
  Deferred compensation -- related parties..................      17,887        31,077        31,077
  Other liabilities.........................................     104,502       112,851       112,851
                                                              ----------    ----------    ----------
        Total Noncurrent Liabilities........................     328,471       480,983       480,983
                                                              ----------    ----------    ----------
Commitments and Contingencies (Note 18)
Minority Interest...........................................       5,569         6,987         6,987
                                                              ----------    ----------    ----------
MANDATORILY REDEEMABLE EQUITY SECURITIES
  Common stock, par value $.01 per share;
    authorized -- 250,000,000 shares at December 31, 1996
    and 1997 (actual and pro forma); issued and
    outstanding -- 47,382,330 shares, 50,658,180 shares and
    0 shares at December 31, 1996 (actual), December 31,
    1997 (actual) and pro forma December 31, 1997,
    respectively............................................     363,264       508,471            --
                                                              ----------    ----------    ----------
STOCKHOLDERS' DEFICIT
  Money Market Preferred Stock -- Cumulative variable
    dividend; liquidating value of $7.67 per share;
    one-tenth of one vote per share; 10,000,000 shares
    authorized December 31, 1996 and 1997 (actual and pro
    forma); 87 shares issued and outstanding (actual and pro
    forma)..................................................          --            --            --
  Common stock, par value $.01 per share; authorized
    250,000,000 shares at December 31, 1996 and 1997 (actual
    and pro forma); issued and outstanding -- 11,086,950
    shares at December 31, 1996 and 1997 (actual) and
    61,745,130 shares pro forma December 31, 1997...........         111           111           617
  Capital surplus...........................................     106,825        23,613       531,578
  Accumulated deficit.......................................    (498,928)     (522,866)     (522,866)
  Cumulative translation adjustment.........................      (2,322)      (16,577)      (16,577)
  Pension liability adjustment..............................        (719)         (706)         (706)
                                                              ----------    ----------    ----------
                                                                (395,033)     (516,425)       (7,954)
  Common stock in treasury, at cost; 0 shares at December
    31, 1996 and 1,115,160 shares at December 31, 1997
    (actual and pro forma)..................................          --        (8,550)       (8,550)
  Unearned compensation -- Restricted Stock.................     (85,000)     (136,739)     (136,739)
                                                              ----------    ----------    ----------
        Total Stockholders' Deficit.........................    (480,033)     (661,714)     (153,243)
                                                              ----------    ----------    ----------
        Total Liabilities, Mandatorily Redeemable Equity
          Securities and Stockholders' Deficit..............  $1,598,812    $1,528,019    $1,528,019
                                                              ==========    ==========    ==========

The accompanying notes are an integral part of these consolidated financial statements.

F-3

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                     YEAR ENDED DECEMBER 31,
                                                         -----------------------------------------------
                                                             1995             1996             1997
                                                         (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Revenues...............................................   $1,085,494       $1,222,139       $1,382,740
Compensation expense, including employee benefits......      672,026          730,261          836,150
General and administrative expenses....................      356,523          391,617          463,936
Recapitalization-related charges.......................           --          315,397               --
Other operating charges................................       31,465           17,166           11,925
                                                          ----------       ----------       ----------
Operating expenses.....................................    1,060,014        1,454,441        1,312,011
                                                          ----------       ----------       ----------
Income (loss) from operations..........................       25,480         (232,302)          70,729
Interest income........................................        9,866           10,269            8,454
Interest expense.......................................      (27,441)         (28,584)         (42,879)
                                                          ----------       ----------       ----------
Income (loss) before income taxes......................        7,905         (250,617)          36,304
Income tax provision (benefit).........................        9,130          (20,611)          58,290
                                                          ----------       ----------       ----------
                                                              (1,225)        (230,006)         (21,986)
Equity in net income (loss) of unconsolidated
  companies............................................        5,197           (9,837)             342
Minority interest in net (income) loss of consolidated
  subsidiaries.........................................       (3,152)           1,532           (2,294)
                                                          ----------       ----------       ----------
Net income (loss)......................................   $      820       $ (238,311)      $  (23,938)
                                                          ==========       ==========       ==========
Basic and diluted loss per common share (Note 3).......                                     $     (.51)
                                                                                            ==========
Weighted average shares outstanding (Note 3)...........                                     46,949,355
                                                                                            ==========

The accompanying notes are an integral part of these consolidated financial statements.

F-4

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                  YEAR ENDED DECEMBER 31,
                                                              --------------------------------
                                                                1995       1996        1997
                                                                       (IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...........................................  $    820   $(238,311)  $ (23,938)
Adjustments to reconcile net income (loss) to net cash
  provided by operating activities:
Recapitalization-related charges............................        --     315,397          --
Depreciation and amortization...............................    47,492      53,030      56,721
Other operating charges.....................................    24,360      11,096      11,925
Deferred income tax expense.................................   (14,866)    (59,671)       (384)
Equity in net (income) loss of unconsolidated companies.....    (5,197)      9,837        (342)
Dividends from unconsolidated companies.....................     2,101       2,691       2,728
Minority interest in net income (loss) of consolidated
  subsidiaries..............................................     3,152      (1,532)      2,294
Change in assets and liabilities, excluding effects from
  acquisitions, dispositions, recapitalization and foreign
  exchange:
Accounts receivable.........................................   (44,156)   (209,518)     42,144
Costs billable to clients...................................   (19,637)      7,784      25,622
Other receivables...........................................     5,462      (2,883)     13,930
Prepaid expenses and other assets...........................    (1,922)      5,342        (876)
Due from employees..........................................      (453)      3,434       1,145
Accounts payable............................................    58,635     256,460      18,547
Accrued expenses and other liabilities......................     7,368      (7,565)     25,621
Accrued payroll and bonuses.................................       (90)      3,192       2,179
Income taxes payable........................................     2,383       4,263      19,352
Deferred compensation.......................................    10,921       4,950      13,052
Other liabilities...........................................     2,188      11,225       9,457
Other.......................................................     1,248       8,843       5,334
                                                              --------   ---------   ---------
Net cash provided by operating activities...................    79,809     178,064     224,511
                                                              --------   ---------   ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment.........................   (42,096)    (51,792)    (51,899)
Acquisitions, net of cash acquired..........................    (5,298)    (23,887)    (11,281)
Investment in net assets of and advances to unconsolidated
  companies.................................................      (189)       (775)     (5,640)
Proceeds from notes receivable..............................     1,762         360       1,678
                                                              --------   ---------   ---------
Net cash used in investing activities.......................   (45,821)    (76,094)    (67,142)
                                                              --------   ---------   ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loans payable, long-term......................        --     319,282     226,770
Repayment of loans payable, long-term.......................   (29,743)   (252,496)   (105,870)
Proceeds from loans payable, short-term, net................    11,052      27,849      20,103
Deferred financing costs....................................        --      (9,157)         --
Recapitalization cash contributions.........................        --     242,007          --
Recapitalization payments...................................        --    (323,920)   (247,789)
Payments of non-recapitalization deferred compensation......   (15,243)    (13,886)       (961)
Proceeds (loans) due from employees, net....................     1,145       2,262        (157)
Common stock/LPUs issued....................................     9,732       4,163      10,390
Common stock/LPUs repurchased...............................   (21,647)     (8,971)     (1,500)
Dividends paid on preferred and common stock................      (491)       (696)         --
(Dividends paid to) capital contributions from minority
  shareholders..............................................    (1,770)      1,652         347
Distributions to limited partners...........................    (3,060)       (703)         --
                                                              --------   ---------   ---------
Net cash used in financing activities.......................   (50,025)    (12,614)    (98,667)
                                                              --------   ---------   ---------
Effect of exchange rate changes on cash and cash
  equivalents...............................................     1,148        (822)     (8,619)
                                                              --------   ---------   ---------
Net (decrease) increase in cash and cash equivalents........   (14,889)     88,534      50,083
Cash and cash equivalents, beginning of period..............    36,535      21,646     110,180
                                                              --------   ---------   ---------
Cash and cash equivalents, end of period....................  $ 21,646   $ 110,180   $ 160,263
                                                              ========   =========   =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid...............................................  $ 30,161   $  28,612   $  39,986
                                                              ========   =========   =========
Income taxes paid...........................................  $ 20,350   $  20,732   $  25,020
                                                              ========   =========   =========
NONCASH INVESTING ACTIVITY
Common Stock issued in acquisitions.........................        --          --   $   1,126

The accompanying notes are an integral part of these consolidated financial statements.

F-5

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)

                                                                                     RETAINED AND
                                                             LIMITED                 UNDISTRIBUTED
                                     NON-VOTING   VOTING    PARTNERS'                  EARNINGS       COMMON
                         PREFERRED     COMMON     COMMON   CONTRIBUTED    CAPITAL    (ACCUMULATED    STOCK IN   RESTRICTED
                           STOCK       STOCK      STOCK      EQUITY       SURPLUS      DEFICIT)      TREASURY     STOCK
                                                                  (IN THOUSANDS)
BALANCE AT DECEMBER 31,
  1994.................    $ 63       $ 4,000     $  --      $   946     $  53,006     $  29,616     $ 3,298    $      --
                           ====       =======     =====      =======     =========     =========     =======    =========
Net income.............      --            --        --           --            --           820          --           --
Dividends paid.........      --            --        --           --            --          (491)         --           --
Common stock/Limited
  Partnership Units
  issued...............      28            --        --        1,359        12,237           183         (72)          --
Limited Partnership
  Units
  repurchased/capital
  distributions........      --            --        --       (4,000)           --        (6,733)         --           --
Common Stock
  repurchased..........     (25)           --        --           --       (10,051)       (5,759)         91           --
Capitalization of tax
  benefits of options
  exercised............      --            --        --           --            29            --          --           --
Equityholder loans.....      --            --        --        4,231         1,882            --          --           --
                           ----       -------     -----      -------     ---------     ---------     -------    ---------
BALANCE AT DECEMBER 31,
  1995.................    $ 66       $ 4,000     $  --      $ 2,536     $  57,103     $  17,636     $ 3,317    $      --
                           ====       =======     =====      =======     =========     =========     =======    =========
Net loss...............      --            --        --           --            --      (238,311)         --           --
Dividends paid.........      --            --        --           --            --          (696)         --           --
Common stock/Limited
  Partnership Units
  issued...............       3            --        --        4,067        13,269            --         (61)          --
Limited Partnership
  Units
  repurchased/capital
  distributions........      --            --        --       (2,370)           --        (3,329)         --           --
Common stock
  repurchased..........      (2)           --        --           --       (14,699)       (8,863)        123           --
Recapitalization
  redemptions..........     (67)       (3,900)       --       (1,534)      (36,435)     (265,365)     (3,379)          --
Recapitalization
  issuances............      --            --       427           --       326,590            --          --      (85,000)
Recapitalization
  exchanges............      --          (100)      158       (2,914)      122,732            --          --           --
Mandatorily Redeemable
  Equity Securities....      --            --      (474)          --      (362,790)           --          --           --
Equityholder loans.....      --            --        --          215         1,055            --          --           --
                           ----       -------     -----      -------     ---------     ---------     -------    ---------
BALANCE AT DECEMBER 31,
  1996.................    $ --       $    --     $ 111      $    --     $ 106,825     $(498,928)    $    --    $ (85,000)
                           ====       =======     =====      =======     =========     =========     =======    =========
Net loss...............      --            --        --           --            --       (23,938)         --           --
Common stock issued....      --            --        --           --         1,501            --          --           --
Common stock
  repurchased..........      --            --        --           --            --            --      (8,550)          --
Unearned
  compensation --
  Restricted Stock.....      --            --        --           --        51,739            --          --      (51,739)
Common stock options
  exercised............      --            --        44           --         8,711            --          --           --
Accretion of
  Mandatorily
  Redeemable Equity
  Securities...........      --            --       (44)          --      (145,163)           --          --           --
                           ----       -------     -----      -------     ---------     ---------     -------    ---------
BALANCE AT DECEMBER 31,
  1997.................    $ --       $    --     $ 111      $    --     $  23,613     $(522,866)    $(8,550)   $(136,739)
                           ====       =======     =====      =======     =========     =========     =======    =========

The accompanying notes are an integral part of these consolidated financial statements.

F-6

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- OPERATIONS AND BASIS OF PRESENTATION:

NATURE OF OPERATIONS: Young and Rubicam Inc. (the "Company") is a global marketing and communications enterprise with integrated services in advertising, perception management and public relations, identity and design, sales promotion, direct marketing and healthcare communications. The Company operates in the U.S., Canada, Europe, Latin America and Asia/Pacific as well as through certain affiliations in other parts of the world.

BASIS OF PRESENTATION: On December 12, 1996, the Company effected a recapitalization (the "Recapitalization"). As the equity holders prior to the Recapitalization retained control of the Company, the financial statements reflect the consolidated financial position, results of operations and cash flows of the Company on a continuous basis (see Note 4).

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company, a Delaware corporation, and all subsidiaries in which it holds a controlling interest, including a Delaware Limited Partnership, Young & Rubicam L.P. (the "LP"). Investments in affiliates in which the Company owns more than 20% but less than or equal to 50% of the voting interest are accounted for under the equity method. All significant intercompany transactions are eliminated.

UNAUDITED PRO FORMA BALANCE SHEET: The unaudited pro forma balance sheet at December 31, 1997 has been presented after giving effect to the termination of the redeemable feature and subsequent reclassification of the Mandatorily Redeemable Equity Securities to stockholders' deficit concurrent with the closing of the contemplated initial public offering (see Note 16).

CASH EQUIVALENTS: The Company considers all highly liquid instruments with an initial maturity of three months or less at the time of purchase to be cash equivalents.

REVENUE RECOGNITION: Revenue from advertising and related services is comprised of commissions and fees derived from billings to clients for media and production activities. Public relations, sales promotion and other services are generally billed on the basis of negotiated fees. Commission revenue is recognized primarily when media placements appear on television, on radio or in print, and when labor and production costs are billed. Fee revenue is recognized when services are rendered.

BENEFIT PLANS: The Company maintains a noncontributory defined benefit pension plan for all full-time U.S. employees. The Company also contributes to government mandated plans and maintains various noncontributory retirement plans at certain foreign subsidiaries in accordance with local laws and customs. The Company also maintains deferred compensation plans and has made appropriate provisions for future payments due under these plans.

DEPRECIATION AND AMORTIZATION: Depreciation and amortization are computed using the straight-line method over the estimated useful life of the respective asset. Leasehold improvements are amortized over the shorter of their estimated useful life or the remaining term of the lease. Goodwill is amortized on a straight-line basis generally over twenty to forty years.

INCOME TAXES: In accordance with Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", deferred tax assets and liabilities are determined based on differences between the financial reporting and the tax basis of assets and liabilities and are measured by applying enacted tax rates and laws to taxable years in which such differences are expected to reverse. The Company's practice is to provide currently for taxes that will be payable upon remittance of foreign earnings of subsidiaries and affiliates to the extent that such earnings are not considered to be indefinitely reinvested.

STOCK-BASED COMPENSATION: SFAS No. 123, "Accounting for Stock-Based Compensation", ("SFAS 123") encourages entities to account for employee stock options or similar equity instruments using a

F-7

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

fair value approach for all such plans. However, it also allows an entity to continue to measure compensation costs for those plans using the method prescribed by Accounting Principles Bulletin ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." The Company has elected to continue to account for such plans under the provisions of APB Opinion No. 25 and has included, in Note 17, the required SFAS 123 pro forma disclosures of net income (loss) and earnings (loss) per share as if the fair value-based method of accounting had been applied.

FOREIGN CURRENCY TRANSLATION: Assets and liabilities of certain non-U.S. subsidiaries are translated at current exchange rates, and related revenues and expenses are translated at average exchange rates in effect during the period. Resulting translation adjustments are recorded as a component of stockholders' deficit in the accompanying Consolidated Balance Sheets. Financial results of non-U.S. subsidiaries in countries with highly inflationary economies are translated using a combination of current and historical exchange rates and any translation adjustments are included in net income (loss) along with all transaction gains and losses for the period.

DERIVATIVE FINANCIAL INSTRUMENTS AND FOREIGN CURRENCY TRANSACTIONS:
Derivative financial instruments are used by the Company principally in the management of its interest rate and foreign currency exposures. The Company does not hold or issue derivative financial investments for trading purposes. Gains and losses on hedges of existing assets and liabilities are included in the carrying amounts of those assets and liabilities and are ultimately recognized in income as part of those carrying amounts. Gains and losses related to hedges of firm commitments are also deferred and included in the basis of the transaction when it is completed. Amounts to be paid or received under interest rate swap agreements are accrued as interest and are recognized over the life of the swap agreements as an adjustment to interest expense.

LONG-LIVED ASSETS: In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", ("SFAS 121") management reviews long-lived assets and the related intangible assets for impairment whenever events or changes in circumstances indicate the carrying amount of such assets may not be recoverable. Recoverability of these assets is determined by comparing the forecasted undiscounted net cash flows of the operation to which the assets relate, to the carrying amount including associated intangible assets of such operation. If the operation is determined to be unable to recover the carrying amount of its assets, then intangible assets are written down first, followed by the other long-lived assets of the operation, to fair value. Fair value is determined based on discounted cash flows or appraised values, depending upon the nature of the assets.

CONCENTRATIONS OF CREDIT RISK: The Company's clients are engaged in various businesses located primarily in North America, Europe, Latin America and Asia/Pacific. The Company performs ongoing credit evaluations of its clients. Reserves for credit losses are maintained at levels considered adequate by management. The Company invests its excess cash in deposits with major banks and in money market securities. These securities typically mature within 90 days and bear minimal risk. Additionally, due to the Company's strategy, the Company is dependent upon a relatively small number of clients who contribute a significant percentage of revenues. The Company's largest client accounted for approximately 9%, 9%, and 10% of consolidated revenues for the years ended December 31, 1995, 1996 and 1997, respectively.

USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

RECENT ACCOUNTING PRONOUNCEMENTS: In June 1997, SFAS No. 130, "Reporting Comprehensive Income", ("SFAS 130") was issued. SFAS 130 establishes standards for the reporting of comprehensive income and its components. It requires all items that are required to be recognized as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other income statement

F-8

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

information. SFAS 130 is effective for financial statements for periods beginning after December 15, 1997. Reclassification of financial statements for earlier periods presented for comparative purposes is required upon adoption.

In June 1997, SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information", ("SFAS 131") was issued. SFAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in annual financial statements and in interim financial reports issued to shareholders. SFAS 131 is effective for financial statements for periods beginning after December 15, 1997.

In February 1998, SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits", ("SFAS 132") was issued. SFAS 132 revises disclosures about pensions and other postretirement benefit plans. SFAS 132 is effective for financial statements for periods beginning after December 15, 1997. Restatement of disclosures for earlier periods provided for comparative purposes is required upon adoption.

The Company anticipates that the adoption of SFAS 130, SFAS 131 and SFAS 132 will not have a significant effect on its 1998 financial statements.

NOTE 3 -- NET LOSS PER COMMON SHARE:

The Company computes earnings (loss) per share in accordance with SFAS No. 128, "Earnings Per Share".

Basic net loss per share was computed by dividing net loss by the weighted-average number of common shares outstanding during the period. In computing basic net loss per share, the Company's 11,086,950 shares of restricted stock were excluded from the weighted average number of common shares outstanding as such shares vest upon the six-month anniversary of an initial public offering or the six-month anniversary thereof, a condition which was not satisfied at December 31, 1997. Diluted net loss per share for the period was computed in the same manner as basic net loss per share since the Company experienced a net loss for the period and therefore including potential common shares would be antidilutive.

There are 31,013,205 common stock options that could potentially dilute basic earnings (loss) per share in the future that were excluded from the computation of diluted net loss per share because the effect would be antidilutive. In addition, there exists 11,086,950 shares of Restricted Stock, which would also be potentially dilutive upon the occurrence of the Company's contemplated initial public offering which is further described in Note 21.

Earnings per share for the years ended December 31, 1996 and 1995 cannot be computed because the Company's capital structure prior to the 1996 Recapitalization consisted of both common shares and Limited Partnership Units in Predecessor entities (see Note 4).

NOTE 4 -- RECAPITALIZATION:

On December 12, 1996, a recapitalization (the "Recapitalization") was effected of Young & Rubicam Inc., a New York corporation (the "Predecessor Company") whereby (a) the Predecessor Company, Young & Rubicam Holdings Inc. ("Holdings"), or subsidiaries of the Predecessor Company (i) acquired 2,058,678 of the 2,458,102 outstanding shares of Predecessor Company common stock for an amount equal to $115 per share less the principal and accrued interest of any outstanding loans relating to such shares (which loans were thereby repaid),
(ii) acquired 760,232 of the 1,869,682 outstanding Limited Partnership Units of the LP ("LPUs") together with any related subordinated promissory notes of the Predecessor Company for an amount equal to $115 per LPU less the principal and accrued interest of any outstanding loans relating to such LPUs (which loans were thereby repaid); (iii) canceled 332,636 of the 690,249 common stock options and 596,448 of the 1,600,414 LPU options (collectively, the "Nonrollover Options") and all outstanding Growth

F-9

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Participation Units ("GPUs") for cash consideration of $115 per unit less the aggregate option exercise price and (iv) exchanged for, or canceled in consideration of, the remaining outstanding common stock, LPUs and options on common stock and LPUs held by certain members of the management of the Predecessor Company (the "Management Investors") for 15,815,985 shares of Holdings common stock and 16,823,565 options on common stock of Holdings
("Rollover Options"); (b) Hellman & Friedman Capital Partners III, L.P. ("HFCP")
and certain other investors contributed $242 million in cash to Holdings in exchange for 31,566,345 shares of Holdings common stock at a price of $7.67 per share ($115 per share prior to the stock dividend which is further described in Note 20) and 2,598,105 options to purchase additional shares of Holdings common stock at $7.67 per share ($115 per share prior to the stock dividend which is further described in Note 20)(the "HFCP Options" -- see Note 17), and (c) Senior Secured Credit Facilities of $700 million (the "Credit Facilities") were arranged (see Note 14).

Common stock, LPUs, Nonrollover Options on common stock and LPUs and GPUs held by non U.S.-based equity holders were acquired or canceled prior to December 31, 1996. Payment for previously tendered Nonrollover options and GPUs of $161.7 million (included as a component of accrued payroll and bonuses at December 31, 1996) held by U.S. based equity holders occurred on March 18, 1997.

Following the closing of the Recapitalization, Holdings was merged with and into the Predecessor Company. As a result of the merger, the 1,391 outstanding shares of Predecessor Company preferred stock were each converted into the right to receive par value $50 in cash. On December 31, 1996, the Predecessor Company then merged into Young & Rubicam Inc., a Delaware corporation (the "Company").

Under the Stockholders' Agreement, the Management Investors are required to deposit all Company common stock currently held or acquired in the future into a voting trust (the "Management Voting Trust") under which all rights to vote such shares are assigned to certain members of the Company's senior management as voting trustees. In the event that HFCP holds greater than 49% of Company common stock, HFCP is required to transfer those shares in excess of 49% to a separate voting trust (the "HFCP Voting Trust") with the Chief Executive Officer of the Company as voting trustee, provided that the Company is not in default under certain terms of the Credit Facilities.

As the equity holders of the Predecessor Company retained control of the Company, the transaction has been reported as a recapitalization. The financial statements reflect the financial position, results of operations and cash flows of the Company and the Predecessor Company on a continuous basis. The excess of the Predecessor common stock and LPUs repurchase transaction amount over the stated amount of the Predecessor common stock and LPUs repurchased has been reported as a distribution to equity holders and charged to limited partners' contributed equity, capital surplus and accumulated deficit.

As a result of the Recapitalization, the Company recorded charges of $315.4 million, primarily related to compensation. A summary of the significant Recapitalization and related charges include the following:

(1) The cancellation of 1,244,647 GPUs outstanding for cash consideration of $115 per unit. Compensation expense of $83.1 million represents the difference between the cash consideration paid to GPU holders and the amount of previously accrued compensation under the original terms of the GPU plan.

(2) The cancellation of 929,084 Nonrollover Options for cash consideration. The cash consideration and the associated compensation expense of $66.6 million represents the difference between the transaction price of $115 and the $40.2 million aggregate exercise price of the Nonrollover Options.

(3) Cancellation of the remaining outstanding options and award of Rollover Options to acquire 16,823,565 shares of Company common stock at an exercise price of $1.92 ($28.75 per share prior to the stock split which is further described in Note 20) per share, with certain limited exceptions outside of the U.S. As a result of the change in the terms of the former stock option plan, which resulted in a new measurement date, the Company recognized compensation expense of $96.7 million representing the

F-10

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

difference between the transaction price per Rollover Option of $7.67 ($115 per share prior to the stock split which is further described in Note 20) and the aggregate exercise price of the Rollover Options.

(4) Professional fees and other charges amounted to approximately $69 million.

NOTE 5 -- EQUITY IN NET ASSETS OF UNCONSOLIDATED COMPANIES:

                                                     1995               1996                1997
                                               ----------------   -----------------   -----------------
                                                                                                EQUITY
                                               EQUITY    EQUITY   EQUITY    EQUITY    EQUITY    IN NET
                                   OWNERSHIP   IN NET    IN NET   IN NET    IN NET    IN NET    INCOME
                                   INTEREST    ASSETS    INCOME   ASSETS    INCOME    ASSETS    (LOSS)
AFFILIATE                                                           (IN THOUSANDS)
Dentsu, Y&R Partnerships........      50%      $16,957   $  534   $12,954   $(9,181)  $17,510   $ 2,587
J.M.C. Creatividad Orientada
  (Venezuela)...................      49%        4,509    1,315     2,471    (2,038)      953    (1,515)
Prolam (Chile)..................      30%        3,106      968     2,656       262     2,851       825
Eco S.A. (Guatemala)............      40%        1,864      372     2,134        26     2,206        96
Cresswell, Munsell, Fultz &
  Zirbel........................      33%        1,245      524     1,635       624     1,922       508
National Public Relations
  (Canada)......................      22%          414      333       607       204       647        98
ViceVersa (Uruguay).............      35%          652      401       883       224        --        --
Other...........................  50% or less    8,618      750     1,879        42       304    (2,257)
                                               -------   ------   -------   -------   -------   -------
                                               $37,365   $5,197   $25,219   $(9,837)  $26,393   $   342
                                               =======   ======   =======   =======   =======   =======

The summarized financial information below represents an aggregation of the Company's unconsolidated companies.

FINANCIAL INFORMATION

                                                               1995        1996        1997
                                                                      (IN THOUSANDS)
EARNINGS DATA
  Revenues.................................................  $234,891    $238,810    $207,668
  Income from operations...................................    29,398      22,132      13,768
  Net income (loss)........................................    14,984     (16,097)      4,347
  Company's equity in net earnings (loss)..................  $  5,197    $ (9,837)   $    342
                                                             ========    ========    ========
BALANCE SHEET DATA
  Current assets...........................................  $361,451    $348,325    $321,372
  Noncurrent assets........................................    54,954      33,996      40,147
  Current liabilities......................................   335,490     323,406     287,101
  Noncurrent liabilities...................................    18,902      11,683      13,215
  Equity...................................................    62,013      47,232      61,203
  Company's equity in net assets...........................  $ 37,365    $ 25,219    $ 26,393
                                                             ========    ========    ========

NOTE 6 -- ACQUISITIONS, DISPOSITIONS AND OTHER OPERATING CHARGES:

In 1995, the Predecessor Company increased its ownership interests in advertising agencies in Holland (from 49% to 70%) and Spain (from 49% to 77%), as well as a public relations firm in Belgium (from 40% to 85%). In addition, the Predecessor Company acquired the remaining 40% interest in an advertising agency in the Czech Republic, the remaining 25% interest in an agency in Hungary, the remaining 20% interest in a direct marketing operation in South Africa and the remaining 10% interest in an advertising agency, also in South Africa. The purchase price of these investments was $5.4 million. Other regional investment activity

F-11

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

took place in Latin America in 1995, with increased ownership interests in advertising agencies in Guatemala (from 25% to 40%) and Uruguay (from 20% to 35%).

In 1995, the D,Y&R Partnerships also acquired a 40% interest in an advertising agency in India (Y&R's effective ownership is 20%). The cost of this investment to Y&R was $2.2 million.

A wholly owned public relations subsidiary in Canada was merged in 1995 with another Canadian public relations firm. The Company has a 22% interest in the merged operation.

In 1995, the Predecessor Company approved a productivity improvement plan which resulted in the elimination of 500 positions throughout its worldwide operations. The Predecessor Company recorded a charge in 1995 of $24.4 million to cover the expected severance, benefits and social law costs which were paid during 1996 relating to this staff reduction.

Also in 1995, losses of $7.1 million were recorded primarily to cancel a long-term agreement with a service provider as well as to dispose of certain non-strategic European agencies. The aforementioned charges are included in other operating charges in the accompanying Consolidated Statement of Operations.

In 1996, the Predecessor Company acquired substantially all of the assets of one advertising agency and one media buying agency in the United States and acquired the remaining 28% equity interest in an advertising agency in Switzerland. In addition, the Predecessor Company increased its ownership interests in three advertising agencies in Europe. Other regional activity took place in Korea where the Company acquired a 25% equity interest in a public relations agency. The purchase price of these investments was $26.8 million.

In 1996, a $17.2 million charge was recorded for asset impairment writedowns principally related to certain operations in Europe and Latin America.

In 1997, the Company acquired the remaining 60% equity interest in an advertising agency in France and a 51% equity interest in an advertising agency in Brazil. In addition, the Company increased its ownership interests in one advertising agency in Latin America and one agency in Europe. The Company also acquired substantially all of the assets of one public relations agency and acquired a 70% equity interest in a German public relations agency and the remaining 49% equity interest in a Japanese public relations agency. The purchase price of these investments was $14.7 million.

Effective January 1, 1997, the Company acquired an additional 37.5% equity interest in the former Australian and New Zealand joint ventures with Dentsu. In consideration for this additional equity interest, the Company contributed to Dentsu, 12.5% of its equity interest in its advertising and direct marketing agencies in Australia and New Zealand.

In 1997, an $11.9 million charge was recorded for asset impairment writedowns principally related to certain operations in the U.S., Africa, Latin America and Europe.

NOTE 7 -- PROPERTY AND EQUIPMENT:

Property and equipment are recorded at cost and are comprised of the following:

                                                                         AS OF DECEMBER 31,
                                                                        --------------------
                                            USEFUL LIVES                  1996        1997
                                                                           (IN THOUSANDS)
Land and buildings............  20-40 years                             $ 31,901    $ 29,716
Furniture, fixtures and
  equipment...................  3-10 years                               220,728     235,836
Leasehold improvements........  Shorter of 10 years or life of lease      78,414      77,804
Automobiles...................  3-5 years                                  6,315       6,609
                                                                        --------    --------
                                                                         337,358     349,965
                                                                        --------    --------
Less -- Accumulated
  depreciation and
  amortization................                                           208,270     224,951
                                                                        --------    --------
                                                                        $129,088    $125,014
                                                                        ========    ========

F-12

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During 1995, 1996 and 1997, depreciation expense amounted to $38.2 million, $42.0 million and $47.6 million, respectively.

NOTE 8 -- CERTAIN LIABILITIES:

Accrued expenses and other liabilities include $71.3 million and $41.0 million of bank overdrafts as of December 31, 1996 and 1997, respectively.

Accrued payroll and bonuses are comprised of the following:

                                                              AS OF DECEMBER 31,
                                                              -------------------
                                                                1996       1997
                                                                (IN THOUSANDS)
Accrued costs -- Recapitalization...........................  $161,700    $    --
Accrued payroll and bonuses.................................    90,787     65,458
                                                              --------    -------
                                                              $252,487    $65,458
                                                              ========    =======

NOTE 9 -- INCOME TAXES:

The components of income (loss) before income taxes are as follows:

                                                     FOR THE YEAR ENDED DECEMBER 31,
                                                     --------------------------------
                                                       1995        1996        1997
                                                              (IN THOUSANDS)
Domestic...........................................  $(22,957)   $(242,578)   $12,304
Foreign............................................    30,862       (8,039)    24,000
                                                     --------    ---------    -------
Total..............................................  $  7,905    $(250,617)   $36,304
                                                     ========    =========    =======

The following summarizes the provision (benefit) for income taxes:

                                                     FOR THE YEAR ENDED DECEMBER 31,
                                                     --------------------------------
                                                       1995        1996        1997
                                                              (IN THOUSANDS)
CURRENT:
  Federal..........................................  $  1,295    $ 16,993    $ 18,195
  State and local..................................     2,138       3,921       4,220
  Foreign..........................................    20,563      18,146      36,259
                                                     --------    --------    --------
                                                       23,996      39,060      58,674
                                                     --------    --------    --------
DEFERRED:
  Federal..........................................    (7,548)    (51,363)      7,547
  State and local..................................    (2,811)    (22,111)      2,472
  Foreign..........................................    (4,507)     13,803     (10,403)
                                                     --------    --------    --------
                                                      (14,866)    (59,671)       (384)
                                                     --------    --------    --------
Provision (benefit) for income taxes...............  $  9,130    $(20,611)   $ 58,290
                                                     ========    ========    ========

F-13

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The reconciliation of the United States statutory rate to the effective rate is as follows:

                                                               FOR THE YEAR ENDED DECEMBER 31,
                                                              ---------------------------------
           PERCENT OF INCOME (LOSS) BEFORE TAXES               1995         1996         1997
United States statutory rate................................    35.0%       (35.0)%       35.0%
Federal tax savings attributable to limited partnership
  structure.................................................   (27.6)          --           --
State and local income taxes, net of federal tax effect.....    (7.1)        (4.5)        17.1
Foreign income taxed greater than the United States
  statutory rate............................................    64.2         15.2        107.2
Change in valuation allowance and related components........    11.5          5.9        (13.1)
Amortization of goodwill....................................    14.3          2.1          8.5
Travel, entertainment and other non-deductible expenses.....    19.7          8.4          6.2
Other, net..................................................     5.5         (0.3)        (0.3)
                                                               -----        -----        -----
Consolidated effective rate.................................  115.5%         (8.2)%     160.6%
                                                               =====        =====        =====

The Company's share of the undistributed earnings of foreign subsidiaries not included in its consolidated Federal income tax return that could be subject to additional income taxes if remitted, was approximately $49.5 million at December 31, 1997. No provision has been recorded for the U.S. or foreign taxes that could result from the remittance of such undistributed earnings since the earnings are permanently reinvested outside the U.S. and it is not practicable to estimate the amount of such taxes. Withholding taxes of approximately $6.4 million would be payable upon remittance of all previously unremitted earnings at December 31, 1997.

The components of the Company's net deferred income tax assets are:

                                                               AS OF DECEMBER 31,
                                                              --------------------
                                                                1996        1997
                                                                 (IN THOUSANDS)
Bad debt reserve............................................  $  1,785    $  3,118
Accrued expenses and other..................................     5,195          --
Net operating loss carryforwards............................     7,377      32,797
Deferred compensation.......................................    76,170       1,172
                                                              --------    --------
                                                                90,527      37,087
Valuation allowance.........................................   (11,795)     (4,255)
                                                              --------    --------
Current portion.............................................    78,732      32,832
                                                              --------    --------
Deferred compensation.......................................    42,646      40,650
Depreciable and amortizable assets..........................    26,671      30,561
Long-term leases............................................     7,351       7,436
Postretirement benefits.....................................     3,570       3,654
Other non-current items.....................................       810      11,989
Net operating loss carryforwards............................    10,259      42,338
Tax credit carryforwards....................................        --       3,658
                                                              --------    --------
                                                                91,307     140,286
Valuation allowance.........................................   (11,896)    (16,094)
                                                              --------    --------
Non-current portion.........................................    79,411     124,192
                                                              --------    --------
Net deferred income tax assets..............................  $158,143    $157,024
                                                              ========    ========

The Company's net deferred income tax assets arise from temporary differences which represent the cumulative deductible or taxable amounts recorded in the financial statements in different years than

F-14

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

recognized in the tax returns. The majority of the temporary differences result from expenses accrued for financial reporting purposes which are not deductible for tax purposes until actually paid and net operating losses.

The net operating loss ("NOL") carryforwards represent the benefit recorded for U.S., state and local, and foreign NOLs. At December 31, 1997, the Company had approximately $140.4 million of NOL carryforwards for U.S. tax purposes which expire in the year 2012 and approximately $69.2 million of NOL carryforwards for foreign tax purposes with carryforward periods ranging from one year to an indefinite time. The Company had approximately $3.2 million of alternative minimum tax credits which are not subject to expiration and $0.4 million of foreign tax credits which expire in the year 2001.

The Company is required to provide a valuation allowance against deferred income tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized. A valuation allowance of $13.5 million was recorded at December 31, 1994. The valuation allowance increased $0.9 million to $14.4 million at December 31, 1995, increased $9.3 million to $23.7 million at December 31, 1996 and decreased $3.3 million to $20.4 million at December 31, 1997. The valuation allowances represent a provision for uncertainty as to the realization of certain deferred tax assets, including net operating loss carryforwards in certain jurisdictions. The Company has concluded, that based upon expected future results, it is more likely than not that the net deferred tax asset balance will be realized.

NOTE 10 -- WORLDWIDE OPERATIONS:

Financial information by geographic area is as follows:

                                      UNITED STATES     EUROPE      OTHER        TOTAL
                                                        (IN THOUSANDS)
1995
Revenues............................    $ 492,265      $411,283    $181,946    $1,085,494
(Loss) income from operations.......       (7,695)       14,899      18,276        25,480
Identifiable assets.................      511,779       499,335     215,467     1,226,581
1996
Revenues............................    $ 571,155      $444,644    $206,340    $1,222,139
(Loss) income from operations.......     (239,201)       (3,627)     10,526      (232,302)
Identifiable assets.................      819,828       533,318     245,666     1,598,812
1997
Revenues............................    $ 661,367      $472,225     249,148    $1,382,740
(Loss) income from operations.......       42,816        29,527      (1,614)       70,729
Identifiable assets.................      687,462       582,424     258,133     1,528,019

Foreign currency transactions and remeasurement losses resulting from operations in highly inflationary economies are included in general and administrative expenses. These amounts were comprised of the following:

                                                           FOR THE YEAR ENDED DECEMBER 31,
                                                           --------------------------------
                                                             1995        1996        1997
                                                                    (IN THOUSANDS)
Foreign currency transaction losses......................   $1,101      $  887      $1,344
Remeasurement losses resulting from operations in highly
  inflationary economies.................................    1,156       1,653       2,603
                                                            ------      ------      ------
                                                            $2,257      $2,540      $3,947
                                                            ======      ======      ======

F-15

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11 -- EMPLOYEE BENEFITS:

The Company has a defined benefit pension plan ("the Plan") that covers all full-time U.S. employees upon commencement of employment. Contributions to the Plan are based upon current costs and prior service costs. Both costs are actuarially computed and the latter are amortized over the average remaining service period. Effective July 1, 1996, the Predecessor Company amended the Plan. Benefits credited to each employee's account under the Plan are based on 3.2% of the employee's annual compensation up to $150,000. The Plan also credits each employee's account with interest equal to the average one year U.S. Treasury Bill interest rate multiplied by the account balance at the beginning of the year. Subject to certain limitations, most vested retirement benefits available under the Plan are insured by the Pension Benefit Guaranty Corporation ("PBGC"). The Company is in compliance with the minimum funding standards required by the Employee Retirement Income Security Act of 1974 ("ERISA").

In connection with the Recapitalization transaction, the Company contributed an additional $12.5 million to the Plan on December 23, 1996, pursuant to an agreement with the PBGC. Total contributions made in 1996 and 1997 were $18.9 million and $6.6 million, respectively.

The Company also agreed to make future contributions to the Plan in an amount required to cause the credit balance at the end of each Plan year to be at least equal to the required credit balance of $12.5 million plus interest. The Company is not required to make any payment that would not be deductible under Internal Revenue Code section 404. The Company's credit balance maintenance requirement terminates when the Company's debt obtains specified rating levels (or, if there are no such ratings from certain major ratings agencies, when the Company meets a fixed charge coverage ratio test), but in no event earlier than December 31, 2001. In addition, such credit balance maintenance requirements terminate if the Plan's unfunded benefit liabilities are zero at the end of two consecutive Plan years.

The Company also contributes to government mandated plans and maintains various noncontributory retirement plans at certain foreign subsidiaries, some of which are considered to be defined benefit plans for accounting purposes.

A summary of the components of net periodic pension cost for the defined benefit plans is as follows:

                                                            FOR THE YEAR ENDED DECEMBER 31,
                            ------------------------------------------------------------------------------------------------
                                         1995                             1996                             1997
                            ------------------------------   ------------------------------   ------------------------------
                              U.S.     NON-U.S.    TOTAL       U.S.     NON-U.S.    TOTAL       U.S.     NON-U.S.    TOTAL
                                                                     (IN THOUSANDS)
Service costs for benefits
  earned during the
  period..................  $  2,774    $  717    $  3,491   $  2,834    $  674    $  3,508   $  2,671    $  550    $  3,221
Interest costs on
  projected benefit
  obligation..............     8,074       946       9,020      8,488       893       9,381      8,804       789       9,593
Actual return on plan
  assets..................   (15,960)       --     (15,960)   (11,070)       --     (11,070)   (15,558)       --     (15,558)
Net amortization and
  deferral................     9,390       182       9,572      5,668       188       5,856      6,862       150       7,012
                            --------    ------    --------   --------    ------    --------   --------    ------    --------
Net periodic pension cost
  of the plans............  $  4,278    $1,845    $  6,123   $  5,920    $1,755    $  7,675   $  2,779     1,489       4,268
                            ========    ======    ========   ========    ======    ========   ========    ======    ========

F-16

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The funded status of the defined benefit plans is summarized as follows:

                                                                      AS OF DECEMBER 31,
                                                ---------------------------------------------------------------
                                                             1996                             1997
                                                ------------------------------   ------------------------------
                                                  U.S.     NON-U.S.    TOTAL       U.S.     NON-U.S.    TOTAL
                                                                        (IN THOUSANDS)
Actuarial present value of accumulated benefit
  obligation including vested benefits of
  $119,093 and $134,491 at December 31, 1996
  and 1997, respectively......................  $111,921   $ 10,350   $122,271   $126,975   $  9,557   $136,532
                                                --------   --------   --------   --------   --------   --------
Projected benefit obligation..................   114,710     12,198    126,908    130,036     10,753    140,789
Plan assets at fair value, primarily fixed
  income and equity securities................   114,264         --    114,264    129,421         --    129,421
                                                --------   --------   --------   --------   --------   --------
Projected benefit obligation in excess of plan
  assets......................................      (446)   (12,198)   (12,644)      (615)   (10,753)   (11,368)
Unrecognized net transition (asset)
  obligation..................................      (225)       644        419       (164)       471        307
Unrecognized prior service benefit............    (2,953)        --     (2,953)    (2,542)        --     (2,542)
Unrecognized net loss.........................    12,811      1,813     14,624     16,352      1,260     17,612
Additional liability..........................        --       (719)      (719)        --       (706)      (706)
                                                --------   --------   --------   --------   --------   --------
(Accrued) prepaid pension costs for defined
  benefit plans...............................  $  9,187   $(10,460)  $ (1,273)  $ 13,031   $ (9,728)  $  3,303
                                                ========   ========   ========   ========   ========   ========

Assumptions used were:

                                                            1995               1996               1997
                                                      ----------------   ----------------   ----------------
                                                      U.S.   NON-U.S.    U.S.   NON-U.S.    U.S.   NON-U.S.
Discount and settlement rate........................  7.5%   6.5%-8.5%   8.0%   7.0%-8.0%   7.25%  6.5%-7.0%
Rate of increase in compensation levels.............  7.0%   3.5%-5.5%   5.5%   3.5%-5.0%    5.0%  3.5%-5.0%
Expected long-term rate of return on assets.........  9.0%      N/A      9.0%      N/A       9.0%     N/A

In 1996 and 1997, the Company recorded liabilities of $0.7 million for the portion of its unfunded pension liabilities that had not been recognized as expense and an adjustment to equity of $0.7 million.

Contributions to other foreign defined contribution plans were $5.9 million, $6.2 million and $7.5 million in 1995, 1996 and 1997, respectively.

The Company also has an employee savings plan that qualifies as a deferred salary arrangement under section 401(k) of the Internal Revenue Code. Under the plan, participating U.S. employees may defer a portion of their pre-tax earnings up to the Internal Revenue Service annual contribution limit. The Company currently matches 100% of each employee's contribution up to a maximum of 5% of the employee's earnings up to $150,000. Amounts expensed by the Company for its contributions to the plan were $6.4 million, $7.0 million and $7.8 million in 1995, 1996 and 1997, respectively. Prior to the Recapitalization, the Company's contribution was made through the issuance of the Company's common stock. All of the shares of common stock held in the Plan were purchased by Holdings as part of the Recapitalization. Subsequent to the Recapitalization, matching contributions are satisfied in cash.

NOTE 12 -- DEFERRED COMPENSATION:

The Predecessor Company maintained a non-qualified deferred compensation plan for its key executives, the Growth Participation Plan. Participation in the plan was at the discretion of management. Awards of growth participation units ("GPUs") granted under the plan generally vested at the rate of 20% per year. As a result of the Recapitalization, all GPUs (whether fully or partially vested) were canceled for cash consideration of $115 per unit (see Note 4).

F-17

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company maintains other deferred cash incentive plans which are either tied to operating performance or contractual deferred compensation agreements. The costs of these compensation plans are expensed currently. At December 31, 1996 and 1997, included in other non-current liabilities were deferred compensation liabilities of $17.9 million and $31.1 million, respectively.

NOTE 13 -- INSTALLMENT PAYMENT OBLIGATIONS:

Prior to 1997, the Company issued installment notes payable to former equityholders of the Predecessor Company which arose out of the repurchase of Common Stock and LPUs upon termination of employment. Installment notes were paid in five annual installments, the first of which was payable 90 days following termination of employment. In connection with the Recapitalization, all foreign installment notes outstanding at December 12, 1996 were assumed and repaid. The remaining current installment notes of $24.9 million at December 31, 1996 were repaid in the first quarter of 1997.

Effective in 1997 and pursuant to the Stockholders' Agreement, the Company may, at its election, pay for shares purchased from Management Investors pursuant to a call or put at the applicable call price or the applicable put price in up to four equal installments. The first such installment is payable in cash upon the applicable payment date (generally the June 30 or December 31 closest in time following termination of employment) and the remaining installments are evidenced by a non-negotiable obligation from the Company to the Management Investor. At December 31, 1997, current and non-current installment notes of $3.2 million and $6.5 million, respectively, were payable to former Management Investors.

Interest accrues and is payable annually with each installment payment at a rate equal to the applicable federal rate in effect as published by the Internal Revenue Service, compounded semi-annually. For 1997, the interest rate ranged from 5.68% to 6.14%.

NOTE 14 -- LOANS PAYABLE:

Short Term: The Company's short term loans payable are primarily advances under bank lines of credit and generally bear interest at prevailing market rates. The Company's current loans payable of $36.3 million and $10.8 million include the short-term portion of long-term loans payable of $14.7 million and $1.2 million at December 31, 1996 and 1997 respectively.

Long-term loans payable are comprised of the following at December 31:

                                                                AS OF DECEMBER 31,
                                                              ----------------------
                                                                1996          1997
                                                                  (IN THOUSANDS)
Senior Secured Credit Facilities............................  $219,282      $330,552
Capital lease obligations...................................       611           404
Other borrowings............................................       859           818
                                                              --------      --------
                                                               220,752       331,774
Less -- Current portion.....................................    14,670         1,222
                                                              --------      --------
                                                              $206,082      $330,552
                                                              ========      ========

In connection with the Recapitalization, in December 1996, the Company entered into Senior Secured Credit Facilities (the "Credit Facilities") amounting to $700 million with a group of banks arranged by Bank of America, with The Bank of New York, Citibank N.A., Credit Lyonnais and Wachovia Bank as managing agents. The Credit Facilities consist of a six and one-half year $400 million term loan and a six and one-half year $300 million revolving credit facility. The term loan is available in two drawings of $200 million each: the

F-18

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

first drawdown occurred in December 1996, while the second drawdown occurred on March 18, 1997. The Company's obligations under the Credit Facilities are secured by a security interest in certain domestic assets, including its headquarters building in New York, all of the capital stock of the direct and indirect domestic subsidiaries of the Company and 66.7% of the capital stock of the Company's first-tier non-U.S. subsidiaries. The Company pays a commitment fee ranging from 0.20% to 0.50% on the unused portion of the total Credit Facilities. The Credit Facilities include several credit sensitive pricing options (LIBOR, Base Rate Loans, Fronted Loans and Swing Line Loans), letter of credit issuances and a $175 million multi-currency subfacility. The applicable interest rate was 6.915% and 6.875% at December 31, 1996 and 1997, respectively.

The Credit Facilities contain various covenants which contain interest, fixed charge, and debt coverage ratios, the maintenance of minimum net worth and limitations on the amount of debt, liens, asset sales, dividends and acquisitions. Deferred financing costs of $9.2 million were capitalized and are being amortized over the six and one-half year term of the Credit Facilities.

The Company is required to enter into interest rate protection agreements with respect to $100 million of the initial drawdown and $100 million of the second drawdown.

In December 1996, the Company entered into a two year $50 million notional principal amount interest rate floored-swap, and pays, on a quarterly basis, fixed interest equal to 6.00% and receives interest based on floating three-month LIBOR. If LIBOR is less than 5.00%, the Company receives the difference between 5.00% and the three-month LIBOR. This agreement expires December 29, 1998.

In January 1997, the Company entered into a one year $50 million notional principal amount interest rate cap. The interest rate cap resulted in the Company receiving quarterly, the difference between the amount that three-month LIBOR exceeded the cap rate of 6.25%. This agreement expired January 27, 1998.

In February 1997, the Company entered into a four year $50 million notional principal amount interest rate swap. The interest rate swap will result in the Company paying, on a quarterly basis, fixed interest equal to 6.11% and receiving interest based on floating three month LIBOR. This four year interest rate swap agreement expires February 20, 2001.

In March 1997, the Company entered into a two year $50 million notional principal amount interest rate floored-swap, and pays, on a quarterly basis, fixed interest equal to 6.36% and receives interest based on floating three-month LIBOR. If LIBOR is less than 5.00%, the Company receives the difference between 5.00% and the three-month LIBOR. This agreement expires March 24, 1999.

In April 1997, the Company entered into a one year $50 million notional principal amount interest rate cap. The interest rate cap will result in the Company receiving quarterly, the difference between the amount that three-month LIBOR exceeds the cap rate of 6.50%. This agreement expires May 1, 1998.

In June 1997, the Company entered into a four year $25 million notional principal amount interest rate swap. The interest rate swap will result in the Company paying, on a quarterly basis, fixed interest equal to 6.365% and receiving interest based on floating three-month LIBOR. This four year interest rate swap agreement expires June 18, 2001.

In February 1996, the Predecessor Company entered into a 10-year, $100 million, 7.01% Senior Note transaction with a group of insurance companies. The proceeds were used to reduce the Revolving Credit Agreement borrowings. This note was repaid by proceeds from the Credit Facilities. A prepayment penalty of $1.8 million was paid in 1996 and is included as a component of interest expense.

In June 1996, the Predecessor Company entered into a $150 million, five year Revolving Credit Agreement. The Company paid a facility fee ranging from 0.125% to 0.30% on the full amount of the committed facility. This agreement included several pricing options (LIBOR, Bid Loans and Swing Line

F-19

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Loans), letter of credit issuances and multi-currency borrowing options. This Revolving Credit Agreement was repaid by proceeds from the Credit Facilities.

In June 1994, the Predecessor Company entered into a $225 million, three year Revolving Credit Agreement. The Company paid a facility fee ranging from 0.20% to 0.375% on the full amount of the committed facility. This revolving credit agreement included several pricing options (LIBOR, Bid Loans and Swing Line Loans), letter of credit issuances and multicurrency borrowing options. The Revolving Credit Agreement was replaced by the five year Revolving Credit Agreement entered into in June 1996.

In October 1991, the Predecessor Company arranged a seven year $40 million, 8.75% Senior Note transaction with the Prudential Insurance Company. This note was repaid by proceeds from the Credit Facilities. A prepayment penalty of $1.1 million was paid in 1996 and is included as a component of interest expense.

In January 1991, the Predecessor Company entered into a five year, $20 million notional principal amount interest rate swap. The Predecessor Company paid, on a semi-annual basis, fixed interest rate equal to 8.485% and received interest based on floating six-month LIBOR. This agreement expired January 22, 1996.

At December 31, 1997, the Company had $690 million in availability under its commercial lines of credit ($449 million in the U.S. and $241 million outside the U.S.). Unused commercial lines of credit at December 31, 1997 were $349 million. The Company paid commitment fees of approximately $0.9 million on the unused portion of the U.S. credit lines and varying fees on the foreign credit lines. At December 31, 1996, the Company had $802 million in availability under its commercial lines of credit ($540 million in the U.S. and $262 million outside the U.S.). Unused commercial lines of credit at December 31, 1996 were $560 million. The Company paid commitment fees of approximately $0.1 million on the unused portion of the U.S. credit lines and varying fees on the foreign credit lines.

Repayment requirements on long-term loans existing at December 31, 1997 are as follows:

                                                                  TOTAL
                                                              (IN THOUSANDS)
1998........................................................     $  1,222
1999........................................................       50,250
2000........................................................       68,750
2001........................................................       71,250
2002........................................................       84,583
Thereafter..................................................       55,719
                                                                 --------
                                                                 $331,774
                                                                 ========

F-20

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 15 -- EQUITY:

The following schedule summarizes the changes in the number of outstanding shares of preferred stock, common stock, LPUs and treasury stock:

                                             VOTING                        LIMITED
                              PREFERRED      COMMON       NON-VOTING     PARTNERSHIP     COMMON STOCK
                                STOCK        STOCK       COMMON STOCK       UNITS        IN TREASURY
BALANCE 12/31/94............    1,252              --     16,000,000       2,465,729      13,190,263
                               ------      ----------    -----------      ----------     -----------
Issued......................      563              --             --          43,000        (289,970)
Repurchased.................     (491)             --             --        (476,719)        365,779
                               ------      ----------    -----------      ----------     -----------
BALANCE 12/31/95............    1,324              --     16,000,000       2,032,010      13,266,072
                               ------      ----------    -----------      ----------     -----------
Issued......................       67              --             --          83,993        (215,907)
Repurchased.................       --              --             --        (246,321)        491,733
Recapitalization............   (1,391)     58,469,280    (16,000,000)     (1,869,682)    (13,541,898)
                               ------      ----------    -----------      ----------     -----------
BALANCE 12/31/96............       --      58,469,280             --              --              --
                               ------      ----------    -----------      ----------     -----------
Issued......................       --       4,391,010             --              --              --
Repurchased.................       --      (1,115,160)            --              --       1,115,160
                               ------      ----------    -----------      ----------     -----------
BALANCE 12/31/97............       --      61,745,130             --              --       1,115,160
                               ======      ==========    ===========      ==========     ===========

The preferred stock of the Predecessor Company was owned by members of the Predecessor Company's Board of Directors. The Predecessor Company had the right to reacquire the preferred stock when the holder ceased to be a member of the Board of Directors.

On December 12, 1996, all outstanding Predecessor Company equity was purchased for cash or exchanged for Company common stock pursuant to the Recapitalization. In addition, all outstanding Predecessor Company options were canceled for cash consideration or the award of Company options and all outstanding GPUs were canceled for cash consideration (see Note 4). In addition, all treasury shares were retired.

In connection with the consummation of the Recapitalization in December 1996, the Company created a class of preferred stock designated as Money Market Preferred Stock (the "Money Market Preferred"). The Money Market Preferred carries a variable rate dividend and is redeemable at the Company's election for $7.67 per share following the fifth anniversary of the issuance thereof. At December 31, 1996 and 1997, 10,000,000 shares of Money Market Preferred were authorized. 87 shares of Money Market Preferred were issued and outstanding at December 31, 1996 and 1997.

In connection with the Recapitalization, the Company also issued 11,086,950 shares of common stock ("Restricted Shares") to a trust ("Restricted Stock Trust"). All Restricted Shares held in the Restricted Stock Trust are deposited in the Management Voting Trust. Any employee awarded Restricted Shares under the plan will become vested in the Restricted Shares on the earlier of (i) a change of control event (as defined); (ii) the consummation of an initial public offering or the six month anniversary following an initial public offering if, in connection with the offering, the holders are unable to sell such Restricted Shares; and (iii) upon any other event as determined by the Compensation Committee of the Board of Directors with the written consent of the HFCP Investors, if prior to an initial public offering, and the Management Voting Trust. The Company has recorded unearned compensation of $85 million and $136.7 million, representing the fair value of the Restricted Shares at December 31, 1996 and 1997, respectively. Compensation expense will be recognized when vesting becomes probable and will be equal to the fair value of the common stock at the time that the Restricted Shares become vested. At December 31, 1996 and 1997, a total of 11,086,950 shares were outstanding and held in the Restricted Stock Trust.

F-21

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 16 -- MANDATORILY REDEEMABLE EQUITY SECURITIES:

Concurrent with the Recapitalization, the Company entered into a Stockholders' agreement which includes both put rights and calls on the Company's common stock. The Company has the right to purchase shares and the stockholder has the right to cause the Company to purchase such shares at certain times and subject to certain conditions. The put provision becomes enforceable upon termination of employment for Management Investors if the Company has not previously exercised its call right and upon the six-year anniversary of the Recapitalization for HFCP. The carrying value of the mandatorily redeemable equity securities held by the Management Investors is equivalent to the redemption value of $7.67 and $12.33 at December 31, 1996 and 1997, respectively. The carrying value of the Mandatorily Redeemable Equity Securities for common shares held by HFCP is being accreted to redemption value over the six year period from the date of the Recapitalization. Accordingly, the carrying value of Mandatorily Redeemable Equity Securities held by HFCP was $7.67 and $8.47 at December 31, 1996 and 1997, respectively.

The accretion from carrying value to redemption value for the respective periods is reflected as a charge to capital surplus. Both the calls and puts terminate upon the earlier to occur of an initial public offering or such time as the Common Stock is listed for trading on a national securities exchange.

NOTE 17 -- OPTIONS:

Under the Company's 1992 Stock Option Plan, options to purchase an aggregate of 8,000,000 shares of common stock, at a price not less than the prior year-end book value, as defined, could be granted to key employees. The Predecessor Company also had an LPU Option Plan with substantially the same terms as the common stock option plan. In accordance with the Recapitalization (as discussed below), all prior option plans were terminated.

In connection with the Recapitalization, the shareholders approved a stock option plan (the "Stock Option Plan") which allowed the Board of Directors to grant to employees of the Company options to purchase up to 33,173,565 shares of Company common stock. The Stock Option Plan governs both the Rollover Options and certain other executive options (the "Executive Options").

At the closing of the Recapitalization (see Note 4), the Board of Directors granted the Rollover Options which were immediately vested and exercisable. Each Rollover Option has an exercise price of $1.92 per share, with certain limited exceptions outside of the U.S. Of the Rollover Options, 50% have a term of five years and the remaining 50% have a term of seven years. In connection with the issuance of the Rollover Options, the Company recognized compensation expense of $96.7 million (see Note 4).

At the closing of the Recapitalization, the Board of Directors granted to employees 5,200,590 options to purchase shares of Company common stock at $7.67 per share (the "Closing Options"). The Closing Options vest as follows: 40% on the grant date, 30% on the third anniversary of the grant date and 30% on the fifth anniversary of the grant date.

Pursuant to the Stock Option Plan, the Board of Directors had the right to grant additional options (the "Additional Options") to purchase up to 2,974,410 shares of Company common stock plus any shares that became available through the cancellation of unexercised Executive Options. Through December 31, 1997, Additional Options to purchase 1,891,200 shares of Company common stock had been granted, each at $7.67 per share. As a result, during 1997 the Company recognized a compensation charge of $1.3 million representing the difference between the estimated fair market value of Company common stock and the exercise price of $7.67 on date of grant in accordance with the applicable vesting provisions of the Additional Options.

F-22

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Additionally, at the closing of the Recapitalization, the Company issued options to HFCP (see Note 4) to purchase 2,598,105 shares of Company common stock at $7.67 per share which were exercisable immediately and expire on the seventh anniversary of the closing. The HFCP Options are not governed under the Stock Option Plan.

In December 1997, the Company adopted the Young & Rubicam Inc. 1997 Incentive Compensation Plan (the "Incentive Compensation Plan" or "ICP"). The ICP superseded the Stock Option Plan and amended and restated the Restricted Stock Plan (the Stock Option Plan and the Restricted Stock Plan (prior to such amendment and restatement) (the "Preexisting Plans"), although all awards granted prior to the adoption of the ICP, and any grants of Restricted Stock made after such adoption but on or prior to March 31, 1998, will remain outstanding in accordance with their terms and will be subject to the terms of the Preexisting Plans.

The ICP provides for grants of stock options, stock appreciation rights ("SARS"), Restricted Stock, deferred stock, other stock-related awards, and performance or annual incentive awards that may be settled in cash, stock or other property ("Awards"). Under the ICP, the total number of shares of Company common stock reserved and available for delivery to participants in connection with Awards is 19,125,000, plus the number of shares of Company common stock subject to awards under the Preexisting Plans that become available (generally due to cancellation or forfeiture) after the effective date of the ICP; provided, however that the total number of shares of Company common stock with respect to which incentive stock options ("ISO") may be granted shall not exceed 15,000,000. Any shares of Company common stock delivered under the ICP may consist of authorized and unissued shares or treasury shares.

The Board of Directors is authorized to grant stock options, including both incentive stock options, non-qualified stock options, and SARS entitling the participant to receive the excess of the fair market value of a share of common stock on the date of exercise over the grant price of the SAR. The exercise price per share subject to an option and the grant price of a SAR is determined by the Board of Directors, but must not be less than the fair market value of a share of common stock on the date of grant. The maximum term of each option or SAR, the times at which each option or SAR will be exercisable, and provisions requiring forfeiture of unexercised options or SARS at or following termination of employment generally is fixed by the Board of Directors, except no option or SAR may have a term exceeding ten years.

The Board of Directors may, at its discretion, accelerate the exercisability, the lapsing of restrictions, or the expiration of deferral or vesting periods of any award, and such accelerated exercisability, lapse, expiration and vesting shall occur automatically in the case of a "change in control" of the Company except to the extent otherwise provided in the award agreement. In addition, the Board of Directors may provide that the performance goals relating to any performance-based awards will be deemed to have been met upon the occurrence of any change in control.

In December 1997, the Company granted options to employees to purchase an aggregate of 9,577,950 shares of Company common stock at $12.33 per share, the fair market value of such common stock as of the date of grant. Each such option will expire if not exercised ten years after the date of grant and will be fully exercisable on the fifth anniversary of the date of grant if the recipient remains an employee of the Company or an affiliate as of such date; provided, however, that in the event that the Company completes an initial public offering of its common stock prior to December 31, 1999, the exercisability of 33 1/3% of the shares subject to any such option will accelerate to December 31, 2000, if the recipient remains an employee of the Company or an affiliate as of December 31, 2000, and an additional 33 1/3% of the shares subject to any such option will accelerate to December 31, 2001, if the recipient remains an employee of the Company or an affiliate as of December 31, 2001. Of the 9,577,950 options granted in December 1997, options to purchase 1,152,150 shares of common stock will not become exercisable until nine years and nine months from the date

F-23

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

of grant, unless certain 1998 operating targets are met, in which case the vesting schedule described above will apply.

The Company has adopted SFAS No. 123, "Accounting for Stock-Based Compensation", ("SFAS 123"). In accordance with the provisions of SFAS 123, the Company applies APB Opinion No. 25, and related interpretations in accounting for its plans. If the Company had elected to recognize compensation expense based upon the fair value at the grant date for awards under its plans consistent with the methodology prescribed by SFAS 123, the Company's SFAS 123 net loss would be increased by $1.3 million and $9.4 million for 1995 and 1996 and the net loss and net loss per common share would be increased by $6.3 million and $.13, respectively, for 1997.

These SFAS 123 pro forma amounts may not be representative of future disclosures since the estimated fair value of stock options is amortized to expense over the vesting period, and additional options may be granted in future years. The fair value for these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions for the period ended December 31, 1995, 1996 and 1997, respectively:

ADDITIONAL OPTIONS

                                            1995           1996           1997
Expected term..........................  2-10 years     5-10 years      10 years
Risk-free rate.........................  5.41%-7.22%    5.92%-6.61%    5.59%-7.12%
Dividend yield.........................      0%             0%             0%
Expected volatility....................      0%             0%             0%

The weighted-average fair value and weighted average exercise price of options granted prior to the Recapitalization for which the exercise price equals the fair value of Company common stock on the grant date was $11.23 and $44.65 in 1995, respectively, and $13.28 and $47.14, in 1996, respectively. The weighted-average fair value and weighted-average exercise price of options granted on and subsequent to the Recapitalization for which the exercise price equals the fair value of Company common stock on the grant date was $3.69 and $7.67 in 1996, respectively, and $5.28 and $12.33 in 1997, respectively.

The weighted-average fair value and weighted-average exercise price of options granted for which the exercise price was less than the fair value of Company common stock on the grant date was $6.30 and $1.97 in 1996, respectively and $6.76 and $7.67 in 1997, respectively. There were no option issuances prior to the Recapitalization for which the exercise price was less than the estimated fair value of Company common stock on the date of grant.

The Black-Scholes option valuation model was developed for use in estimating the weighted-average fair value of traded options which have no vesting restrictions and are fully transferable. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in managements opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

F-24

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Transactions involving options are summarized as follows:

                                                                OPTIONS      WEIGHTED-AVERAGE
                                                              OUTSTANDING     EXERCISE PRICE
JANUARY 1, 1995.............................................   1,633,110          $40.51
  Granted...................................................   1,197,722           44.72
  Exercised.................................................    (144,400)          34.26
  Cancellations.............................................    (260,324)          40.17
                                                              ----------          ------
DECEMBER 31, 1995...........................................   2,426,108           42.99
                                                              ----------          ------
  Granted...................................................     284,773           47.14
  Exercised.................................................    (252,278)          41.94
  Cancellations.............................................    (167,940)          42.83
  Recapitalization cancellations............................  (2,290,663)          43.64
  Recapitalization grants...................................  24,622,260            3.76
                                                              ----------          ------
DECEMBER 31, 1996...........................................  24,622,260            3.76
                                                              ----------          ------
  Granted...................................................  11,469,150           11.56
  Exercised.................................................  (4,250,790)           2.19
  Cancellations.............................................    (827,415)           4.50
                                                              ----------          ------
DECEMBER 31, 1997...........................................  31,013,205            6.84
                                                              ==========          ======

The following information is as of December 31, 1997:

Number outstanding...................................     12,312,690     9,122,565    9,577,950
                                                       -------------    ----------    ---------
Weighted-average contractual life, in years..........              6            10           10
Weighted-average exercise price......................  $        1.92    $     7.67    $   12.33
                                                       -------------    ----------    ---------
Number exercisable...................................     12,312,690     4,930,305            0
                                                       -------------    ----------    ---------
Weighted-average exercise price......................  $        1.92    $     7.67    $   12.33
                                                       -------------    ----------    ---------

The following information is as of December 31, 1995 and 1996:

                                                             1995                  1996
Range of Exercise Prices...............................  $35.85-$44.65    $     1.92   $    7.67
                                                         -------------    ----------   ---------
Number outstanding.....................................      2,426,108    16,823,565   7,798,695
                                                         -------------    ----------   ---------
Weighted-average contractual life, in years............              5             6          10
Weighted-average exercise price........................  $       42.96    $     1.92   $    7.67
                                                         -------------    ----------   ---------
Number exercisable.....................................        544,004    16,823,565   4,678,335
                                                         -------------    ----------   ---------
Weighted-average exercise price........................  $       40.92    $     1.92   $    7.67
                                                         -------------    ----------   ---------

NOTE 18 -- LITIGATION, COMMITMENTS AND CONTINGENT LIABILITIES:

The Company has performed, and continues to perform, services for clients in a wide range of businesses, including tobacco products manufacturers. As a result, the Company may from time to time be joined as a defendant in litigation brought against its clients and others by third parties, including its competitors, governmental and regulatory bodies, or consumers, alleging that advertising claims made through the

F-25

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company with respect to such clients' products are false, deceptive or misleading; that such clients products are defective, injurious or pose some manner of threat to the public generally; or that marketing or communications materials created for such clients infringe upon the proprietary rights of third parties. The Company's practice is to attempt to minimize such potential liabilities through insurance coverage and/or indemnification provisions in its agreements with clients and others.

Recently, the Company was named as a defendant in an action brought by a county government against tobacco products manufacturers (including a current and a former client of the Company) and others alleging that, because the Company performed advertising and other professional services for such clients, the Company is liable for damages for health and other claims. While this action is in its early stages and the allegations against the Company have not been made with specificity, the Company believes it has meritorious defenses to the claims and intends to contest them vigorously.

The Company is named as party in litigation matters which arise in the ordinary course of its business, including claims by former employees for money damages and other relief based upon the circumstances or consequences of their separation from employment. The Company believes that it has meritorious defenses to these claims, and is contesting such claims vigorously. In addition, the Company is covered by insurance with respect to some of such claims. Accordingly, the Company does not expect such matters to have a material adverse effect on its consolidated financial position, results of operations or cash flows.

Net rental expense was $62.4 million, $62.9 million, and $74.4 million in 1995, 1996 and 1997, respectively. Future minimum rental commitments as of December 31, 1997 are as follows:

                                                         (IN THOUSANDS)
1998...................................................     $ 62,863
1999...................................................       54,525
2000...................................................       42,924
2001...................................................       40,162
2002...................................................       39,119
Thereafter.............................................      108,437

Certain leases contain renewal options calling for increased rentals. Others contain certain escalation clauses relating to taxes and other operating expenses.

At December 31, 1996, the Company had outstanding guarantees of $18.6 million in support of credit lines of unconsolidated companies. At December 31, 1997, the Company had outstanding guarantees of $7.6 million in support of credit lines of unconsolidated companies.

The Company and its corporate affiliates conduct business in various developing countries in Asia, Africa, Latin America and Eastern Europe, where the systems and bodies of commercial law and trade practices arising thereunder are in a continuing state of evolution. Commercial laws in such countries are often vague, arbitrary, contradictory, inconsistently administered and retroactively applied. Under such circumstances, it is difficult for the Company to determine with certainty at all times the exact requirements of such local laws. Nevertheless, the Company believes that any difficulty in compliance with local laws in such developing countries will not have a materially adverse impact on the consolidated financial position, results of operations or cash flows of the Company.

NOTE 19 -- FAIR VALUE OF FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES:

At December 31, 1996 and 1997, the carrying value of the Company's financial instruments approximated fair value in all material respects.

F-26

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company entered into interest rate exchange agreements with off-balance sheet risk in order to reduce its exposure to changes in interest rates on its variable rate long-term debt. These interest rate exchange agreements included interest rate swaps, interest rate floors and interest rate caps. At December 31, 1996 and 1997, the notional amount of these agreements was $50 million and $275 million, respectively (see Note 14). The fair value, which has been estimated based upon quotations from independent third party banks, approximated the notional amount at December 31, 1996 and 1997.

The Company enters into forward foreign exchange contracts to hedge certain assets and liabilities which are recorded in a currency different from that in which they settle. The purpose of these contracts is almost exclusively to hedge intercompany transactions. The Company's forward foreign exchange contracts do not create exchange rate risk because gains and losses on these contracts generally offset losses and gains on the foreign currency denominated intercompany transactions. The gains and losses on these positions are deferred and included in the basis of the transaction upon settlement. The terms of these contracts are generally a one month maturity. The tables below summarize the Company's forward foreign exchange contracts outstanding at December 31, 1996 and 1997. The "buy" amounts represent the U.S. dollar equivalent of commitments to purchase the respective currency, and the "sell" amounts represent the U.S. dollar equivalent of commitments to sell the respective currency.

1996                                                          COMPANY BUYS    COMPANY SELLS
                                                                     (IN THOUSANDS)
Canadian Dollar.............................................    $    --          $8,399
Italian Lira................................................      4,524              --
Swiss Franc.................................................      5,934              --
Japanese Yen................................................      6,199              --
                                                                -------          ------
                                                                $16,657          $8,399
                                                                =======          ======

1997                                                          COMPANY BUYS    COMPANY SELLS
                                                                     (IN THOUSANDS)
German Deutschemark.........................................    $    --          $13,318
Italian Lira................................................         --            3,901
Swedish Krona...............................................         --            1,268
Swiss Franc.................................................      6,849               --
Japanese Yen................................................      5,975               --
                                                                -------          -------
                                                                $12,824          $18,487
                                                                =======          =======

Management believes the risk of incurring losses due to credit risk and foreign exchange would not have a material adverse impact on the consolidated financial position, results of operations or cash flows of the Company.

NOTE 20 -- SUBSEQUENT EVENT -- COMMON STOCK DIVIDEND

On April 6, 1998, the Board of Directors declared a stock dividend of 14 shares of common stock payable for each share of common stock outstanding on the effective date of the Company's planned initial public offering (see note 21). Common stock and accumulated deficit reflected in the historical balance sheets at December 31, 1996 and 1997 have been restated to reflect the common stock dividend. The number of common shares the Company is authorized to issue was also increased from 10 million to 250 million and the number of authorized preferred shares, none of which have been issued, was increased from 50,000 to 10 million.

F-27

YOUNG & RUBICAM INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

All references in the consolidated financial statements to shares, share prices, per share data, including stock option and stock option plan information, for periods after the 1996 Recapitalization are reflected on a post dividend basis. All references in the historical financial statements to common shares and Limited Partnership Units in Predecessor entities including option and option plan information are reflected on a pre-dividend basis.

NOTE 21 -- PUBLIC OFFERING AND RELATED TRANSACTIONS SUBSEQUENT TO THE DATE OF THE INDEPENDENT ACCOUNTANTS REPORT (UNAUDITED)

OFFERING: On February 26, 1998, the Company filed a Registration Statement on Form S-1. Total proceeds to be raised in connection with the public offerings are estimated at $430 million, comprised of approximately $150 million raised from the sale of newly issued common shares and approximately $280 million raised from common shares to be sold from certain selling stockholders. The Company intends to use the estimated net proceeds from the sale of newly issued common shares to repay borrowings under the term loan portion of its Credit Facilities. The Company will not receive any of the net proceeds from the sale of common stock by the selling stockholders.

NEW DEBT FACILITY: On March 10, 1998, the Company received an executed commitment letter (the "Commitment") from Citibank N.A. and the Bank of America National Trust and Savings Association for an aggregate of $150 million of a $400 million, 5 year multicurrency revolving credit facility (the "Facility"). The Commitment is subject to, among other things, the receipt of commitments from other lenders to provide not less than $250 million and the consummation of the initial public offering resulting in not less than $100 million of cash proceeds to the Company. Under the proposed terms of the Facility, interest charged on loans will include base rate, Eurodollar and Eurocurrency rates, plus applicable margins tied to the leverage ratio ranging from 0.04% to 0.05%.

RESTRICTED STOCK: In March 1998, the Company amended the Restricted Stock Trust agreement which will result in the redemption of 1,855,845 of the 11,086,950 shares of common stock previously held in the Restricted Stock Trust upon consummation of the initial public offering. Based upon an assumed initial public offering price of $22.50, the consummation of the offering will give rise to a non-recurring, non-cash, pre-tax charge of $207.7 million arising from the vesting of the aggregate 9,231,105 shares of Restricted Stock.

F-28

[PHOTOGRAPH OF OLD-FASHIONED
HANDWRITING ON HEAVY PAPER
VERY CLOSE-UP PREDOMINANTLY
IN ORANGE AND YELLOW.
NO PARTICULAR WORDS
CAN BE IDENTIFIED.]

F-29


NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE UNDERWRITERS OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.


TABLE OF CONTENTS

                                        PAGE
Prospectus Summary....................     4
Risk Factors..........................    10
The Company...........................    17
Use of Proceeds.......................    19
Dividend Policy.......................    19
Capitalization........................    20
Dilution..............................    22
Selected Consolidated Financial
  Data................................    23
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................    25
Business..............................    31
Management............................    41
Certain Transactions..................    57
Principal and Selling Stockholders....    58
Description of Capital Stock..........    60
Shares Eligible for Future Sale.......    73
Certain U.S. Tax Consequences to Non-
  United States Holders...............    75
Underwriting..........................    76
Legal Matters.........................    80
Experts...............................    80
Available Information.................    80
Index to Consolidated Financial
  Statements..........................   F-1

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.



16,600,000 SHARES

[YOUNG & RUBICAM INC. LOGO]

COMMON STOCK
PROSPECTUS
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION

BEAR, STEARNS & CO. INC.
FURMAN SELZ
GOLDMAN, SACHS & CO.
SALOMON SMITH BARNEY
, 1998



[INTERNATIONAL BACK COVER PAGE]


NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE UNDERWRITERS OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.


TABLE OF CONTENTS

                                        PAGE
Prospectus Summary....................     4
Risk Factors..........................    10
The Company...........................    17
Use of Proceeds.......................    19
Dividend Policy.......................    19
Capitalization........................    20
Dilution..............................    22
Selected Consolidated Financial
  Data................................    23
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................    25
Business..............................    31
Management............................    41
Certain Transactions..................    57
Principal and Selling Stockholders....    58
Description of Capital Stock..........    60
Shares Eligible for Future Sale.......    73
Certain U.S. Tax Consequences to Non-
  United States Holders...............    75
Underwriting..........................    76
Legal Matters.........................    80
Experts...............................    80
Available Information.................    80
Additional Information................    81
Index to Consolidated Financial
  Statements..........................   F-1

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.



16,600,000 SHARES

[YOUNG & RUBICAM INC. LOGO]

COMMON STOCK
PROSPECTUS
DONALDSON, LUFKIN & JENRETTE
INTERNATIONAL

BEAR, STEARNS INTERNATIONAL LIMITED
FURMAN SELZ
GOLDMAN SACHS INTERNATIONAL
SALOMON SMITH BARNEY INTERNATIONAL
, 1998



PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the estimated expenses in connection with the issuance and distribution of the Common Stock being registered, other than underwriting discounts and commissions:

SEC registration fee........................................  $135,158
NASD filing fee.............................................    30,500
New York Stock Exchange listing fee.........................         *
Legal fees and expenses.....................................         *
Accounting fees and expenses................................         *
Printing and engraving expenses.............................         *
Registrar and transfer agent's fee..........................         *
Miscellaneous...............................................         *
                                                              --------
          Total.............................................  $      *
                                                              ========


* To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Article XI of Y&R's Amended and Restated Certificate of Incorporation provides substantially as follows:

Section 1. Elimination of Certain Liability of Directors. A director of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit.

Section 2. Indemnification and Insurance.

(a) Right to indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Company to the fullest extent authorized by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended but, in the case of any such amendment, to the fullest extent permitted by law, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment), against all expense, liability and loss (including, without limitation, attorneys' fees, judgments, fines, amounts paid or to be paid in settlement, and excise taxes or penalties arising under the Employee Retirement Income Security Act of 1974) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof, the Company shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Company. The right to indemnification conferred in this

II-1


Section shall be a contract right and shall include the right to be paid by the Company the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Company of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. The Company may, by action of the Board of Directors, provide indemnification to employees and agents of the Company with the same scope and effect as the foregoing indemnification of directors and officers.

(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of this Section is not paid in full by the Company within thirty days after a written claim has been received by the Company, the claimant may at any time thereafter bring suit against the Company to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Company) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the Company to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Company. Neither the failure of the Company (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Company (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

(c) Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-law, agreement, vote of stockholders or disinterested directors or otherwise.

(d) Insurance. The Company may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Company or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Company would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware.

Section 5 of the Management Voting Trust Agreement provides substantially as follows:

The Company hereby agrees to assume liability for and does hereby indemnify, protect, save and hold harmless the Voting Trustees and their successors, assigns, agents and servants to the full extent lawful from and against any and all liabilities, obligations, losses, damages, penalties, taxes, claims, actions, suits, costs, expenses or disbursements (including legal fees and expenses) of any kind and nature whatsoever ("Losses") that may be imposed, incurred by or asserted against the Voting Trustees or any of them individually in any way relating to or arising under the Management Voting Trust Agreement or the enforcement of any of the terms thereof or in any way relating to or arising out of the administration of the trusts created thereby or the action or inaction of the Management Voting Trust thereunder, unless the Company shall sustain the burden of proving by clear and convincing evidence that such Losses were proximately caused by an act or omission on the part of such Voting Trustee or Voting Trustees that was not taken in good faith or that was not reasonably believed to be in or not opposed to the best interests of the Company and the Management Investors as a group. The Company shall advance to any Voting Trustee all reasonable expenses in connection with litigation arising under the Management Voting Trust Agreement or the enforcement of any of the terms

II-2


thereof or in any way relating to or arising out of the administration of the trusts created thereby or the action or inaction of the Management Voting Trust thereunder, including, but not limited to, expenses in connection with litigation in which such Voting Trustee purports to seek to enforce any portion of the Management Voting Trust Agreement. A Voting Trustee shall be required to execute an undertaking agreeing to repay the Company the amount so advanced in the event it is ultimately determined that such Voting Trustee is not entitled to indemnification with respect to such Losses, but the Voting Trustee shall not be required to give a bond or any security for the advancement of such expenses. To the extent insurance is available on commercially reasonable terms, the Company will procure and maintain (for the benefit of the Company and the Voting Trustees) insurance covering the Voting Trustees at least to the extent their conduct would give rise to indemnification under the Management Voting Trust Agreement. The provisions contained in this indemnification section shall survive the termination of the Management Voting Trust Agreement.

The Restricted Stock Plan and the Management Stock Option Plan each provide that no member of the Compensation Committee of the Company Board or of the Company Board shall be liable for any action or determination made in good faith with respect to such plan or any grant under such plan. The Restricted Stock Plan and the Management Stock Plan each provide that to the fullest extent permitted by law, the Company shall indemnify and save harmless each person made or threatened to be made a party to any civil or criminal action or proceeding by reason of the fact that such person, or such person's testator or intestate, is or was a member of the Compensation Committee of the Company Board. The 1997 ICP Plan provides that no member of the Compensation Committee or any officer or employee of the Company or an affiliate acting at the direction or on behalf of the Compensation Committee shall be personally liable for any action or determination taken or made in good faith with respect to the 1997 ICP Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Company with respect to any such action or determination.

Y&R also carries liability insurance covering officers and directors.

Pursuant to the proposed form of Underwriting Agreement, the Underwriters have agreed to indemnify the directors and officers of Y&R in certain circumstances.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

In December 1996, in connection with the Recapitalization, Y&R (i) issued and sold 30,228,195 shares of Common Stock to the Recapitalization Investors and one entity affiliated with an independent member of the Board for cash consideration of $231,749,495, (ii) issued and sold 17,154,135 shares of Common Stock to 182 employees in exchange for a combination of cash, notes, shares of common stock, $.25 par value, of Young & Rubicam Inc., a New York corporation, and limited partnership units of Young & Rubicam L.P., a Delaware limited partnership, (iii) granted 16,823,565 Rollover Options to its employees in consideration of the surrender for cancellation of all or a portion of their outstanding employee options, and (iv) granted 5,200,590 Executive Options to its employees without consideration pursuant to the Management Stock Option Plan.

In August 1997, two members of management of the Company purchased an aggregate of 12,900 shares of Common Stock for an aggregate purchase price of $98,900. In October 1997, four members of management of the Company purchased an aggregate of 36,000 shares of Common Stock for an aggregate purchase price of $276,000. In November 1997, the Company purchased additional equity interests in two of its Argentine subsidiaries using an aggregate of 91,320 shares of Common Stock as part of the consideration therefor.

During 1997, management investors whose employment with the Company was terminated exercised Rollover Options to purchase an aggregate of 463,065 shares of Common Stock at $1.92 per share, or an aggregate of $887,541. All of such shares of Common Stock were repurchased by the Company pursuant to the call provisions of the Stockholders Agreement at a price equal to $7.67 per share.

In December 1997, the Company issued and sold 4,250,790 shares of Common Stock to its employees for an aggregate amount of $9,314,483 pursuant to the exercise of Rollover Options and Executive Options. In

II-3


March 1998, the Company issued and sold 135,885 shares of Common Stock to its employees for an aggregate amount of $864,196 pursuant to the exercise of Rollover Options and Executive Options.

All of the sales of Y&R securities described above were deemed to be exempt from the registration requirements under the Securities Act pursuant to Section 4(2) thereof, and in reliance on Rule 701 promulgated under Section 3(b) thereof and Regulation D and Regulation S thereunder. Each recipient of such securities represented in each transaction such recipient's intention to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the share certificates issued in such transactions.

ITEM 16. EXHIBITS.

(a) Exhibits

 1.1   Form of Underwriting Agreement*.............................
 3.1   Amended and Restated Certificate of Incorporation of
       Registrant..................................................
 3.2   Amendment to Amended and Restated Certificate of
       Incorporation of Registrant.................................
 3.3   Amended and Restated Bylaws of Registrant...................
 3.4   Form of Amended and Restated Certificate of Incorporation of
       Registrant to become effective upon the closing of the
       Offerings under the Registration Statement..................
 3.5   Form of Amended and Restated Bylaws of Registrant to become
       effective upon the closing of the Offerings under the
       Registration Statement......................................
 4.1   Specimen Certificate of Common Stock of Registrant*.........
 4.2   Form of Rights Agreement....................................
 4.3   Form of Certificate of Designation for Registrant's
       Cumulative Participating Junior Preferred Stock.............
 5.1   Opinion of Cleary, Gottlieb, Steen & Hamilton, counsel to
       the Registrant, as to the legality of the shares of Common
       Stock being registered*.....................................
 9.1   Management Voting Trust Agreement, dated as of December 12,
       1996+.......................................................
 9.2   Young & Rubicam Inc. Restricted Stock Trust Agreement, dated
       as of December 12, 1996+....................................
10.1   $700,000,000 Credit and Guarantee Agreement, dated as of
       December 12, 1996+..........................................
10.2   Amended Stockholders' Agreement*............................
10.3   Contribution Agreement dated October 30, 1996+..............
10.4   Young & Rubicam Holdings Inc. Restricted Stock Plan+........
10.5   Young & Rubicam Holdings Inc. Management Stock Option
       Plan+.......................................................
10.6   Young & Rubicam Inc. 1997 Incentive Compensation Plan.......
10.7   Young & Rubicam Inc. Select Executive Retirement Income
       Plan, dated as of December 19, 1997, with Peter
       Georgescu+..................................................
10.8   Young & Rubicam Inc. Select Executive Retirement Income
       Plan, dated as of January 1, 1995, with Peter Georgescu+....
10.9   Young & Rubicam Inc. Select Executive Retirement Income
       Plan, dated as of January 1, 1986, with Peter Georgescu+....
10.10  Young & Rubicam Inc. Select Executive Retirement Income
       Plan, dated as of December 19, 1997, with John McGarry+.....
10.11  Young & Rubicam Inc. Select Executive Retirement Income
       Plan, dated as of January 1, 1986, with John McGarry+.......
10.12  Young & Rubicam Inc. Select Executive Retirement Income
       Plan, dated as of December 31, 1994, with John McGarry+.....

II-4


10.13  Young & Rubicam Inc. Select Executive Retirement Income
       Plan, dated as of December 19, 1997, with Edward Vick+......
10.14  Young & Rubicam Inc. Select Executive Retirement Income
       Plan, dated as of January 1, 1995, with Edward Vick+........
10.15  Young & Rubicam Inc. Select Executive Retirement Income
       Plan, dated as of December 19, 1997 with Alan J.
       Sheldon+....................................................
10.16  Young & Rubicam Inc. Select Executive Retirement Income
       Plan, dated as of January 1, 1995 with Alan Sheldon+........
10.17  Young & Rubicam Inc. Select Executive Retirement Income
       Plan, dated as of January 1, 1988 with Alan Sheldon+........
10.18  Registration Rights Agreement, dated as of December 12,
       1996+.......................................................
10.19  Letter Agreement dated as of October 16, 1997 by and between
       Young & Rubicam Inc. and Michael J. Dolan+..................
10.20  Letter Agreement dated June 28, 1996 by and between Young &
       Rubicam Inc. and Michael J. Dolan+..........................
10.21  Lease agreement for 230 Park Avenue South+..................
10.22  H&F Option Agreement, dated as of December 12, 1996, among
       Y&R Holdings, Y&R Inc., Y&R Inc., and H&F Capital Partners
       III, L.P.+..................................................
10.23  H&F Option Agreement, dated as of December 12, 1996, among
       Y&R Holdings, Y&R Inc., Y&R Inc., and H&F Orchard Partners
       III, L.P.+..................................................
10.24  Form of Young & Rubicam Inc. Key Corporation Managers Bonus
       Plan........................................................
10.25  Amendment No. 1 to Restricted Stock Trust Agreement dated as
       of March 13, 1998...........................................
10.26  Young & Rubicam Inc. Deferred Compensation Plan.............
10.27  Young & Rubicam Inc. Grantor Trust Agreement*...............
21.1   List of Subsidiaries........................................
23.1   Consent of Price Waterhouse LLP.............................
23.2   Consent of Cleary, Gottlieb, Steen & Hamilton (included in
       opinion to be filed as Exhibit 5.1)*........................
24.1   Powers of Attorney (included on signature pages)+...........


* To be filed by amendment.

+ Previously filed.

(b) Financial Statement Schedules

Schedule II -- Young & Rubicam Inc. and Subsidiary Companies Valuation and Qualifying Accounts and Reserves.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes:

(a) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a

II-5


court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

(b) (1) That for purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this Registration Statement as of the time it was declared effective.

(2) That for the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c) To provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery each to purchaser.

II-6


SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-1 and has duly caused this Amendment No. 2 to Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on April 17, 1998.

YOUNG & RUBICAM INC.

By:   /s/ STEPHANIE W. ABRAMSON

  ------------------------------------
  Name: Stephanie W. Abramson
  Title: General Counsel and
     Executive Vice President

Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 2 to Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

                   SIGNATURE                                       TITLE                         DATE
                   ---------                                       -----                         ----

                       *                            Chairman of the Board and Chief         April 17, 1998
------------------------------------------------      Executive Officer (principal
               Peter A. Georgescu                     executive officer)

                       *                            Vice Chairman, Chief Financial          April 17, 1998
------------------------------------------------      Officer and Director (principal
                Michael J. Dolan                      financial officer)

                       *                            Senior Vice President, Finance          April 17, 1998
------------------------------------------------      (principal accounting officer)
                  Kevin Lavan

                       *                            Chief Operating Officer and Director    April 17, 1998
------------------------------------------------
                 Edward H. Vick

                       *                            Executive Vice President and            April 17, 1998
------------------------------------------------      Director
              Thomas D. Bell, Jr.

                       *                            Director                                April 17, 1998
------------------------------------------------
               F. Warren Hellman

                       *                            Director                                April 17, 1998
------------------------------------------------
               Richard S. Bodman

                       *                            Director                                April 17, 1998
------------------------------------------------
             Philip U. Hammarskjold

                       *                            Director                                April 17, 1998
------------------------------------------------
                Alan D. Schwartz

                       *                            Director                                April 17, 1998
------------------------------------------------
              John F. McGillicuddy

*By:   /s/ STEPHANIE W. ABRAMSON

     ---------------------------------
     Name: Stephanie W. Abramson,
     Title: Attorney-in-Fact

II-7


SCHEDULE II

YOUNG AND RUBICAM INC. AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)

                                                                  ADDITIONS
                                                      ---------------------------------
                                         BALANCE AT   CHARGED TO COSTS     CHARGED TO                  BALANCE
DESCRIPTION                              BEGINNING      AND EXPENSES     OTHER ACCOUNTS   DEDUCTIONS   AT END
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year ended December 31, 1995
  Allowance for Doubtful Accounts......   $ 8,284         $ 8,352              --          $ 5,110     $11,526
                                          =======         =======              ==          =======     =======
Year ended December 31, 1996
  Allowance for Doubtful Accounts......   $11,526         $11,411              --          $13,088     $ 9,849
                                          =======         =======              ==          =======     =======
Year ended December 31, 1997
  Allowance for Doubtful Accounts......   $ 9,849         $14,269              --          $ 9,993     $14,125
                                          =======         =======              ==          =======     =======

S-1

EXHIBIT INDEX

                                                                       SEQUENTIALLY
EXHIBIT                                                                  NUMBERED
NUMBER                           DESCRIPTION                               PAGE
-------                          -----------                           ------------
     1.1 Form of Underwriting Agreement*.............................
     3.1 Amended and Restated Certificate of Incorporation of
         Registrant..................................................
     3.2 Amendment to Amended and Restated Certificate of
         Incorporation of Registrant
     3.3 Amended and Restated Bylaws of Registrant...................
     3.4 Form of Amended and Restated Certificate of Incorporation of
         Registrant to become effective upon the closing of the
         Offerings under the Registration Statement..................
     3.5 Form of Amended and Restated Bylaws of Registrant to become
         effective upon the closing of the Offerings under the
         Registration Statement......................................
     4.1 Specimen Certificate of Common Stock of Registrant*.........
     4.2 Form of Rights Agreement....................................
     4.3 Form of Certificate of Designation for Registrant's
         Cumulative Participating Junior Preferred Stock.............
     5.1 Opinion of Cleary, Gottlieb, Steen & Hamilton, counsel to
         the Registrant, as to the legality of the shares of Common
         Stock being registered*.....................................
     9.1 Management Voting Trust Agreement, dated as of December 12,
         1996+.......................................................
     9.2 Young & Rubicam Inc. Restricted Stock Trust Agreement, dated
         as of December 12, 1996+....................................
    10.1 $700,000,000 Credit and Guarantee Agreement, dated as of
         December 12, 1996+..........................................
    10.2 Amended Stockholders' Agreement*............................
    10.3 Contribution Agreement dated October 30, 1996+..............
    10.4 Young & Rubicam Holdings Inc. Restricted Stock Plan+........
    10.5 Young & Rubicam Holdings Inc. Management Stock Option
         Plan+.......................................................
    10.6 Young & Rubicam Inc. 1997 Incentive Compensation Plan.......
    10.7 Young & Rubicam Inc. Select Executive Retirement Income
         Plan, dated as of December 19, 1997, with Peter
         Georgescu+..................................................
    10.8 Young & Rubicam Inc. Select Executive Retirement Income
         Plan, dated as of January 1, 1995, with Peter Georgescu+....
    10.9 Young & Rubicam Inc. Select Executive Retirement Income
         Plan, dated as of January 1, 1986, with Peter Georgescu+....
    10.10 Young & Rubicam Inc. Select Executive Retirement Income
         Plan, dated as of December 19, 1997, with John McGarry+.....
    10.11 Young & Rubicam Inc. Select Executive Retirement Income
         Plan, dated as of January 1, 1986, with John McGarry+.......
    10.12 Young & Rubicam Inc. Select Executive Retirement Income
         Plan, dated as of December 31, 1994, with John McGarry+.....
    10.13 Young & Rubicam Inc. Select Executive Retirement Income
         Plan, dated as of December 19, 1997, with Edward Vick+......
    10.14 Young & Rubicam Inc. Select Executive Retirement Income
         Plan, dated as of January 1, 1995, with Edward Vick+........
    10.15 Young & Rubicam Inc. Select Executive Retirement Income
         Plan, dated as of December 19, 1997 with Alan J.
         Sheldon+....................................................


                                                                       SEQUENTIALLY
EXHIBIT                                                                  NUMBERED
NUMBER                           DESCRIPTION                               PAGE
-------                          -----------                           ------------
    10.16 Young & Rubicam Inc. Select Executive Retirement Income
         Plan, dated as of January 1, 1995 with Alan Sheldon+........
    10.17 Young & Rubicam Inc. Select Executive Retirement Income
         Plan, dated as of January 1, 1988 with Alan Sheldon+........
    10.18 Registration Rights Agreement, dated as of December 12,
         1996+.......................................................
    10.19 Letter Agreement dated as of October 16, 1997 by and between
         Young & Rubicam Inc. and Michael J. Dolan+..................
    10.20 Letter Agreement dated June 28, 1996 by and between Young &
         Rubicam Inc. and Michael J. Dolan+..........................
    10.21 Lease agreement for 230 Park Avenue South+..................
    10.22 H&F Option Agreement, dated as of December 12, 1996, among
         Y&R Holdings, Y&R Inc., Y&R Inc., and H&F Capital Partners
         III, L.P.+..................................................
    10.23 H&F Option Agreement, dated as of December 12, 1996, among
         Y&R Holdings, Y&R Inc., Y&R Inc., and H&F Orchard Partners
         III, L.P.+..................................................
    10.24 Form of Young & Rubicam Inc. Key Corporation Managers Bonus
         Plan........................................................
    10.25 Amendment No. 1 to Restricted Stock Trust Agreement dated as
         of March 13, 1998...........................................
    10.26 Young & Rubicam Inc. Deferred Compensation Plan.............
    10.27 Young & Rubicam Inc. Grantor Trust Agreement*...............
    21.1 List of Subsidiaries........................................
    23.1 Consent of Price Waterhouse LLP.............................
    23.2 Consent of Cleary, Gottlieb, Steen & Hamilton (included in
         opinion to be filed as Exhibit 5.1)*........................
    24.1 Powers of Attorney (included on signature pages)+...........


* To be filed by amendment.

+ Previously filed.


Exhibit 3.1

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF
YOUNG & RUBICAM INC.

ARTICLE I - NAME

The name of the corporation (which is hereinafter referred to as the "Corporation") is:

Young & Rubicam Inc.

ARTICLE II - AGENT

The registered office of the Corporation is located at 1209 Orange Street, in the City of Wilmington, in the County of New Castle, in the State of Delaware. The name of its registered agent at that address is The Corporation Trust Company.

ARTICLE III - PURPOSE

The purposes for which the Corporation is formed are to engage in any lawful act or activity for which corporations may be organized and incorporated under the General Corporation Law of the State of Delaware.

ARTICLE IV - STOCK

Section 1. Authorized Stock. The aggregate number of shares which the Corporation shall have authority to issue is 10,100,000. 100,000 of said shares shall be without par value, and shall be designated Preference Stock, and 10,000,000 of said shares shall be of the par value of $0.01 per share, and shall be designated Common Stock.

Section 2. Preference Stock. Subject to the limitations and in the manner provided by law, shares of the Preference Stock may be issued from time to time in series and, except as otherwise provided in Section 3 of this Article IV with respect to the initial series of the Preference Stock (the "Money Market Preferred Stock"), the Board of Directors of the Corporation is hereby authorized to establish and designate series in addition to the Money Market Preferred Stock, to fix the number of shares constituting each series, and to fix the designations and the relative rights, preferences and limitations of the shares of each series and the variations in the relative rights, preferences and limitations as between series, and to increase and to decrease the number of shares constituting each series. Subject to the limitations and in the manner provided by law, the authority of the Board of Directors of the Corporation with respect to each series shall include but shall not be limited to the authority to determine the following:

(a) The designation of such series.

(b) The number of shares initially constituting such series.


(c) The increase, and the decrease to a number not less than the number of the outstanding shares of such series, of the number of shares constituting such series theretofore fixed.

(d) The rate or rates and the times at which dividends on the shares of such series shall be paid and whether or not such dividends shall be cumulative and, if such dividends shall be cumulative, the date or dates from and after which they shall accumulate; provided, however, that, if the stated dividends are not paid in full, the shares of all series of the Preference Stock ranking pari passu with the Money Market Preferred Stock (including the shares of the Money Market Preferred Stock) shall share ratably in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full.

(e) Whether or not the shares of such series shall be redeemable and, if such shares shall be redeemable, the terms and conditions of such redemption, including but not limited to the date or dates upon or after which such shares shall be redeemable and the amount per share which shall be payable upon such redemption, which amount may vary under different conditions and at different redemption dates.

(f) The amount payable on the shares of such series in the event of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; provided, however, that the holders of such shares shall be entitled to be paid, or to have set apart for payment, not less than $.01 per share before the holders of shares of the Common Stock or the holders of any other class or series of stock ranking junior to the Preference Stock as to rights on liquidation shall be entitled to be paid any amount or to have any amount set apart for payment; provided, further, that, if the amounts payable on liquidation are not paid in full, the shares of all series of the Preference Stock ranking pari passu with the Money Market Preferred Stock (including the shares of Money Market Preferred Stock) shall share ratably in any distribution of assets other than by way of dividends in accordance with the sums which would be payable in such distribution if all sums payable were discharged in full. A liquidation, dissolution or winding up of the Corporation, as such terms are used in this paragraph (f), shall not be deemed to be occasioned by or to include any consolidation or merger of the Corporation with or into any other corporation or corporations or a sale, lease or conveyance of all or a part of its assets.

(g) Whether or not the shares of such series shall have voting rights, in addition to the voting rights provided by law and, if such shares shall have such voting rights, the terms and conditions thereof, including but not limited to the right of the holders of such shares to vote as a separate class either alone or with the holders of shares of one or more other series of Preference Stock and the right to have more than one vote per share.

(h) Whether or not a sinking fund shall be provided for the redemption of the shares of such series and, if such a sinking fund shall be provided, the terms and conditions thereof.

2

(i) Whether or not a purchase fund shall be provided for the shares of such series, and, if such a purchase fund shall be provided, the terms and conditions thereof.

(j) Whether or not the shares of such series shall have conversion privileges, and, if such shares shall have conversion privileges, the terms and conditions of conversion, including but not limited to any provision for the adjustment of the conversion rate or the conversion price.

(k) Any other relative rights, preferences and limitations.

Section 3. Money Market Preferred Stock. The initial series of the Preference Stock is hereby established, consisting initially of 50,000 shares and designated Money Market Preferred Stock. Subject to the limitations provided by law and to the provisions of Sections 1, 2 and 4 of this Article IV, the relative rights, preferences and limitations of the shares of the Money Market Preferred Stock are as follows:

(a) Dividends. The holders of Money Market Preferred Stock shall not be entitled to any dividends, except as set forth below. The holders of the Money Market Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors of the Corporation, cash dividends at the Applicable Rate per share per annum, and no more, payable for each quarterly dividend period ending on December 31, March 31, June 30, and September 30 (each, a "Dividend Period") (to be paid on January 15, April 15, July 15 and October 15, respectively (the "Dividend Payment Dates"), commencing with the Dividend Period ending March 31, 1997). Dividends shall accrue and be cumulative with respect to shares issued in the merger (the "Merger") with Young & Rubicam Inc. (a New York corporation) (the "Predecessor") in exchange for shares of substantially identical shares of the Predecessor from December 12, 1996 (the "Initial Issue Date") and with respect to shares issued subsequent to the Merger, from the first day of the quarterly dividend period next succeeding the quarterly dividend period in which such shares are issued. Dividends on the Money Market Preferred Stock shall be paid in full for all prior dividend periods, and shall be paid or declared and set apart for payment in full for the current dividend period, before the payment of any dividends, other than dividends payable in shares of the Common Stock, on the Common Stock or any other class of stock ranking junior to the Money Market Preferred Stock as to dividends. Accumulations of dividends on the Money Market Preferred Stock shall bear interest at the Applicable Rate per annum.

"Applicable Rate" means the rate per annum quoted by Bank of America National Trust and Savings Association, a national banking association ("B of A") at approximately 11:00 a.m. London time (or as soon thereafter as practicable) for the offering by B of A to leading banks in the London interbank market of dollar deposits having a term of three months, as in effect on the first business day of the applicable Dividend Period (or, in the case of the Dividend Periods ending December 31, 1996 and March 31, 1997, such rate as in effect on the Initial Issue Date), plus 250 basis points.

(b) Redemption. (1) The Corporation, at the option of its Board of Directors, may on or at any time and from time to time subsequent to December 12, 2001 redeem all

3

or less than all of the shares of the Money Market Preferred Stock then outstanding at a redemption price per share of $115 (together with the amount of all dividends accrued and unpaid thereon to the date fixed for redemption); provided however, that no share of Money Market Preferred Stock shall be redeemed on or prior to the fifth anniversary of the date such share of Money Market Preferred Stock was issued.

(2) Notice of redemption shall be given by the Corporation by causing a notice thereof to be mailed to each holder of record of the Money Market Preferred Stock (as of the date of mailing) of the shares to be redeemed or as of a record date fixed for the determination of the holders entitled to such notice, addressed to such holder at his address appearing on the books of the Corporation or given by him to the Corporation for the purpose of notice, or, if no such address appears or is given, at the place where the principal office of the Corporation is located, not less than 30 or more than 90 days before the date fixed for redemption. Such notice of redemption shall set forth the date fixed for redemption, the redemption price, the shares, and the total number thereof, to be redeemed and the place (in the Borough of Manhattan, The City of New York), at which the stockholders may obtain payment of the redemption price upon the surrender of the certificates representing their shares. No defect in any such notice or in the mailing thereof shall affect the validity of the proceeding for the redemption of the shares so to be redeemed.

(3) On or after the date fixed for redemption and stated in such notice, each holder of shares called for redemption shall, upon surrender of certificates representing such shares to the Corporation at the place designated in such notice, be entitled to receive payment of the redemption price thereof. In case less than all of the shares represented by any such surrendered certificates are redeemed, a new certificate shall be issued representing the unredeemed shares.

(4) If, on or prior to the date fixed for redemption of any shares, the Corporation shall deposit with any bank or trust company organized under the laws of the United States or of the State of New York having an office in the Borough of Manhattan, The City of New York, and having capital, surplus and undivided profits aggregating at least $5,000,000, as a trust fund, a sum sufficient to redeem, on the date fixed for redemption thereof, the shares called for redemption, with irrevocable instructions and authority to the bank or trust company to give the notice of redemption thereof, if such notice shall not previously have been given by the Corporation, or to complete the giving of such notice if theretofore commenced, and to pay, on and after the date fixed for redemption (or, at the election of the Corporation, prior thereto) the redemption price of such shares to the respective holders upon the surrender of their certificates representing such shares, then,
(i) from and after the date of such deposit (although prior to the date fixed for redemption), such shares shall be deemed to be redeemed and dividends thereon shall cease to accrue after the date fixed for redemption, and (ii) from and after the date of such deposit, such shares shall be deemed to be no longer outstanding, and the holders thereof shall cease to be stockholders with respect to such shares, and shall have no rights with respect thereto except the right to receive from the bank or trust company (or from the Corporation) payment of the redemption price of such shares, without interest, upon the surrender of the certificates representing such shares. Any moneys so deposited by

4

the Corporation and unclaimed at the end of six years from the date fixed for redemption shall, upon the request of the Corporation, be repaid to it, in which event, the persons entitled thereto shall look only to the Corporation for payment thereof and may apply for and receive said moneys, without interest, from the Corporation; provided, however, that, if the Corporation shall, as required or permitted by law, pay to any state authority under applicable escheat or unclaimed property laws any unclaimed moneys so repaid to the Corporation, said persons shall thereafter look only to such state authorities for payment thereof.

(5) Shares of the Money Market Preferred Stock so redeemed may be reissued as shares of such series or as shares of such other series of the Preference Stock as shall be determined by the Board of Directors of the Corporation.

(c) Conversion. Shares of Money Market Preferred Stock shall not be convertible into any other shares of capital stock of the Corporation.

(d) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of the Money Market Preferred Stock shall be entitled to receive from the assets of the Corporation the sum of $115 per share together with the amount of all dividends accrued and unpaid thereon to the date that payment is made available to such holders, before the payment or declaration and setting apart for payment of any amount for, or the distribution of any assets of the Corporation to, the holders of shares of the Common Stock or the holders of shares of any other class or series of stock ranking junior to the Money Market Preferred Stock in connection with such liquidation, dissolution or winding up.

(e) Voting. The holders of shares of the Money Market Preferred Stock shall have the right to vote, together with the holders of all the outstanding shares of Common Stock and not as a class, except as otherwise provided herein or as required by the Delaware General Corporation Law, on all matters on which holders of Common Stock shall have the right to vote. The holders of shares of Money Market Preferred Stock shall have the right to cast one-tenth of one vote for each share of Money Market Preferred Stock held by them.

Section 4. Except as otherwise provided by law, or in Section 3(e) of this Article IV, the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes. Each share of Common Stock shall have one vote, and the Common Stock shall vote together as a single class.

ARTICLE V - ELECTION OF DIRECTORS

Unless and except to the extent that the By-Laws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot.

ARTICLE VI - AMENDMENT OF BY-LAWS

Subject to the supermajority voting requirements specified in Article IV of the Corporation's By-laws, in furtherance and not in limitation of the powers conferred by law, the

5

Board of Directors of the Corporation (the "Board") is expressly authorized and empowered to make, alter and repeal the By-Laws of the Corporation by a majority vote at any regular or special meeting of the Board or by written consent, subject to the power of the stockholders of the Corporation to alter or repeal any By-Laws made by the Board.

ARTICLE VII - AMENDMENT OF CHARTER

Subject to the supermajority voting requirements specified in Article IV of the Corporation's By-laws, the Corporation reserves the right at any time from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and any other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or here-after prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article.

ARTICLE VIII TRANSFER RESTRICTIONS

Section 1. Limitations on Transfers. (a) Any Transfer of legal or beneficial ownership of Common Stock in breach of the Stockholders' Agreement shall be prohibited and be void ab initio, regardless of whether such Transfer has been recorded in the books of the Corporation and new certificates have been issued.

(b) No employee or agent of the Corporation shall record any prohibited Transfer, and the purported transferee of such a prohibited Transfer (the "Purported Transferee") shall not be recognized as a stockholder of the Corporation for any purpose whatsoever in respect of the Common Stock that is the subject of the prohibited Transfer. The Purported Transferee shall not be entitled, with respect to such stock, to any rights of a stockholder of the Corporation, including without any limitation, the right to vote such Common Stock or to receive dividends or distributions in respect thereof, if any.

(c) Insofar as necessary or appropriate, the By-Laws of the Corporation shall make appropriate provisions to effectuate the requirements of this Article VIII. All certificates representing Common Stock shall bear a legend to the effect that such Common Stock is subject to the restrictions set forth in this Article VIII.

(d) The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law.

Section 2. Transfer. As used in this Article VIII, the term "Transfer" shall mean the direct or indirect sale, transfer, assignment, pledge, hypothecation or other encumbrance or disposition of any shares (or any related voting trust certificates).

6

ARTICLE IX - BOARD OF DIRECTORS

Section 1. Number. The number of the directors of the Corporation shall be as from time to time fixed by, or in the manner provided in, the By-Laws of the Corporation.

Section 2. Removal. Any director may be removed from office with or without cause by the affirmative vote of the holders of at least a majority of the voting power of the Corporation's capital stock entitled to vote generally in the election of directors ("Voting Stock") then outstanding, voting together as a single class.

ARTICLE X - STOCKHOLDER ACTION

Any action required or permitted to be taken by the stockholders of the Corporation may be taken by the written consent of stockholders holding a majority of the outstanding shares of Voting Stock.

ARTICLE XI - LIABILITY OF DIRECTORS & OFFICERS, ETC.

Section 1. Elimination of Certain Liability of Directors. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit.

Section 2. Indemnification and Insurance.

(a) Right to indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended but, in the case of any such amendment, to the fullest extent permitted by law, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including, without limitation, attorneys' fees, judgments, fines, amounts paid or to be paid in settlement, and excise taxes or penalties arising under the Employee Retirement Income Security Act of 1974) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof, the Corporation shall

7

indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. The Corporation may, by action of the Board, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers.

(b) Right of Claimant to Bring Suit. If a claim under paragraph
(a) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Corporation (including its Board, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

(c) Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-law, agreement, vote of stockholders or disinterested directors or otherwise.

(d) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware.

8

Exhibit 3.2

CERTIFICATE OF AMENDMENT OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
YOUNG & RUBICAM INC.

The name of the corporation is Young & Rubicam Inc. (the "Corporation"). The date of filing of the Corporation's original certificate of incorporation with the Secretary of State is October 17, 1996, which certificate of incorporation was amended and restated by the filing of an amended and restated certificate of incorporation with the Secretary of State on December 13, 1996. The amendment to the amended and restated certificate of incorporation was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

Article IV, Section 1 of the Amended and Restated Certificate of Incorporation of the Corporation is hereby amended to read in its entirety as follows:

"ARTICLE IV - STOCK

Section 1. Authorized Stock. The aggregate number of shares which the Corporation shall have authority to issue is 260,000,000. 10,000,000 of said shares shall be of the par value of $0.01 per share, and shall be designated Preference Stock, and 250,000,000 of said shares shall be of the par value of $0.01 per share, and shall be designated Common Stock."

IN WITNESS WHEREOF, Young & Rubicam Inc. has caused this Certificate of Amendment to its Amended and Restated Certificate of Incorporation to be signed by Renee E. Becnel, its Senior Vice President, and attested by Mark T. McEnroe, its Assistant Secretary, this 8th day of April, 1998.

                                         By: /s/ Renee E. Becnel
                                             ----------------------------
                                         Name: Renee E. Becnel
                                         Title: Senior Vice President

ATTEST:

By: /s/ Mark T. McEnroe
    -------------------------------
Name: Mark T. McEnroe
Title: Assistant Secretary


Exhibit 3.3

AMENDED AND RESTATED BY-LAWS

OF

YOUNG & RUBICAM INC.

ARTICLE I

OFFICES

SECTION 1. REGISTERED OFFICE -- The registered office of Young & Rubicam Inc. (the "Corporation") is located at 1209 Orange Street, in the City of Wilmington, in the County of New Castle, in the State of Delaware. The name of its registered agent at that address is The Corporation Trust Company.

SECTION 2. OTHER OFFICES -- The Corporation may have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors may from time to time select or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 1. ANNUAL MEETINGS -- Annual meetings of stockholders for the election of directors, and for such other business as may be stated in the notice of the meeting, shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and as set forth in the notice of the meeting. If the Board of Directors fails so to determine the time, date and place of meeting, the annual meeting of stockholders shall be held at the principal office of the Corporation in the State of New York on the first Tuesday in April. If the date of the annual meeting shall fall upon a legal holiday, the meeting shall be held on the next succeeding business day. At each annual meeting, the stockholders entitled to vote shall elect, by a plurality vote, a Board of Directors and they may transact such other corporate business as shall be stated in the notice of the meeting.

SECTION 2. SPECIAL MEETINGS -- Special meetings of the stockholders for any purpose or purposes may be called by the Chairman of the Board, the President or the Secretary and shall be called by such persons at the request in writing of at least two Directors.

SECTION 3. VOTING -- Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation of the Corporation and these By-Laws may vote in person or by proxy executed in writing by the stockholder or by his or her duly authorized attorney-in-fact. If a quorum is present, the affirmative vote of a majority of the votes cast at a meeting of the stockholders by the holders of shares entitled to vote thereon shall be the act of the stockholders, unless the vote of a greater or lesser number of shares of stock is required by law, the Certificate of Incorporation of the Corporation or these Bylaws.


A complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is entitled to be present.

SECTION 4. QUORUM-- Except as otherwise required by law, by the Certificate of Incorporation of the Corporation or by these By-Laws, the presence, in person or by proxy, of stockholders holding shares of capital stock constituting a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote thereat, shall constitute a quorum at all meetings of the stockholders. In case a quorum shall not be present at any meeting, a majority in interest of the stockholders present in person or by proxy and entitled to vote thereat, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote shall be present. At any such adjourned meeting at which the requisite amount of stock entitled to vote shall be represented, any business may be transacted that might have been transacted at the meeting as originally noticed; but only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof.

SECTION 5. NOTICE OF MEETINGS -- Written notice, stating the place, date and time of the meeting, and the general nature of the business to be considered, shall be given to each stockholder entitled to vote thereat, at his or her address as it appears on the records of the Corporation, not less than ten nor more than sixty days before the date of the meeting. No business other than that stated in the notice shall be transacted at any meeting without the unanimous consent of all the stockholders entitled to vote thereat.

SECTION 6. ACTION WITHOUT MEETING -- Unless otherwise provided by the Certificate of Incorporation of the Corporation, any action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of shares of outstanding capital stock of the Corporation having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

ARTICLE III

DIRECTORS

SECTION 1. NUMBER -- The number of the directors of the Corporation shall initially be fixed at nine, provided however, that in accordance with Section 5.01(b) of the Stockholders' Agreement dated as of December 12, 1996, by and among the HFCP Investors (as defined therein), the Initial Management Investors (as defined therein), the Management Voting

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Trust (as defined therein), and the Director Investors (as defined therein), Young & Rubicam Holdings Inc., Young & Rubicam Inc., a New York corporation, the Corporation, and such other parties as may be added from time to time (the "Stockholders' Agreement"), in the event the Corporation fails to satisfy the Minimum Performance Standard (as defined in the Stockholders' Agreement), the size of the Board shall be increased to such number as is necessary, such that the HFCP Designees (as defined in the Stockholders' Agreement) then in office, plus additional individuals then designated by the HFCP Investors (as defined in the Stockholders' Agreement) would constitute a majority of the total number of directors which the Corporation would have if there were no vacancies (the "Whole Board").

SECTION 2. NEWLY CREATED DIRECTORSHIPS AND VACANCIES. Newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled in accordance with Article V of the Stockholders' Agreement, by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by the stockholders.

SECTION 4. REMOVAL -- Subject to Article V of the Stockholders' Agreement any director or directors may be removed with or without cause at any time by the affirmative vote of the holders of a majority of the voting power entitled to vote for the election of directors.

SECTION 5. COMMITTEES-- The Board of Directors may, by resolution or resolutions passed by a majority of the Whole Board, designate one or more committees, each committee to consist of one or more directors of the Corporation, selected in accordance with Section 5.02 of the Stockholders' Agreement.

Except as expressly set forth in Article IV of these By-laws with respect to certain powers of the Compensation Committee, no such committee shall have and or exercise any of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation with respect to the matters set forth in Article IV of these By-laws.

SECTION 6. MEETINGS -- The newly elected directors may hold their first meeting for the purpose of organization and the transaction of business, if a quorum be present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent of all the Directors.

Regular meetings of the Board of Directors may be held without notice at such places and times as shall be determined from time to time by resolution of the Board of Directors.

Special meetings of the Board of Directors may be called by the Chairman of the Board or the President, and shall be called by the Secretary on the written request of any two directors, on at least one day's notice to each director (except that notice to any director may be waived in writing by such director) and shall be held at such place or places as may be determined by the Board of Directors, or as shall be stated in the call of the meeting.

Unless otherwise restricted by the Certificate of Incorporation of the Corporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board

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of Directors, may participate in any meeting of the Board of Directors or any committee thereof by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

SECTION 7. QUORUM-- A majority of the Whole Board shall constitute a quorum for the transaction of business. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at the meeting which shall be so adjourned. Subject to the supermajority voting requirements set forth in Article IV hereof, the vote of the majority of the Directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless the Certificate of Incorporation of the Corporation or these By-Laws shall require the vote of a greater number.

SECTION 8. COMPENSATION -- The Joint Designees (as defined in the Stockholders' Agreement) but no other member of the Board of Directors, shall be compensated for their service as directors of the Corporation; provided, however, that expenses for attendance at meetings of the Board of Directors and committees of the Board of Directors shall be reimbursed for all members of the Board of Directors. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor.

SECTION 9. ACTION WITHOUT MEETING -- Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board of Directors or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or such committee.

ARTICLE IV

RESTRICTED ACTIVITIES

SECTION 1. RESTRICTIONS -- (a) Except as contemplated in Section 5.04(a) of the Stockholders' Agreement (unless otherwise defined herein, capitalized terms used in this Section shall have the meaning ascribed to them in the Stockholders' Agreement), without the approval (i) by the unanimous vote of all members of the Board of Directors present at a duly held meeting of the Board of Directors at which (A) all Management Designees and (B) at least one HFCP Designee are present, (ii) by the unanimous written consent of all the members of the Board of Directors (at a time when there is no more than one vacancy among the HFCP Designees, or the Management Designees, respectively) or
(iii) by each of (A) the majority vote of the Board of Directors at a duly held meeting of the Board of Directors, (B) the Management Voting Trust (as evidenced by a written consent) and (C) the HFCP Investors (as evidenced by a written consent), the Corporation will not, and will not permit any of its Subsidiaries to, take any of the following actions:

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(1) amend its certificate of incorporation, by-laws, or other organizational documents, or amend, terminate or waive any provision under, the Contribution Agreement, the Merger Agreements, the Special Compensation Arrangements or any Closing Agreement;

(2) declare, set aside, make or pay any dividend or other distribution in respect of its capital stock or other equity interests, or purchase or redeem, directly or indirectly, any shares of its capital stock or other equity interests (other than (x) the repurchase of Shares pursuant to Articles II, Ill and IV of the Stockholders' Agreement, (y) dividends by a Subsidiary of the Corporation to the Corporation or a Subsidiary of the Corporation and (z) dividends or other distributions made by any entity in which the Corporation or any Subsidiary owns a minority interest, made in the normal course of business, consistent with past practice);

(3) other than with respect to grant or exercise of the HFCP Options, the Roll-Over Options or the Executive Options, or pursuant to grants under the Restricted Stock Plan, issue, deliver or sell, or authorize the issuance, delivery or sale of, any shares of its capital stock of any class, any equity interest, or any Derivative Security, or any options, warrants, conversion or other rights to purchase any such shares, equity interests or Derivative Securities, or any securities convertible into or exchangeable for such shares, equity interests or Derivative Securities, or issue or authorize the issuance of any other security in respect of or in lieu of or in substitution for shares of its capital stock, equity interests or Derivative Securities, or enter into any agreements restricting the transfer of, or affecting the rights of holders of, shares of Common Stock, grant any preemptive or anti-dilutive rights to any holder of any class of securities of the Corporation, or grant registration rights with respect to any of the Corporation's securities;

(4) except for amounts available for draw under the Credit Agreement, incur any indebtedness for borrowed money, guarantee any such indebtedness or issue or sell any debt securities, in excess of $20 million in the aggregate, or (other than pursuant to the revolving credit facility under the Credit Agreement) prepay or refinance any indebtedness for borrowed money;

(5) engage in any Interested Party Transaction;

(6) except as contemplated by the capital expenditure budget approved pursuant to clause (14) of this Article IV, acquire any assets or properties for cash or otherwise for an amount in excess of $10 million in the aggregate in one year;

(7) replace the independent auditors of the Corporation or make any material change in any method of financial accounting or accounting practice, except for any such change required by reason of a concurrent change in generally accepted accounting principles;

(8) utilize, release or eliminate reserves that will have an impact on Proportionate EBITA in an amount in excess of $2 million in the aggregate during either the twelve month period ending on December 31, 1998 or the twelve month period ending December 31, 2000;

(9) sell or otherwise dispose of assets material to the Corporation and its Subsidiaries taken as a whole, including any operating group or line of business;

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(10) except with the approval of the Compensation Committee, increase by twenty percent or more the annual base compensation of any officer or key employee of the Corporation whose annual base compensation exceeded $250,000 in the preceding twelve months, or enter into or make any material change in any severance contract or arrangement with any such officer or key employee;

(11) make any material change in the Bonus Pool or the overall compensation structure of the Corporation and its Subsidiaries;

(12) consummate a complete liquidation or dissolution of the Corporation, a merger or consolidation (x) in which the Corporation is a constituent corporation or (y) with respect to which the shares of Common Stock would have the right to vote under applicable state law, a sale of all or substantially all of the Corporation's assets, or any similar business combination (provided, however, that nothing in this clause (12) shall prohibit the HFCP Investors from Transferring the Shares held by them in accordance with Articles II and III of the Stockholders' Agreement);

(13) enter into any transaction involving in excess of $1 million other than in the ordinary course of business;

(14) approve the annual capital expenditure budget of the Corporation and its Subsidiaries, taken as a whole;

(15) appoint a new Chief Executive Officer of the Corporation; or

(16) enter into any agreement (except the Stockholders' Agreement, the Merger Agreements and the Closing Agreements) with respect to the foregoing.

(b) Clauses (a)(i)(A) and (a)(iii)(B) of Section 1 of this Article IV shall not apply if the Corporation as of the date such approval would otherwise be required hereunder is not in compliance with the Minimum Performance Standard. Clause (15) does not apply to removal of an existing officer.

SECTION 2. TERM -- Upon the termination of the Stockholders' Agreement, this Article IV shall have no further force or effect.

ARTICLE V

OFFICERS

SECTION 1. ELECTION; QUALIFICATIONS -- As soon as practicable after each annual meeting of shareholders, the Board of Directors shall elect or appoint a Chairman of the Board, one or more Vice Chairmen, a President, one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers, including assistant officers, as the Board of Directors may from time to time deem advisable. No officer need be a director of the Corporation. Any two or more offices may be held by the same person, except the offices of President and Secretary.

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SECTION 2. TERM OF OFFICE; VACANCIES -- All officers shall be elected or appointed to hold office until the meeting of the Board of Directors following the next annual meeting of shareholders. Each officer shall hold office for such term, and until his or her successor has been elected or appointed and qualified unless he or she shall earlier resign, die, or be removed. Any vacancy occurring in any office, whether because of death, resignation or removal, with or without cause, or any other reason, shall be filled by the Board of Directors.

SECTION 3. REMOVAL; RESIGNATION. Any officer may be removed by the Board of Directors with or without cause. Any officer may resign his or her office at any time, such resignation to be made in writing and to take effect immediately or on any future date stated in such writing, without acceptance by the Corporation.

SECTION 4. POWERS AND DUTIES OF OFFICERS. Officers of the Corporation shall, unless otherwise provided by the Board of Directors, each have such powers and duties as generally pertain to their respective offices as well as such powers and duties as may be set forth in these By-Laws or may from time to time be specifically conferred or imposed by the Board of Directors. The President shall be the chief executive officer of the Corporation, unless otherwise designated by the Board of Directors.

SECTION 5. SHARES OF OTHER CORPORATIONS. Whenever the Corporation is the holder of shares of any other corporation, any right or power of the Corporation as such shareholder (including the attendance, acting and voting at shareholders' meetings and execution of waivers, consents, proxies or other instruments) may be exercised on behalf of the Corporation by the Chairman, any Vice Chairman, the President, any Executive Vice President, any Senior Vice President, Secretary or such other person as the Board of Directors may authorize from time to time.

SECTION 6. DELEGATION. In the event of the absence of any officer of the Corporation or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may at any time and from time to time delegate all or any part of the powers or duties of any officer to any other officer or officers or to any director or directors.

ARTICLE VI

TRANSFER RESTRICTIONS

SECTION 1. LIMITATIONS ON TRANSFERS. (a) Any Transfer of legal or beneficial ownership of Common Stock in breach of the Stockholders' Agreement shall be prohibited and be void ab initio, regardless of whether such Transfer has been recorded in the books of the Corporation and new certificates have been issued.

(b) No employee or agent of the Corporation shall record any prohibited Transfer, and the purported transferee of such a prohibited Transfer (the "Purported Transferee") shall not be recognized as a stockholder of the Corporation for any purpose whatsoever in respect of the Common Stock that is the subject of the prohibited Transfer. The Purported Transferee shall not be entitled, with respect to such stock, to any rights of a stockholder of the Corporation, including without any limitation, the right to vote such Common Stock or to receive dividends or distributions in respect thereof, if any.

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(c) All certificates representing Common Stock shall bear a legend to the effect that such Common Stock is subject to the restrictions set forth in this Article VI.

(d) The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law.

SECTION 2. TRANSFER. As used in this Article VI, the term "Transfer" shall mean the direct or indirect sale, transfer, assignment, pledge, hypothecation or other encumbrance or disposition of any shares (or any related voting trust certificates).

ARTICLE VII

MISCELLANEOUS

SECTION 1. CERTIFICATES OF STOCK -- A certificate of stock shall be issued to each stockholder certifying the number of shares owned by such stockholder in the Corporation. Certificates of stock of the Corporation shall be of such form and device as the Board of Directors may from time to time determine.

SECTION 2. LOST CERTIFICATES -- A new certificate of stock may be issued in the place of any certificate theretofore issued by the Corporation, alleged to have been lost or destroyed, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or such owner's legal representatives, to give the Corporation a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate, or the issuance of any such new certificate.

SECTION 3. TRANSFER OF SHARES -- The shares of stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the Board of Directors may designate, by whom they shall be canceled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer.

SECTION 4. STOCKHOLDERS RECORD DATE -- In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date: (1) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty nor less than ten days

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before the date of such meeting; (2) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than ten days from the date upon which the resolution fixing the record date is adopted by the Board of Directors; and (3) in the case of any other action, shall not be more than sixty days prior to such other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; (2) the record date for determining stockholders entitled to express consent to corporate action in writing without a meeting when no prior action of the Board of Directors is required by law, shall be the first day on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation in accordance with applicable law, or, if prior action by the Board of Directors is required by law, shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

SECTION 5. DIVIDENDS -- Subject to the provisions of the Certificate of Incorporation of the Corporation, the Board of Directors may, out of funds legally available therefor at any regular or special meeting, declare dividends upon stock of the Corporation as and when they deem appropriate. Before declaring any dividend there may be set apart out of any funds of the Corporation available for dividends, such sum or sums as the Board of Directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the Board of Directors shall deem conducive to the interests of the Corporation.

SECTION 6. SEAL -- The corporate seal of the Corporation shall be in such form as shall be determined by resolution of the Board of Directors. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise imprinted upon the subject document or paper.

SECTION 7. FISCAL YEAR -- The fiscal year of the Corporation shall be the calendar year unless otherwise determined by resolution of the Board of Directors.

SECTION 8. CHECKS -- All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, or agent or agents, of the Corporation, and in such manner as shall be determined from time to time by resolution of the Board of Directors.

SECTION 9. NOTICE AND WAIVER OF NOTICE -- Whenever any notice is required to be given under these By-Laws, personal notice is not required (except in the case of notices pursuant to Article III, Section 6), and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his or her address as it appears on the records of the Corporation,

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and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by law. Whenever any notice is required to be given under the provisions of any law, or under the provisions of the Certificate of Incorporation of the Corporation or of these By-Laws, a waiver thereof, in writing and signed by the person or persons entitled to said notice, whether before or after the time stated thereon, shall be deemed equivalent to such required notice.

ARTICLE VIII

AMENDMENTS

Subject to the approval required by Article IV hereof, these By-Laws may be altered, amended or repealed, or new By-laws may be adopted (a) by the affirmative vote of the holders of shares constituting a majority of the voting power of the Corporation, or (b) the Board of Directors by majority vote of those present at any meeting at which a quorum is present.

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Exhibit 3.4

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF
YOUNG & RUBICAM INC.

The name of the corporation is Young & Rubicam Inc. (the "Corporation"). The date of filing of the Corporation's original certificate of incorporation with the Secretary of State is October 17, 1996, which certificate of incorporation was amended and restated by the filing of an amended and restated certificate of incorporation with the Secretary of State on December 13, 1996 and further amended by the filing of a certificate of amendment with the Secretary of State on April 9, 1998. This Amended and Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware.

The Amended and Restated Certificate of Incorporation of the Corporation is hereby amended and restated to read as follows:

ARTICLE I - NAME

The name of the corporation (which is hereinafter referred to as the "Corporation") is:

Young & Rubicam Inc.

ARTICLE II - AGENT

The registered office of the Corporation is located at 1209 Orange Street, in the City of Wilmington, in the County of New Castle, in the State of Delaware. The name of its registered agent at that address is The Corporation Trust Company.

ARTICLE III - PURPOSE

The purposes for which the Corporation is formed are to engage in any lawful act or activity for which corporations may be organized and incorporated under the General Corporation Law of the State of Delaware.

ARTICLE IV - STOCK

Section 1. Authorized Stock. The aggregate number of shares which the Corporation shall have authority to issue is 260,00,000. 10,000,000 of said shares shall be of the par value of $0.01 per share, and shall be designated Preference Stock, and 250,000,000 of said shares shall be of the par value of $0.01 per share, and shall be designated Common Stock.

Section 2. Preference Stock. Subject to the limitations and in the manner provided by law, shares of the Preference Stock may be issued from time to time in series and, except as otherwise provided in Section 3 of this Article IV with respect to the initial series of the Preference Stock (the "Money Market Preferred Stock"), the Board of Directors of the Corporation is hereby authorized to establish and designate series of the Preference Stock in addition to the Money Market Preferred Stock, to fix the number of shares constituting each


series, and to fix the designations and the relative rights, preferences and limitations of the shares of each series and the variations in the relative rights, preferences and limitations as between series, and to increase and to decrease the number of shares constituting each series. Subject to the limitations and in the manner provided by law, the authority of the Board of Directors of the Corporation with respect to each series shall include but shall not be limited to the authority to determine the following:

(a) The designation of such series.

(b) The number of shares initially constituting such series.

(c) The increase, and the decrease to a number not less than the number of the outstanding shares of such series, of the number of shares constituting such series theretofore fixed.

(d) The rate or rates and the times at which dividends on the shares of such series shall be paid and whether or not such dividends shall be cumulative and, if such dividends shall be cumulative, the date or dates from and after which they shall accumulate; provided, however, that, if the stated dividends are not paid in full, the shares of all series of the Preference Stock ranking pari passu with the Money Market Preferred Stock (including the shares of the Money Market Preferred Stock) shall share ratably in the payment of dividends, including accumulations, if any, in accordance with the sums which would be payable on such shares if all dividends were declared and paid in full.

(e) Whether or not the shares of such series shall be redeemable and, if such shares shall be redeemable, the terms and conditions of such redemption, including but not limited to the date or dates upon or after which such shares shall be redeemable and the amount per share which shall be payable upon such redemption, which amount may vary under different conditions and at different redemption dates.

(f) The amount payable on the shares of such series in the event of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation; provided, however, that the holders of such shares shall be entitled to be paid, or to have set apart for payment, not less than $.01 per share before the holders of shares of the Common Stock or the holders of any other class or series of stock ranking junior to the Preference Stock as to rights on liquidation shall be entitled to be paid any amount or to have any amount set apart for payment; provided, further, that, if the amounts payable on liquidation are not paid in full, the shares of all series of the Preference Stock ranking pari passu with the Money Market Preferred Stock (including the shares of Money Market Preferred Stock) shall share ratably in any distribution of assets other than by way of dividends in accordance with the sums which would be payable in such distribution if all sums payable were discharged in full. A liquidation, dissolution or winding up of the Corporation, as such terms are used in this paragraph (f), shall not be deemed to be occasioned by or to include any consolidation or merger of the Corporation with or into any other corporation or other entity or corporations or other entities or a sale, lease or conveyance of all or a part of its assets.

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(g) Whether or not the shares of such series shall have voting rights, in addition to the voting rights provided by law and, if such shares shall have such voting rights, the terms and conditions thereof, including but not limited to the right of the holders of such shares to vote as a separate class either alone or with the holders of shares of one or more other series of Preference Stock and the right to have more than one vote per share.

(h) Whether or not a sinking fund shall be provided for the redemption of the shares of such series and, if such a sinking fund shall be provided, the terms and conditions thereof.

(i) Whether or not a purchase fund shall be provided for the shares of such series, and, if such a purchase fund shall be provided, the terms and conditions thereof.

(j) Whether or not the shares of such series shall have conversion privileges, and, if such shares shall have conversion privileges, the terms and conditions of conversion, including but not limited to any provision for the adjustment of the conversion rate or the conversion price.

(k) Any other relative rights, preferences and limitations.

Section 3. Money Market Preferred Stock. The initial series of the Preference Stock is hereby established, consisting initially of 50,000 shares and designated Money Market Preferred Stock. Subject to the limitations provided by law and to the provisions of Sections 1, 2 and 4 of this Article IV, the relative rights, preferences and limitations of the shares of the Money Market Preferred Stock are as follows:

(a) Dividends. The holders of Money Market Preferred Stock shall not be entitled to any dividends, except as set forth below. The holders of the Money Market Preferred Stock shall be entitled to receive, when and as declared by the Board of Directors of the Corporation, cash dividends at the Applicable Rate per share per annum, and no more, payable for each quarterly dividend period ending on December 31, March 31, June 30, and September 30 (each, a "Dividend Period") (to be paid on January 15, April 15, July 15 and October 15, respectively (the "Dividend Payment Dates"), commencing with the Dividend Period ending March 31, 1997). Dividends shall accrue and be cumulative with respect to shares issued in the merger (the "Merger") with Young & Rubicam Inc. (a New York corporation) (the "Predecessor") in exchange for shares of substantially identical shares of the Predecessor from December 12, 1996 (the "Initial Issue Date") and with respect to shares issued subsequent to the Merger, from the first day of the quarterly dividend period next succeeding the quarterly dividend period in which such shares are issued. Dividends on the Money Market Preferred Stock shall be paid in full for all prior dividend periods, and shall be paid or declared and set apart for payment in full for the current dividend period, before the payment of any dividends, other than dividends payable in shares of the Common Stock, on the Common Stock or any other class of stock ranking junior to the Money Market Preferred Stock as to dividends. Accumulations of dividends on the Money Market Preferred Stock shall bear interest at the Applicable Rate per annum.

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"Applicable Rate" means the rate per annum quoted by Bank of America National Trust and Savings Association, a national banking association ("B of A") at approximately 11:00 a.m. London time (or as soon thereafter as practicable) for the offering by B of A to leading banks in the London interbank market of dollar deposits having a term of three months, as in effect on the first business day of the applicable Dividend Period (or, in the case of the Dividend Periods ending December 31, 1996 and March 31, 1997, such rate as in effect on the Initial Issue Date), plus 250 basis points.

(b) Redemption. (1) The Corporation, at the option of its Board of Directors, may on or at any time and from time to time subsequent to December 12, 2001 redeem all or less than all of the shares of the Money Market Preferred Stock then outstanding at a redemption price per share of $115 (together with the amount of all dividends accrued and unpaid thereon to the date fixed for redemption); provided however, that no share of Money Market Preferred Stock shall be redeemed on or prior to the fifth anniversary of the date such share of Money Market Preferred Stock was issued.

(2) Notice of redemption shall be given by the Corporation by causing a notice thereof to be mailed to each holder of record of the Money Market Preferred Stock (as of the date of mailing) of the shares to be redeemed or as of a record date fixed for the determination of the holders entitled to such notice, addressed to such holder at his address appearing on the books of the Corporation or given by him to the Corporation for the purpose of notice, or, if no such address appears or is given, at the place where the principal office of the Corporation is located, not less than 30 or more than 90 days before the date fixed for redemption. Such notice of redemption shall set forth the date fixed for redemption, the redemption price, the shares, and the total number thereof, to be redeemed and the place (in the Borough of Manhattan, The City of New York), at which the stockholders may obtain payment of the redemption price upon the surrender of the certificates representing their shares. No defect in any such notice or in the mailing thereof shall affect the validity of the proceeding for the redemption of the shares so to be redeemed.

(3) On or after the date fixed for redemption and stated in such notice, each holder of shares called for redemption shall, upon surrender of certificates representing such shares to the Corporation at the place designated in such notice, be entitled to receive payment of the redemption price thereof. In case less than all of the shares represented by any such surrendered certificates are redeemed, a new certificate shall be issued representing the unredeemed shares.

(4) If, on or prior to the date fixed for redemption of any shares, the Corporation shall deposit with any bank or trust company organized under the laws of the United States or of the State of New York having an office in the Borough of Manhattan, The City of New York, and having capital, surplus and undivided profits aggregating at least $5,000,000, as a trust fund, a sum sufficient to redeem, on the date fixed for redemption thereof, the shares called for redemption, with irrevocable instructions and authority to the bank or trust company to give the notice of redemption thereof, if such notice shall not previously have been given by the Corporation, or to complete the giving of such notice if theretofore commenced, and to pay, on and after the date fixed for redemption (or, at the election of the Corporation, prior thereto) the redemption price of such shares to the respective holders upon the surrender of their certificates representing such shares, then, (i) from and after the date of such deposit (although prior to the date fixed for

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redemption), such shares shall be deemed to be redeemed and dividends thereon shall cease to accrue after the date fixed for redemption, and
(ii) from and after the date of such deposit, such shares shall be deemed to be no longer outstanding, and the holders thereof shall cease to be stockholders with respect to such shares, and shall have no rights with respect thereto except the right to receive from the bank or trust company (or from the Corporation) payment of the redemption price of such shares, without interest, upon the surrender of the certificates representing such shares. Any moneys so deposited by the Corporation and unclaimed at the end of six years from the date fixed for redemption shall, upon the request of the Corporation, be repaid to it, in which event, the persons entitled thereto shall look only to the Corporation for payment thereof and may apply for and receive said moneys, without interest, from the Corporation; provided, however, that, if the Corporation shall, as required or permitted by law, pay to any state authority under applicable escheat or unclaimed property laws any unclaimed moneys so repaid to the Corporation, said persons shall thereafter look only to such state authorities for payment thereof.

(5) Shares of the Money Market Preferred Stock so redeemed may be reissued as shares of such series or as shares of such other series of the Preference Stock as shall be determined by the Board of Directors of the Corporation.

(c) Conversion. Shares of Money Market Preferred Stock shall not be convertible into any other shares of capital stock of the Corporation.

(d) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of the Money Market Preferred Stock shall be entitled to receive from the assets of the Corporation the sum of $115 per share together with the amount of all dividends accrued and unpaid thereon to the date that payment is made available to such holders, before the payment or declaration and setting apart for payment of any amount for, or the distribution of any assets of the Corporation to, the holders of shares of the Common Stock or the holders of shares of any other class or series of stock ranking junior to the Money Market Preferred Stock in connection with such liquidation, dissolution or winding up.

(e) Voting. The holders of shares of the Money Market Preferred Stock shall have the right to vote, together with the holders of all the outstanding shares of Common Stock and not as a class, except as otherwise provided herein or as required by the Delaware General Corporation Law, on all matters on which holders of Common Stock shall have the right to vote. The holders of shares of Money Market Preferred Stock shall have the right to cast one-tenth of one vote for each share of Money Market Preferred Stock held by them.

Section 4. Except as otherwise provided by law, in Section 3(e) of this Article IV or by the resolution or resolutions providing for the issue of any series of Preference Stock, the holders of outstanding shares of Common Stock shall have the exclusive right to vote for the

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election of directors and for all other purposes, each holder of record of shares of Common Stock being entitled to one vote for each share of Common Stock standing in such holder's name on the books of the Corporation.

ARTICLE V - ELECTION OF DIRECTORS

Unless and except to the extent that the By-Laws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot.

ARTICLE VI - AMENDMENT OF BY-LAWS

In furtherance and not in limitation of the powers conferred by law, the Board of Directors of the Corporation (the "Board") is expressly authorized and empowered to adopt, amend and repeal the By-Laws of the Corporation by a majority vote at any regular or special meeting of the Board or by written consent, subject to the power of the stockholders of the Corporation to amend or repeal any By-Laws made by the Board. Notwithstanding any other provision of this Certificate of Incorporation or the By-Laws (and notwithstanding that a lesser percentage may be specified by law), the provisions of Article II, Sections 1, 2 and 5, Article III, Section 1, and Article VII of the By-Laws may not be amended or repealed, nor may any By-Law provision inconsistent therewith be adopted, by the stockholders of the Corporation unless such action is approved by the affirmative vote of the holders of not less than eighty percent (80%) of the voting power of all of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for purposes of this Article VI as a single class.

ARTICLE VII - AMENDMENT OF CHARTER

The Corporation reserves the right at any time from time to time to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, and any other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted, in the manner now or hereafter prescribed by law; and all rights, preferences and privileges of whatsoever nature conferred upon stockholders, directors or any other persons whomsoever by and pursuant to this Certificate of Incorporation in its present form or as hereafter amended are granted subject to the right reserved in this Article. Notwithstanding any other provisions of this Certificate of Incorporation or the By-Laws of the Corporation (and notwithstanding that a lesser percentage may be specified by law), the provisions of this Article VII, Article VI, Article VIII, Article IX, Section 1 of Article X, Article XI, Article XII, Article XIII and Article XIV hereof may not be amended or repealed, nor may any Certificate of Incorporation provision inconsistent therewith be adopted, by the stockholders of the Corporation unless such action is approved by the affirmative vote of the holders of not less than eighty percent (80%) of the voting power of all of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for purposes of this Article VII as a single class.

ARTICLE VIII - BOARD OF DIRECTORS

Section 1. Number. The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors consisting of not fewer than five (5) nor more than fifteen (15) directors (exclusive of directors referred to in the following paragraph), the exact

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number to be determined from time to time by resolution adopted by affirmative vote of a majority of such directors then in office. Upon the filing of this Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, the directors shall be divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of one-third of the total number of directors determined by the Board pursuant to this Section 1. Class I directors shall serve for an initial term ending at the annual meeting of stockholders held in 1999, Class II directors for an initial term ending at the annual meeting of stockholders held in 2000 and Class III directors for an initial term ending at the annual meeting of stockholders held in 2001. At each annual meeting of stockholders beginning in 1999, successors to the directors in the class whose term expires at that annual meeting shall be elected for a three-year term. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any additional director of any class elected to fill a vacancy resulting from an increase in such class shall hold office for the remaining term of that class, but in no case will a decrease in the number of directors shorten the term of any incumbent director. A director shall hold office until the annual meeting for the year in which his or her term expires and until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, retirement, disqualification or removal from office.

Notwithstanding the foregoing, whenever the holders of any one or more classes or series of Preference Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the number of such directors and the election, term of office, filling of vacancies and other features of such directorships shall be governed by the provisions of Article IV of this Certificate of Incorporation and any resolution or resolutions adopted by the Board pursuant thereto, and such directors shall not be divided into classes unless expressly so provided therein.

Section 2. Removal. Subject to the rights of the holders of any one or more classes or series of Preference Stock issued by the Corporation, any director, or the entire Board, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of not less than eighty percent (80%) of the voting power of all of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for purposes of this sentence as a single class. Any vacancy in the Board that results from an increase in the number of directors may be filled by a majority of the directors then in office, provided that a quorum is present, and any other vacancy may be filled only by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall hold office for the remaining term of his or her predecessor.

ARTICLE IX - STOCKHOLDER ACTION

No action required to be taken or which may be taken at any annual or special meeting of stockholders of the Corporation may be taken by stockholders of the Corporation except at such a meeting of stockholders.

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ARTICLE X - LIABILITY OF DIRECTORS & OFFICERS, ETC.

Section 1. Elimination of Certain Liability of Directors. A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit.

Section 2. Indemnification and Insurance.

(a) Right to indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, trustee, partner, member, employee or agent of another corporation or of a partnership, limited liability company, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, trustee, partner, member, employee or agent or in any other capacity while serving as a director, officer, trustee, partner, member, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended (but, in the case of any such amendment, to the fullest extent permitted by law, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including, without limitation, attorneys' fees, judgments, fines, amounts paid or to be paid in settlement, and excise taxes or penalties arising under the Employee Retirement Income Security Act of 1974) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the General Corporation Law of the State of Delaware requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise, but no bond or other security shall be required. The Corporation may, by action of the

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Board, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers.

(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Corporation (including its Board, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

(c) Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, By-law, agreement, vote of stockholders or disinterested directors or otherwise.

(d) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, trustee, partner, member, employee or agent of the Corporation or another corporation, partnership, limited liability company, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware.

ARTICLE XI - ISSUANCE OF STOCK AND RIGHTS

The Board shall have authority to authorize the issuance, from time to time without any vote or other action by the stockholders, of any or all shares of stock of the Corporation of any class at any time authorized, any securities convertible into or exchangeable for any such shares so authorized, and any warrant, option or right to purchase, subscribe for or otherwise acquire, shares of stock of the Corporation for any such consideration and on such terms as the Board from time to time in its discretion lawfully may determine, which terms and conditions may include, without limitation, restrictions or conditions that preclude or limit the exercise, transfer or receipt thereof or that invalidate or void any such securities, warrants, options or rights; provided, however, that the consideration for the issuance of shares of stock of the Corporation having par value shall not be less than such par value. Stock so issued, for

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which the consideration has been paid to the Corporation, shall be fully paid stock, and the holders of such stock shall not be liable to any further call or assessments thereon. Nothing in this Article XI shall be interpreted to limit the authority of the Board under the Delaware General Corporation Law or under any other provision of this Certificate of Incorporation, to authorize the issuance of shares, warrants, options or rights or other securities or to take any other action.

ARTICLE XII - CONSIDERATION OF OTHER CONSTITUENCIES

In addition to any other considerations which the Board may lawfully take into account in determining whether to take or to refrain from taking corporate action on any matter, including proposing any matter to the stockholders of the Corporation, the Board may, but shall not be obligated to, take into account the interests of clients or other customers, creditors, current and retired employees and other constituencies of the Corporation and its subsidiaries and the effect upon communities in which the Corporation and its subsidiaries do business.

ARTICLE XIII - SHAREHOLDER PROPOSAL AND NOMINATION PROCEDURES

The By-Laws of the Corporation may establish procedures regulating the submission by stockholders of nominations and proposals for consideration at meetings of stockholders of the Corporation.

ARTICLE XIV - BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS

The Corporation shall be governed in all manner and respects by the provisions of Section 203 of the Delaware General Corporation Law ("Section 203"); provided, however, that in no case shall Hellman & Friedman Capital Partners III, L.P., a California limited partnership, H&F Orchard Partners III, L.P., a California limited partnership, H&F International Partners III, L.P., a California limited partnership, or any successor to all or substantially all of their assets, or any affiliate thereof (collectively, "H&F Investors"), or any person who is a Transferee (as defined below) of the H&F Investors, regardless of the total percentage of the Corporation's Common Stock or other voting stock owned by the H&F Investors or such person, be deemed an "interested stockholder" for any purpose under Section 203 whatsoever. As used in this Article XIV, the terms "interested stockholder", "owned", "person" and "voting stock" shall have the meanings ascribed to such terms in Section 203(c) of the Delaware General Corporation Law, and the term "Transferee" shall mean any person to which any H&F Investor sells, distributes or otherwise transfers Common Stock, or other voting stock of the Corporation, provided that (i) the transfer to such Transferee either is not restricted under, or occurs in compliance with, the transfer restrictions set forth in Articles II and III of the Amended and Restated Stockholders' Agreement dated as of April __, 1998 by and among the H&F Investors, the Management Investors and the Management Voting Trust (as such terms are defined therein), such additional signatories as may be deemed added from time to time pursuant thereto, and the Company (the "Stockholders' Agreement"), and (ii) such Transferee becomes a party to the Stockholders' Agreement if required thereby.

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IN WITNESS WHEREOF, Young & Rubicam Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by _________________, its
[title], and attested by ____________________, its [secretary], this __ day of _________, 1998.

By: _____________________________ Name:


Title:

ATTEST:

By: ________________________
Name:
Title:

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Exhibit 3.5

AMENDED AND RESTATED BY-LAWS

of

YOUNG & RUBICAM INC.


ARTICLE I

OFFICES

SECTION 1. REGISTERED OFFICE -- The registered office of Young & Rubicam Inc. (the "Corporation") is located at 1209 Orange Street, in the City of Wilmington, in the County of New Castle, in the State of Delaware. The name of its registered agent at that address is The Corporation Trust Company.

SECTION 2. OTHER OFFICES -- The Corporation may have other offices, either within or without the State of Delaware, at such place or places as the Board of Directors may from time to time select or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 1. ANNUAL MEETINGS -- Annual meetings of stockholders for the election of directors, and for such other business as may be stated in the notice of the meeting, shall be held at such place, either within or without the State of Delaware, and at such time and date as the Board of Directors, by resolution, shall determine and as set forth in the notice of the meeting. If the Board of Directors fails so to determine the time, date and place of meeting, the annual meeting of stockholders shall be held at the principal office of the Corporation in the State of New York on the first Tuesday in June. If the date of the annual meeting shall fall upon a legal holiday, the meeting shall be held on the next succeeding business day. At each annual meeting, the stockholders entitled to vote shall elect directors by a plurality vote, in accordance with Article VIII of the Certificate of Incorporation, and the stockholders may transact such other corporate business as shall be stated in the notice of the meeting.

SECTION 2. SPECIAL MEETINGS -- Except as provided in the Certificate of Incorporation, special meetings of the stockholders may be called only on the order of the Chairman of the Board or the Board of Directors and shall be held at such date, time and place as may be specified by such order. The business permitted to be conducted at any special meeting of the stockholders is limited to the purpose or purposes specified by such order.

SECTION 3. VOTING -- Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation of the Corporation and these By-Laws may vote in person or by proxy executed in writing by the stockholder or by his or her duly authorized attorney-in-fact. If a quorum is present, the affirmative vote of a majority of the votes cast at a meeting of the stockholders by the holders of shares entitled to vote thereon shall be the act of


the stockholders, unless the vote of a greater or lesser number of shares of stock is required by law, the Certificate of Incorporation of the Corporation or these Bylaws.

A complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, with the address of each, and the number of shares held by each, shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is entitled to be present.

SECTION 4. QUORUM -- Except as otherwise required by law, by the Certificate of Incorporation of the Corporation or by these By-Laws, the presence, in person or by proxy, of stockholders holding shares of capital stock constituting a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote thereat, shall constitute a quorum at all meetings of the stockholders. In case a quorum shall not be present at any meeting, a majority in interest of the stockholders present in person or by proxy and entitled to vote thereat, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock entitled to vote shall be present. At any such adjourned meeting at which the requisite amount of stock entitled to vote shall be represented, any business may be transacted that might have been transacted at the meeting as originally noticed; but, unless the Board of Directors fixes a new record date, only those stockholders entitled to vote at the meeting as originally noticed shall be entitled to vote at any adjournment or adjournments thereof.

SECTION 5. NOTICE OF MEETINGS -- Written notice of all meetings of the stockholders shall be mailed or delivered to each stockholder not less than ten nor more than sixty days before the meeting. The notice or an accompanying document shall identify the business to be transacted at the meeting as determined by the Board of Directors and, if directors are to be elected, the nominees therefor proposed by the Board of Directors.

Other business may be transacted at the annual meeting (but not at any special meeting), only if the Secretary of the Corporation has received from the sponsoring stockholder (a) not less than ninety nor more than one hundred twenty days before the first Tuesday in June (or, if the Board of Directors has designated another date for the annual meeting pursuant to Section 1 of this Article II, not less than ninety nor more than one hundred twenty days before such other date or, if such other date has not been publicly disclosed or announced at least one hundred five days in advance, then not less than fifteen days after such initial public disclosure or announcement) a written notice setting forth (i) as to each matter the stockholder proposes to bring before the annual meeting, a brief description of the proposal desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business, (iii) the class and number of shares which are owned beneficially and of record by the stockholder on the date of such stockholder's notice and (iv) any material interest of the stockholder in such proposal, and (b) not more than ten days after receipt by the sponsoring stockholder of a written request from the Secretary, such additional information as the Secretary

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may reasonably require. Notwithstanding anything in these By-Laws to the contrary, no business shall be brought before or conducted at an annual meeting except in accordance with the provisions of this Section 5 of Article II. The officer of the Corporation or other person presiding over the annual meeting shall, if the facts so warrant, determine and declare to the meeting that business was not properly brought before the meeting in accordance with the provisions of this Section 5 of Article II and, if he or she should so determine, such officer shall so declare to the meeting and any business so determined to be not properly brought before the meeting shall not be transacted.

Candidates for election to the Board of Directors of the Corporation (other than nominees proposed by the Board of Directors) may be nominated at the annual meeting (but not at any special meeting), only if the Secretary of the Corporation has received from the nominating stockholder (a) not less than ninety nor more than one hundred twenty days before the first Tuesday in June (or, if the Board of Directors has designated another date for the annual meeting pursuant to Section 1 of this Article II, not less than ninety nor more than one hundred twenty days before such other date or, if such other date has not been publicly disclosed or announced at least one hundred five days in advance, then not less than fifteen days after such initial public disclosure or announcement) a written notice setting forth (i) with respect to each person whom such stockholder proposes to nominate for election or re-election as a director, all information relating to such person that would be required to be disclosed in solicitations of proxies for election of directors, or would otherwise be required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, if such Regulation 14A were applicable (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected) or any successor regulation or statute, (ii) the name and address, as they appear on the Corporation's books, of the stockholder proposing such business and (iii) the class and number of shares which are owned beneficially and of record by the stockholder on the date of such stockholder's notice, and (b) not more than ten days after receipt by the nominating stockholder of a written request from the Secretary, such additional information as the Secretary may reasonably require. Notwithstanding anything in these By-Laws to the contrary, no person shall be eligible for election as a director except in accordance with the provisions of this Section 5 of Article II. The officer of the Corporation or other person presiding over the annual meeting shall, if the facts so warrant, determine and declare to the meeting that a nomination was not made in accordance with the provisions of this Section 5 of Article II and, if he or she should so determine, such officer shall so declare to the meeting and any such defective nomination shall be disregarded.

ARTICLE III

DIRECTORS

SECTION 1. NUMBER -- Subject to the provisions of the Certificate of Incorporation, the number of directors of the Corporation shall initially be fixed at nine and thereafter shall be determined from time to time by resolution adopted by affirmative vote of a majority of such directors then in office.

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SECTION 2. COMMITTEES -- The Board of Directors may, by resolution or resolutions passed by a majority of the entire Board of Directors, designate one or more committees, each committee to consist of one or more directors of the Corporation.

SECTION 3. MEETINGS -- The Board of Directors may hold an annual meeting for the purpose of organization and the transaction of business, if a quorum be present, immediately after the annual meeting of the stockholders; or the time and place of such meeting may be fixed by consent of all the directors.

Regular meetings of the Board of Directors or any committee may be held without notice at such places and times as shall be determined from time to time by resolution of the Board of Directors or such committee, respectively.

Special meetings of the Board of Directors may be called by the Chairman of the Board or the President, and shall be called by the Secretary on the written request of any two directors, on at least one day's notice to each director (except that notice to any director may be waived in writing by such director) and shall be held at such place or places as may be determined by the Board of Directors, or as shall be stated in the call of the meeting.

Special meetings of a committee of the Board of Directors may be called by the chairman of the committee, and shall be called by the secretary of the committee on the written request of any two members, on at least one day's notice to each member (except that notice to any member may be waived in writing by such member) and shall be held at such place or places as may be determined by the committee, or as shall be stated in the call of the meeting.

Unless otherwise restricted by the Certificate of Incorporation of the Corporation or these By-Laws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in any meeting of the Board of Directors or any committee thereof by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

SECTION 4. QUORUM -- A majority of the entire Board of Directors or a majority of an entire committee shall constitute a quorum of the Board of Directors or such committee for the transaction of business. If at any meeting of the Board of Directors or a committee there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at the meeting which shall be so adjourned. The vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors unless the Certificate of Incorporation of the Corporation or these By-Laws shall require the vote of a greater number.

SECTION 5. COMPENSATION -- The directors shall receive such compensation for their services as may be prescribed by the Board of Directors. Expenses for attendance at meetings of the Board of Directors and committees of the Board of Directors shall be reimbursed for all members of the Board of Directors. Nothing herein contained shall be

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construed to preclude any director from serving the Corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor.

SECTION 6. ACTION WITHOUT MEETING -- Any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent thereto is signed by all members of the Board of Directors or of such committee, as the case may be, and such written consent is filed with the minutes of proceedings of the Board of Directors or such committee.

ARTICLE IV

OFFICERS

SECTION 1. ELECTION; QUALIFICATIONS -- As soon as practicable after each annual meeting of shareholders, the Board of Directors shall elect or appoint a Chairman of the Board, one or more Vice Chairmen, a President, one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a Secretary, a Treasurer, and such other officers, including assistant officers, as the Board of Directors may from time to time deem advisable. No officer need be a director of the Corporation. Any two or more offices may be held by the same person, except the offices of President and Secretary.

SECTION 2. TERM OF OFFICE; VACANCIES -- All officers shall be elected or appointed to hold office until the meeting of the Board of Directors following the next annual meeting of stockholders. Each officer shall hold office for such term, and until his or her successor has been elected or appointed and qualified unless he or she shall earlier resign, die, or be removed. Any vacancy occurring in any office, whether because of death, resignation or removal, with or without cause, or any other reason, shall be filled by the Board of Directors.

SECTION 3. REMOVAL; RESIGNATION. Any officer may be removed by the Board of Directors with or without cause. Any officer may resign his or her office at any time, such resignation to be made in writing and to take effect immediately or on any future date stated in such writing, without acceptance by the Corporation.

SECTION 4. POWERS AND DUTIES OF OFFICERS. Officers of the Corporation shall, unless otherwise provided by the Board of Directors, each have such powers and duties as generally pertain to their respective offices as well as such powers and duties as may be set forth in these By-Laws or may from time to time be specifically conferred or imposed by the Board of Directors. The Board of Directors shall designate either the Chairman of the Board or the President as the chief executive officer of the Corporation.

SECTION 5. SHARES OF OTHER CORPORATIONS. Whenever the Corporation is the holder of shares of any other corporation, any right or power of the Corporation as such shareholder (including the attendance, acting and voting at shareholders' meetings and execution of waivers, consents, proxies or other instruments) may be exercised on behalf of the Corporation by the Chairman, any Vice Chairman, the President, any Executive Vice President, any Senior Vice President, the Secretary or such other person as the Board of Directors may authorize from time to time.

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SECTION 6. DELEGATION. In the event of the absence of any officer of the Corporation or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may at any time and from time to time delegate all or any part of the powers or duties of any officer to any other officer or officers or to any director or directors.

ARTICLE V

TRANSFER RESTRICTIONS

Any direct or indirect sale, transfer, assignment, pledge, hypothecation or other encumbrance or disposition (a "Transfer") of legal or beneficial ownership of any stock heretofore or hereafter issued and sold by the Corporation pursuant to Regulation S under the Securities Act of 1933, as amended (the "Securities Act"), may be made only (i) pursuant to an effective registration statement under the Securities Act or (ii) pursuant to a transaction that is exempt from, or not subject to, the registration requirements of the Securities Act. Neither the Corporation nor any employee or agent of the Corporation shall record any Transfer prohibited by the preceding sentence, and the purported transferee of such a prohibited Transfer (the "Purported Transferee") shall not be recognized as a securityholder of the Corporation for any purpose whatsoever in respect of the security or securities that are the subject of the prohibited Transfer. The Purported Transferee shall not be entitled, with respect to such securities, to any rights of a securityholder of the Corporation, including without limitation, in the case of securities that are Common Stock, the right to vote such Common Stock or to receive dividends or distributions in respect thereof, if any. All certificates representing securities subject to the transfer restrictions set forth in this Article V shall bear a legend to the effect that the securities represented by such certificates are subject to such restrictions, unless and until the Company determines in its sole discretion that such legend may be removed consistent with applicable law.

ARTICLE VI

MISCELLANEOUS

SECTION 1. CERTIFICATES OF STOCK -- A certificate of stock shall be issued to each stockholder certifying the number of shares owned by such stockholder in the Corporation. Certificates of stock of the Corporation shall be in such form as the Board of Directors may from time to time determine.

SECTION 2. LOST CERTIFICATES -- A new certificate of stock may be issued in the place of any certificate theretofore issued by the Corporation, alleged to have been lost or destroyed, and the Board of Directors may, in its discretion, require the owner of the lost or destroyed certificate, or such owner's legal representatives, to give the Corporation a bond, in such sum as they may direct, not exceeding double the value of the stock, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss of any such certificate, or the issuance of any such new certificate.

SECTION 3. TRANSFER OF SHARES -- The shares of stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock and

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transfer books and ledgers, or to such other person as the Board of Directors may designate, by whom they shall be canceled, and new certificates shall thereupon be issued. A record shall be made of each transfer and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer.

SECTION 4. STOCKHOLDERS RECORD DATE -- In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors and which record date: (1) in the case of determination of stockholders entitled to vote at any meeting of stockholders or adjournment thereof, shall, unless otherwise required by law, not be more than sixty nor less than ten days before the date of such meeting; and (2) in the case of any other action, shall not be more than sixty days prior to such other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

SECTION 5. DIVIDENDS -- Subject to the provisions of the Certificate of Incorporation of the Corporation, the Board of Directors may, out of funds legally available therefor at any regular or special meeting, declare dividends upon stock of the Corporation as and when they deem appropriate. Before declaring any dividend there may be set apart out of any funds of the Corporation available for dividends, such sum or sums as the Board of Directors from time to time in their discretion deem proper for working capital or as a reserve fund to meet contingencies or for equalizing dividends or for such other purposes as the Board of Directors shall deem conducive to the interests of the Corporation.

SECTION 6. SEAL -- The corporate seal of the Corporation shall be in such form as shall be determined by resolution of the Board of Directors. Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise imprinted upon the subject document or paper.

SECTION 7. FISCAL YEAR -- The fiscal year of the Corporation shall be the calendar year unless otherwise determined by resolution of the Board of Directors.

SECTION 8. CHECKS -- All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, or agent or agents, of the Corporation, and in such manner as shall be determined from time to time by resolution of the Board of Directors.

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SECTION 9. NOTICE AND WAIVER OF NOTICE -- Whenever any notice is required to be given under these By-Laws, personal notice is not required (except in the case of notices pursuant to Article III, Section 3), and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his or her address as it appears on the records of the Corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by law. Whenever any notice is required to be given under the provisions of any law, or under the provisions of the Certificate of Incorporation of the Corporation or of these By-Laws, a waiver thereof, in writing and signed by the person or persons entitled to said notice, whether before or after the time stated thereon, shall be deemed equivalent to such required notice.

ARTICLE VII

AMENDMENTS

In furtherance and not in limitation of the powers conferred by law, the Board of Directors of the Corporation is expressly authorized and empowered to adopt, amend and repeal the By-Laws of the Corporation by a majority vote at any regular or special meeting of the Board of Directors or by written consent, subject to the power of the stockholders of the Corporation to amend or repeal any By-Laws made by the Board of Directors. Notwithstanding any other provisions of the Certificate of Incorporation or the By-Laws (and notwithstanding that a lesser percentage may be specified by law), the provisions of Article II, Sections 1, 2 and 5, Article III, Section 1, and this Article VII of the By-Laws may not be amended or repealed, nor may any By-Law provision inconsistent herewith or therewith be adopted, by the stockholders of the Corporation unless such action is approved by the affirmative vote of the holders of not less than eighty percent (80%) of the voting power of all of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for purposes of this Article VII as a single class.

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Exhibit 4.2


YOUNG & RUBICAM INC.

AND

THE BANK OF NEW YORK


Rights Agent

Rights Agreement

Dated as of April __, 1998



TABLE OF CONTENTS

Section                                                                     Page
-------                                                                     ----

1     Certain Definitions...................................................   1

2     Appointment of Rights Agent...........................................   7

3     Issue of Right Certificates...........................................   7

4     Form of Right Certificates............................................   9

5     Countersignature and Registration.....................................   9

6     Transfer, Split Up, Combination and Exchange of
      Right Certificates; Mutilated, Destroyed, Lost or
      Stolen Right Certificates.............................................  10

7     Exercise of Rights; Purchase Price; Expiration Date of Rights.........  11

8     Cancellation of Right Certificates....................................  13

9     Reservation and Availability of Capital Stock.........................  13

10    Preferred Share Record Date...........................................  15

11    Adjustment of Purchase Price, Number of Shares or
      Number of Rights......................................................  15

12    Certification of Adjusted Purchase Price or Number of Shares..........  23

13    Consolidation, Merger or Sale or Transfer of Assets
      or Earning Power......................................................  24

14    Fractional Rights and Fractional Shares...............................  27

15    Rights of Action......................................................  28

16    Agreement of Right Holders............................................  29

17    Right Certificate Holder Not Deemed a Stockholder.....................  30

18    Concerning the Rights Agent...........................................  30

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Section                                                                     Page
-------                                                                     ----

19    Merger or Consolidation or Change of Name of Rights Agent.............  30

20    Duties of Rights Agent................................................  31

21    Change of Rights Agent................................................  34

22    Issuance of New Right Certificates....................................  35

23    Redemption............................................................  35

24    Exchange..............................................................  36

25    Notice of Certain Events..............................................  37

26    Notices...............................................................  38

27    Supplements and Amendments............................................  39

28    Successors............................................................  40

29    Benefits of this Agreement............................................  40

30    Severability..........................................................  40

31    Determination and Actions by the Board of Directors, etc..............  40

32    Governing Law.........................................................  41

33    Counterparts..........................................................  41

34    Descriptive Headings..................................................  41

Exhibit A Form of Certificate of Designations

Exhibit B Form of Right Certificate

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RIGHTS AGREEMENT

This Rights Agreement, dated as of April __, 1998, between Young & Rubicam Inc., a Delaware corporation (the "Company"), and The Bank of New York, a New York banking corporation, as Rights Agent (the "Rights Agent").

W I T N E S S E T H:

WHEREAS, the board of directors of the Company (the "Board of Directors") has authorized and declared a dividend of one right (a "Right") for each share of Common Stock of the Company outstanding immediately prior to the date and time of consummation of the Company's initial public offering of shares of Common Stock (the "Record Date"), and has further authorized and directed the issuance of one Right (subject to adjustment) with respect to each share of Common Stock that shall become outstanding (whether originally issued or delivered from the Company's treasury) between the Record Date and the earlier of the Distribution Date and the Expiration Date, including any shares of Common Stock issued in connection with the initial public offering of the shares of Common Stock, each Right initially representing the right to purchase one one-hundredth of a Preferred Share upon the terms and subject to the conditions hereinafter set forth;

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:

Section 1. Certain Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated:

(a) "Acquiring Person" shall mean (i) any Person (other than the H&F Investors and other than any Permitted H&F 15% Transferee), who or which, together with all Affiliates and Associates of such Person, shall be or become the Beneficial Owner of fifteen percent (15%) or more of the then outstanding shares of Common Stock (other than as a result of an Approved Offer), (ii) the H&F Investors, if after the Record Date, the H&F Investors, together with all of their Affiliates and Associates, shall acquire Beneficial Ownership of any additional shares of Common Stock, such that following the acquisition of such additional shares of Common Stock, (A) the H&F Investors beneficially own fifteen percent (15%) or more of the then outstanding shares of Common Stock, and, (B) if the Management Voting Trust is then in existence, following the acquisition of such additional shares of Common Stock, the H&F Investors beneficially own a greater percentage of the Diluted Shares Outstanding than the percentage of the Diluted Shares Outstanding subject to the Management Voting Trust at the time of the acquisition of such additional shares of Common Stock (it being understood that neither sales by, nor termination of, the Management Voting Trust shall result in the H&F Investors becoming an Acquiring Person pursuant to this clause (ii) absent a subsequent acquisition of beneficial ownership of additional shares of Common Stock by the H&F Investors or any of their Affiliates or


Associates) or (iii) any person who or which is a Permitted H&F 15% Transferee, if contemporaneously with or subsequent to the Transfer from the H&F Investors that resulted in such Person becoming a Permitted H&F 15% Transferee, such Permitted H&F 15% Transferee, together with all of its Affiliates and Associates, shall purchase or otherwise become the Beneficial Owner of any additional shares of Common Stock; provided, however, that (w) a Person shall not become an Acquiring Person if such Person, together with all of its Affiliates and Associates, shall become the Beneficial Owner of fifteen percent (15%) or more of the then outstanding shares of Common Stock (in the case of clause (i) above) as a result of a reduction in the number of shares of Common Stock outstanding due to the repurchase of shares of Common Stock by the Company, unless and until such time as such Person shall purchase or otherwise become (as a result of actions taken by such Person or any of its Affiliates or Associates) the Beneficial Owner of any additional shares of Common Stock; (x) "Acquiring Person" shall not include any Company Entity; and (y) "Acquiring Person" shall not include any Person who or which, together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of fifteen percent (15%) or more of the then outstanding shares of Common Stock (in the case of clause (i) above) or any additional shares of Common Stock (in the case of clauses (ii) and (iii) above) but who acquired beneficial ownership of shares of Common Stock inadvertently, and such Person promptly (and in any event within ten (10) Business Days after being so requested by the Company) enters into an irrevocable commitment satisfactory to the Board of Directors promptly (and in any event within twenty (20) Business Days or such shorter period as shall be determined by the Board of Directors) to divest, and thereafter promptly divests as required by such commitment, sufficient shares of Common Stock so that such Person, together with all of its Affiliates and Associates, ceases to be a Beneficial Owner of fifteen percent (15%) or more of the then outstanding shares of Common Stock (in the case of clause (i) above) or such additional shares of Common Stock (in the case of clauses (ii) and (iii) above).

(b) "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect on the date of this Agreement.

(c) "Approved Offer" shall mean a tender or exchange offer for all outstanding shares of Common Stock which is at a price and on terms approved, prior to the acceptance for payment of shares under such tender or exchange offer, by the Board of Directors.

(d) "Associate" shall include (x) any Person included in the definition of "Associate" in Rule 12b-2 under the Exchange Act, as in effect on the date of this Agreement, and (y) any Affiliate of any such Person.

(e) A Person shall be deemed the "Beneficial Owner" of, and to have "beneficial ownership" of, and to "beneficially own" any securities:

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(i) which such Person or any of such Person's Affiliates or Associates beneficially owns or may be deemed to beneficially own, directly or indirectly (as determined pursuant to Rule 13d-3 or 13d-5 under the Exchange Act as in effect on the date of this Agreement);

(ii) which such Person or any of such Person's Affiliates or Associates has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or only after the passage of time or the satisfaction of one or more conditions or both) pursuant to any agreement (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), arrangement or understanding (whether in writing or not), or upon the exercise of conversion rights, exchange rights, rights (other than the Rights), warrants or options, or otherwise; provided, however, that a Person shall not be deemed to be the Beneficial Owner of, or to beneficially own, any security solely because such security has been tendered pursuant to a tender or exchange offer made by such Person or any of such Person's Affiliates or Associates until such tendered security is accepted for payment or exchange); or (B) the right to vote or dispose of, or to direct the vote or disposition of, alone or in concert with others, pursuant to any agreement, arrangement or understanding (whether in writing or not); provided, however, that a Person shall not be deemed pursuant to this clause (ii)(B) to be the Beneficial Owner of, or to beneficially own, any security if the agreement, arrangement or understanding to vote, or direct the vote of, such security (1) arises solely from a revocable proxy or consent given to such Person or any of such Person's Affiliates or Associates in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Exchange Act and
(2) is not also then reportable on Schedule 13D under the Exchange Act (or any comparable or successor report), other than solely by reason of the existence of such revocable proxy or consent; or

(iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement (other than customary agreements with and between underwriters and selling group members with respect to a bona fide public offering of securities), arrangement or understanding (whether or not in writing) for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy or consent as described in clause (ii)(B) of this paragraph) or disposing of any securities of the Company.

Except as otherwise provided in Section 2(k) hereof, if a Person shall be deemed to be the Beneficial Owner of any securities which are not outstanding, such securities shall be deemed to be outstanding for purposes of determining the percentage of the then outstanding shares of Common Stock beneficially owned by such Person but all other securities (including securities of the same class) not actually outstanding shall not be deemed outstanding for such purposes.

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(g) "Business Day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.

(h) "close of business" on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however, that if such date is not a Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding Business Day.

(i) "Common Stock" shall mean the Common Stock, par value $0.01 per share, of the Company (as it may be constituted from time to time during the term of this Agreement), except that "Common Stock" when used with reference to any Person other than the Company (or, in the case of a transaction referred to in Section 13 hereof, if the Company is the successor to the other Person referred to in Section 13, or is the surviving corporation, when thereafter used with reference to the Company) shall mean the capital stock (or, in the case of a partnership or other unincorporated entity, the equivalent equity interest) with the greatest voting power of such Person, together with all rights and benefits (however denominated or constituted) relating to such capital stock (including, without limitation, any rights or warrants to acquire additional shares of such capital stock or other securities or assets, or to participate in any trust for the benefit of holders of such shares, or to share in the benefits of any agreements or other arrangements for the benefit of such holders), whether or not such rights are yet exercisable, and together with any other securities which are represented by the certificates for such shares or are transferred in connection with transfers of such shares.

(j) "Company Entity" shall mean any of the Company, any wholly owned Subsidiary of the Company, any employee benefit plan or employee stock plan of the Company or of any wholly owned Subsidiary of the Company, any Person or entity holding shares of Common Stock which was organized, appointed or established by the Company or any such wholly owned Subsidiary for or pursuant to the terms of any such plan, the Management Voting Trust, the Young & Rubicam Restricted Stock Trust (the "Restricted Stock Trust"), the trustees under the Management Voting Trust or the Restricted Stock Trust, any Affiliate or Associate of the Management Voting Trust or the Restricted Stock Trust or any trustee under either such trust and any group that includes the Management Voting Trust, the Restricted Stock Trust, any trustee under either such trust or any Affiliate or Associate thereof.

(k) "Diluted Shares Outstanding" as of any given time shall mean the sum of (a) the number of shares of Common Stock then issued and outstanding (including all shares of Common Stock held in the Restricted Stock Trust) and
(b) the number of shares of Common Stock issuable upon exercise of (1) the HFCP Options and the Roll-Over Options and (2) all other options, warrants and rights to acquire, and the conversion of any securities convertible into, shares of Common Stock, to the extent such rights to acquire shares of Common Stock are then exercisable. For purposes of Section 1(a)(ii)(B), when calculating

4

the percentage of the Diluted Shares Outstanding owned by the H&F Investors or the Management Voting Trust, as the case may be, the H&F Investors or the Management Voting Trust, as the case may be, shall be deemed to own all shares of Common Stock beneficially owned by them assuming the exercise of all of their options, warrants and rights to acquire, and the conversion by them of any securities convertible into, shares of Common Stock to the extent, but only to the extent, such rights to acquire shares of Common Stock are then exercisable by them. For purposes of calculating the percentage of Diluted Shares Outstanding owned by the Management Voting Trust, the Management Voting Trust shall be deemed to own all shares of Common Stock (including all shares of Common Stock required to be deposited thereunder upon exercise of vested options) then subject to the Management Voting Trust.

(l) "H&F Investors" shall mean, collectively, Hellman & Friedman Capital Partners III, L.P., a California limited partnership, H&F Orchard Partners III, L.P., a California limited partnership and H&F Partners III, L.P., a California limited partnership.

(m) "HFCP Options" shall have the meaning given such term in the Stockholders' Agreement.

(n) "Management Voting Trust" shall mean the trust established pursuant to the management voting trust agreement dated as of December 12, 1996 by and among the Company, the Restricted Stock Trust, the Voting Trustees (as defined therein) and each other party thereto.

(o) "Permitted H&F Transferee" shall mean any transferee of Shares (as defined in the Stockholders' Agreement) from an H&F Investor in a Transfer that either is not restricted by, or occurs in compliance with, the transfer restrictions set forth in Articles II and III of the Stockholders' Agreement, which transferee becomes a party to the Stockholders' Agreement if required thereby.

(p) "Permitted H&F 15% Transferee" shall mean any Person who is a Permitted H&F Transferee who or which, immediately after the transfer from the H&F Investors that resulted in such Person becoming a Permitted H&F Transferee, together with all Affiliates and Associates of such Person, is the beneficial owner of 15% or more of the then outstanding shares of Common Stock.

(q) "Person" shall mean any individual, firm, limited liability company, corporation, partnership, trust, association or other entity.

(r) "Preferred Shares" shall mean shares of Cumulative Participating Junior Preferred Stock, no par value, of the Company having the rights, preferences and limitations set forth in the form of Certificate of Designations attached to this Agreement as Exhibit A and, to the extent that there are not a sufficient number of shares of Cumulative Participating Junior Preferred Stock authorized to permit the full exercise of the then outstanding Rights, any other series of preferred stock of the Company designated for such purpose by the Board

5

of Directors containing terms substantially similar to the terms of the Cumulative Participating Junior Preferred Stock.

(s) "Roll-Over Options" shall have the meaning set forth in the Stockholders' Agreement.

(t) "Stock Acquisition Date" shall mean the time and day of the first public announcement (which for purposes of this definition, shall include, without limitation, the filing of a report pursuant to the Exchange Act) by the Company or an Acquiring Person indicating that an Acquiring Person has become such.

(u) "Stockholders' Agreement" shall mean the amended and restated stockholders' agreement dated as of April [_], 1998 by and among the H&F Investors, the Management Investors and the Management Voting Trust (as such terms are defined therein), such additional signatories as may be deemed added from time to time pursuant thereto, and the Company.

(v) "Stock Split" shall mean any and all dividends declared on the outstanding shares of Common Stock payable in shares of Common Stock, if the declaration of such dividends occurs prior to the date on which the class of shares of Common Stock is registered under the Exchange Act, regardless of when such dividends are payable or paid.

(w) "Subsidiary" shall mean, with respect to any Person, any corporation or other entity as to which such Person beneficially owns, directly or indirectly, sufficient voting securities or other ownership interests having ordinary voting power sufficient, in the absence of contingencies, to elect at least a majority of its directors (or individuals performing similar functions).

(x) "Transfer" shall have the meaning set forth in the Stockholders' Agreement.

(y) The terms set forth below are defined in the Sections indicated below:

     Term                                                Section
     ----                                                -------
Act                                                     7(c)
Board of Directors                                      Recitals
Common Stock Equivalent                                 11(a)(iii)(B)
current market price                                    11(d)
Current Value                                           11(a)(iii)(A)
Distribution Date                                       3(a)
Equivalent Preferred Shares                             11(b)
Exchange Act                                            1(b)
Exchange Ratio                                          24
Expiration Date                                         7(a)

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Final Expiration Date                                   7(a)
NASDAQ                                                  11(d)(i)
NYSE                                                    11(d)(i)
Principal Party                                         13(b)
Purchase Price                                          7(b)
Record Date                                             Recitals
Redemption Date                                         7(a)
Redemption Price                                        23
Restricted Stock Trust                                  1(j)
Right                                                   Recitals
Right Certificates                                      3(a)
Rights Agent                                            Recitals
Section 13 Event                                        13(a)
Security                                                11(d)(i)
Spread                                                  11(a)(iii)(A)
Substitution Period                                     11(a)(iii)
Trading Day                                             11(d)(i)
Trigger Date                                            11(a)(iii)

Section 2. Appointment of Rights Agent. The Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such Co-Rights Agents as it may deem necessary or desirable upon ten (10) days' prior written notice to the Rights Agent. The Rights Agent shall have no duty to supervise, and shall in no event be liable for, the acts or omissions of any such Co-Rights Agent. In the event that the Company appoints one or more Co-Rights Agents, the respective duties of the Rights Agent and any Co-Rights Agents shall be as the Company shall determine.

Section 3. Issue of Right Certificates. (a) Until the close of business on the earlier of (i) the tenth (10th) Business Day after the Stock Acquisition Date and (ii) the tenth (10th) Business Day (or such later day as may be determined by action of the Board of Directors prior to such time as any Person becomes an Acquiring Person) after the date of the commencement by any Person (other than any Company Entity) of, or the first public announcement of the intent of any Person (other than any Company Entity) to commence (which intention to commence remains in effect for five (5) Business Days after such announcement), a tender or exchange offer the consummation of which would result in any Person becoming an Acquiring Person (the earlier of the dates referred to in clauses (i) and (ii) above being herein referred to as the "Distribution Date"), (x) the Rights will be evidenced (subject to the provisions of paragraph
(b) of this Section 3) by the certificates for the shares of Common Stock registered in the names of the holders of the shares of Common Stock (which certificates for shares of Common Stock shall also be deemed (other than for purposes of this Section 3 and any provision of this Agreement referring to the issuance of

7

Rights Certificates) to be Right Certificates) and not by separate Right Certificates, and (y) the Rights (and the right to receive Right Certificates) will be transferable only simultaneously and together with the transfer of the underlying shares of Common Stock. The Company shall give the Rights Agent prompt written notice of the Distribution Date. As soon as practicable after the Distribution Date, and receipt by the Rights Agent of written notice of the Distribution Date from the Company, subject to Section 7(e) hereof, the Company will prepare and execute, the Rights Agent will countersign, and the Company will send or cause to be sent (and the Rights Agent will, if requested, send, at the expense of the Company) by first-class, postage-prepaid mail, to each record holder of shares of Common Stock as of the close of business on the Distribution Date, as shown by the records of the Company, at the address of such holder shown on such records, a right certificate, substantially in the form of Exhibit B hereto (a "Right Certificate"), evidencing one Right for each share of Common Stock so held, subject to adjustment as herein provided. As of and after the close of business on the Distribution Date, the Rights will be evidenced solely by such Right Certificates and may be transferred only by the transfer of the Rights Certificates as permitted hereby, separately and apart from any transfer of one or more shares of Common Stock.

(b) With respect to certificates for shares of Common Stock outstanding as of the Record Date or issued prior to the Distribution Date, until the Distribution Date the Rights will be evidenced solely by such certificates registered in the names of the holders thereof. Until the Distribution Date (or the earlier of the Redemption Date or the Expiration Date), the surrender for transfer of any certificate for shares of Common Stock outstanding as of the Record Date shall also constitute the transfer of the Rights associated with the shares of Common Stock represented thereby.

The Company will mail to any record holder of a Right (including, prior to the Distribution Date, a record holder of shares of Common Stock) a copy of this Rights Agreement, without charge, promptly after receipt of a written request therefor.

(c) Rights shall be issued in respect of all shares of Common Stock that become outstanding after the Record Date and prior to the earlier of the Distribution Date and the Expiration Date, and all certificates for shares of Common Stock which become outstanding after the Record Date, but prior to the earlier of the Distribution Date and the Expiration Date shall have impressed on, printed on, written on or otherwise affixed to them substantially the following legend:

This certificate also evidences and entitles the holder hereof to certain Rights as set forth in a Rights Agreement between Young & Rubicam Inc. and The Bank of New York, dated as of April [_], 1998, as it may from time to time be supplemented or amended pursuant to its terms (the "Rights Agreement"), the terms of which are hereby incorporated by reference and a copy of which is on file at the principal executive offices of Young & Rubicam Inc. Under certain circumstances as set forth

8

in the Rights Agreement, such Rights will be evidenced by separate certificates and will no longer be evidenced by this certificate. Young & Rubicam Inc. will mail to the registered holder of this certificate a copy of the Rights Agreement without charge promptly after receipt of a written request therefor. Under certain circumstances provided for in the Rights Agreement, Rights issued to or beneficially owned by any Person who is an Acquiring Person or an Affiliate or Associate thereof (as such terms are defined in the Rights Agreement) or any subsequent holder of such Rights shall become null and void.

In the event that the Company purchases or acquires any shares of Common Stock after the Record Date but prior to the Distribution Date, any Rights associated with such shares of Common Stock shall be deemed cancelled and retired so that the Company shall not be entitled to exercise any Rights associated with the shares of Common Stock which are no longer outstanding.

Section 4. Form of Right Certificates. The Right Certificates (and the forms of election to purchase shares and of assignment to be printed on the reverse thereof) shall be substantially in the form of Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto or with any rule or regulation of any stock exchange or quotation system on which the Rights may from time to time be listed, or to conform to usage. Subject to the provisions of Sections 11 and 22 hereof, the Right Certificates, whenever distributed, shall be dated as of the Record Date, shall show the date of countersignature and on their face shall entitle the holders thereof to purchase such number of one-hundredths of a Preferred Share as shall be set forth therein at the Purchase Price, but the number and type of securities purchasable upon the exercise of each Right and the Purchase Price thereof shall be subject to adjustment as provided herein.

Section 5. Countersignature and Registration. (a) The Right Certificates shall be executed on behalf of the Company by its Chairman of the Board, its Chief Executive Officer, its President or any Senior Vice President or Vice President, or its Treasurer, either manually or by facsimile signature. The Right Certificates shall be manually countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. In case any officer of the Company who shall have signed any of the Right Certificates shall cease to be such officer of the Company before countersignature by the Rights Agent and issuance and delivery by the Company, such Right Certificates, nevertheless, may be countersigned by the Rights Agent, and issued and delivered with the same force and effect as though the person who signed

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such Right Certificates had not ceased to be such officer of the Company; and any Right Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Right Certificate, shall be a proper officer of the Company to sign such Right Certificate, although at the date of the execution of this Rights Agreement any such person was not such an officer.

(b) Following the Distribution Date, the Rights Agent will keep or cause to be kept, at its principal stock transfer office or such other office designated by it for such purpose, books for registration and transfer of the Right Certificates issued hereunder. Such books shall show the name(s) and address(es) of the holder(s) of each Right Certificate, the number of Rights evidenced on its face by each Right Certificate, the certificate number of each Right Certificate and the date of each Right Certificate.

Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. (a) Subject to the provisions of Sections 7(e), 7(f) and 14 hereof, at any time after the close of business on the Distribution Date, and at or prior to the close of business on the Expiration Date, any Right Certificate or Right Certificates may be transferred, split up, combined or exchanged for another Right Certificate or other Right Certificates entitling the registered holder to purchase a like number of one one-hundredths of a Preferred Share (or other securities, cash and/or assets, as the case may be) as the Right Certificate or Right Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine or exchange any Right Certificate or Right Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Right Certificate or Right Certificates to be transferred, split up, combined or exchanged at the principal stock transfer office of the Rights Agent or such other office of the Rights Agent designated for such purpose. Neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to the transfer of any such surrendered Right Certificate unless and until the registered holder shall have completed and signed the certificate contained in the form of assignment on the reverse side thereof and shall have provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) or Associates and Affiliates of the foregoing as the Company shall reasonably request. Thereupon the Rights Agent shall, subject to Sections 7(e), 7(f) and 14 hereof, countersign and deliver to the person entitled thereto a Right Certificate or Right Certificates, as the case may be, as so requested. The Company may require payment, by the holders of the Rights, of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination or exchange of Right Certificates.

(b) Subject to the provisions of Sections 7(e), 7(f) and 14 hereof, upon receipt by the Company and the Rights Agent of evidence reasonably satisfactory to them of the loss, theft, destruction or mutilation of a Right Certificate, and, in case of loss, theft or destruction, of an indemnity or security reasonably satisfactory to the Company and the Rights Agent, and reimbursement to the Company and the Rights Agent of all reasonable

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expenses incidental thereto, and upon surrender to the Rights Agent and cancellation of the Right Certificate if mutilated, the Company will make and deliver a new Right Certificate of like tenor to the Rights Agent for countersignature and delivery to the registered holder in lieu of the Right Certificate so lost, stolen, destroyed or mutilated.

Section 7. Exercise of Rights; Purchase Price, Expiration Date of Rights. (a) Subject to Sections 7(e), 7(f), 9(e) and 11(a)(iii) hereof, the registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase and the certificate on the reverse side thereof duly executed, to the Rights Agent at its principal office or such other office designated by it for such purpose, together with payment of the Purchase Price for each one-hundredth of a Preferred Share (or other securities, cash and/or assets, as the case may be) as to which the Rights are exercised, at or prior to the earliest of (i) the close of business on May 1, 2008 (the "Final Expiration Date"), (ii) the date and time at which the Rights are redeemed as provided in
Section 23 hereof (the "Redemption Date"), (iii) the date and time at which the Rights are exchanged as provided in Section 24 hereof, or (iv) the date and time at which the Rights expire pursuant to Section 13(d) (such earliest date and time being referred to herein as the "Expiration Date").

(b) The purchase price for each one one-hundredth of a Preferred Share purchasable pursuant to the exercise of a Right shall initially be $[____], shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and shall be payable in lawful money of the United States of America in accordance with paragraph (c) below (the "Purchase Price").

(c) Except as otherwise provided herein, upon receipt of a Right Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment of the Purchase Price for the Preferred Shares (or other securities, cash and/or assets, as the case may be) to be purchased and an amount equal to any applicable transfer tax (as determined by the Rights Agent) in cash, or by certified check or bank draft payable to the order of the Company, the Rights Agent shall, subject to Section 20(j) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the Preferred Shares certificates (or make available, if the Rights Agent is the transfer agent) for the number of Preferred Shares to be purchased and the Company hereby irrevocably authorizes its transfer agent to comply with all such requests or (B) if the Company has elected to deposit the Preferred Shares issuable upon exercise of the Rights hereunder into a depositary, requisition from the depositary agent depositary receipts representing such number of one one-hundredths of a Preferred Share as are to be purchased (in which case certificates for the Preferred Shares represented by such receipts shall be deposited by the transfer agent of the Preferred Shares with the depositary agent) and the Company hereby directs the depositary agent to comply with such request, (ii) when appropriate, requisition from the Company the amount of cash to be paid in lieu of issuance of fractional shares in

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accordance with Section 14 hereof, (iii) after receipt of such certificates or depositary receipts, cause the same to be delivered to or upon the order of the registered holder of such Right Certificate, registered in such name or names as may be designated by such holder and (iv) when appropriate, promptly after receipt thereof, deliver any such cash to or upon the order of the registered holder of such Right Certificate. In the event that the Company is obligated to issue other securities of the Company, pay cash and/or distribute other property pursuant to Section 11 hereof, the Company will make all arrangements necessary so that such other securities, cash and/or property are available for distribution by the Rights Agent, if and when appropriate. Notwithstanding the foregoing provisions of this Section 7(c), the Company may suspend the issuance of Preferred Shares or shares of Common Stock or other securities upon exercise of a Right for a reasonable period, not in excess of ninety (90) calendar days, during which the Company seeks to register under the Securities Act of 1933, as amended (the "Act"), and any applicable securities law of any other jurisdiction, the Preferred Shares or shares of Common Stock or such other securities to be issued pursuant to the Rights.

(d) In case the registered holder of any Right Certificate shall exercise less than all the Rights evidenced thereby, a new Right Certificate evidencing Rights equivalent to the Rights remaining unexercised shall be issued by the Rights Agent to the registered holder of such Right Certificate or to his duly authorized assigns, subject to the provisions of Sections 7(e), 7(f) and 14 hereof, or the Rights Agent shall place an appropriate notation on the Right Certificate with respect to those Rights exercised.

(e) Notwithstanding any other provision of this Agreement to the contrary, from and after the Stock Acquisition Date, any Rights beneficially owned by (i) an Acquiring Person or any Affiliate or Associate thereof, (ii) a transferee of an Acquiring Person (or of any Affiliate or Associate thereof) who becomes a transferee concurrently with or after the Acquiring Person becomes such, (iii) a transferee of an Acquiring Person (or of any Affiliate or Associate thereof) who becomes a transferee prior to the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) by the Acquiring Person to holders of equity interests in such Acquiring Person (or any Affiliate or Associate thereof) or to any Person with whom the Acquiring Person (or any Affiliate or Associate thereof) has any continuing agreement, arrangement or understanding (whether or not in writing) regarding the transferred Rights or (B) a transfer which the Board of Directors has determined is part of a plan, arrangement or understanding (whether or not in writing) which has as a purpose or effect the avoidance of this Section 7(e) or of Section 11 or 13 with respect to the limitation of rights beneficially owned by an Acquiring Person (or any Associate or Affiliate thereof), or (iv) a subsequent transferee of any of the foregoing, shall become null and void without any further action and no existing or subsequent holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of this Agreement or otherwise. No Right Certificate shall be issued pursuant to Section 3 hereof that represents Rights beneficially owned by an Acquiring Person whose Rights would be void pursuant to the provisions of this Section 7(e)

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or any Associate or Affiliate thereof; no Right Certificate shall be issued at any time upon the transfer of any Rights to an Acquiring Person whose Rights would be void pursuant to the provisions of this Section 7(e) or any Associate or Affiliate thereof or to any nominee of such Acquiring Person, Associate or Affiliate; and any Right Certificate delivered to the Rights Agent for transfer to an Acquiring Person whose Rights would be void pursuant to the provisions of this Section 7(e) shall be cancelled; provided, that if any Right Certificate that should not have been issued, or should have been cancelled, pursuant to this sentence is issued or is not cancelled, it shall nevertheless be void as provided above in this Section 7(e). The Company shall use all reasonable efforts to insure that the provisions of this Section 7(e) hereof are complied with, but shall have no liability to any holder of Right Certificates or any other Person as a result of the failure to make any determination with respect to an Acquiring Person or its Affiliates or Associates or to transferees of the foregoing. The Rights Agent shall use all reasonable efforts to comply with the provisions hereof to the extent it has received instructions from the Company concerning such matters.

(f) Notwithstanding any other provision of this Agreement to the contrary, neither the Rights Agent nor the Company shall be obligated to take any action whatsoever with respect to a registered holder of any Right Certificate upon the occurrence of any purported transfer or exercise as set forth in this Section 7 unless and until the registered holder shall have completed and signed the certificate contained in the form of election to purchase shares set forth on the reverse side thereof and shall have provided such additional evidence of the identity of the Beneficial Owner and former Beneficial Owner (and Associates and Affiliates of the foregoing) as the Company shall reasonably request.

Section 8. Cancellation of Right Certificates. All Right Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no Right Certificate shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Rights Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent shall so cancel and retire, any other Right Certificate purchased or acquired by the Company otherwise than upon the exercise thereof. The Rights Agent shall deliver all cancelled Right Certificates to the Company.

Section 9. Reservation and Availability of Capital Stock. (a) The Company covenants and agrees that at all times prior to the Stock Acquisition Date, it will cause to be reserved and kept available out of its authorized and unissued Preferred Shares or any authorized and issued Preferred Shares held in its treasury, the number of Preferred Shares that will be sufficient to permit the exercise in full of all outstanding Rights and, after the Stock Acquisition Date, shall to the extent reasonably practicable, so reserve and keep available a sufficient number of its authorized and unissued shares of Common Stock and/or other securities or out of its authorized and issued shares of Common Stock and/or other

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securities held in its treasury which may be required to permit the exercise in full of the Rights pursuant to this Agreement.

(b) The Company covenants and agrees that it will take all such action as may be necessary to insure that all Preferred Shares (and following the Stock Acquisition Date, shares of Common Stock and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of the certificates for such shares (subject to payment of the Purchase Price), be duly and validly authorized and issued and fully paid and nonassessable shares.

(c) The Company covenants and agrees that it will pay when due and payable any and all U.S. federal and state transfer taxes and charges which may be payable in respect of the issuance or delivery of the Right Certificates or of any Preferred Shares (or shares of Common Stock and/or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax which may be payable in respect of any transfer involved in the transfer or delivery of Right Certificates to a person other than, or the issuance or delivery of certificates or depositary receipts for Preferred Shares (or shares of Common Stock and/or other securities, as the case may be) in a name other than that of, the registered holder of the Right Certificate evidencing Rights surrendered for exercise or to issue or deliver any certificates or depositary receipts for Preferred Shares (or shares of Common Stock and/or other securities, as the case may be) upon the exercise of any Rights until any such tax shall have been paid (any such tax being payable by the holder of such Right Certificate at the time of surrender) or until it has been established to the Company's satisfaction that no such tax is due.

(d) So long as the Preferred Shares (or shares of Common Stock and/or other securities, as the case may be) issuable upon the exercise of the Rights may be listed on any national securities exchange, the Company shall use its best efforts to cause, from and after such time as the Rights become exercisable, all shares reserved for such issuance to be listed on such exchange upon official notice of issuance upon such exercise.

(e) The Company shall use its best efforts to (i) file as soon as practicable following the Stock Acquisition Date (or, if required by law, at such earlier time following the Distribution Date as so required) a registration statement under the Act with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (ii) cause such registration statement to become effective as soon as practicable after such filing and (iii) cause such registration statement to remain effective (with a prospectus at all times meeting the requirements of the Act and the rules and regulations thereunder) until the earlier of (A) the date as of which the Rights are no longer exercisable for such securities and (B) the expiration of the Rights. The Company will also take such action as may be appropriate to ensure compliance with the securities or "blue sky" laws of the various states. The Company may temporarily suspend, in accordance with applicable law, for a period of time not to exceed ninety (90) calendar days after the date set forth in clause (i) of the first

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sentence of this Section 9(e), the exercisability of the Rights in order to prepare and file such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement, and shall simultaneously send written notice to the Rights Agent, stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect. Notwithstanding any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification in such jurisdiction shall not have been obtained, the exercise thereof shall not be permitted under applicable law or a registration statement shall not have been declared effective. The Rights Agent may assume that any Right exercised is permitted to be exercised under applicable law and shall have no liability for acting in reliance upon such assumption.

Section 10. Preferred Share Record Date. Each Person in whose name any certificate or depositary receipt for Preferred Shares (or shares of Common Stock and/or other securities, as the case may be) is issued upon the exercise of Rights shall for all purposes be deemed to have become the holder of record of the Preferred Shares (or shares of Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate or depositary receipt shall be dated, the date upon which the Right Certificate evidencing such Rights was duly surrendered and payment of the Purchase Price (and any applicable transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the transfer books of the Company are closed, such Person shall be deemed to have become the record holder of such shares on, and such certificate or depositary receipt shall be dated, the next succeeding Business Day on which the transfer books of the Company are open. Prior to the exercise of the Rights evidenced thereby, the holder of a Right Certificate shall not be entitled to any rights of a stockholder of the Company with respect to shares for which the Rights shall be exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided herein.

Section 11. Adjustment of Purchase Price, Number of Shares or Number of Rights. The Purchase Price, the number and kind of securities, or fractions thereof, covered by each Right and the number of Rights outstanding are subject to adjustment from time to time as provided in this Section 11.

(a) (i) In the event the Company shall at any time after the date of this Agreement (A) declare or pay a dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide or split the outstanding Preferred Shares, (C) combine or consolidate the outstanding Preferred Shares into a smaller number of Preferred Shares or (D) issue any shares of its capital stock in a reclassification of the Preferred Shares (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), except as otherwise provided in this Section 11(a) and Section 7(e), the Purchase Price in effect at the time of the record date for such dividend or

15

of the effective date of such subdivision, split, combination, consolidation or reclassification, and the number and kind of shares of Preferred Shares or capital stock, as the case may be, issuable upon exercise of a Right on such date, shall be proportionately adjusted so that the holder of any Right exercised after such time shall be entitled to receive, upon payment of the Purchase Price then in effect, the aggregate number and kind of shares of Preferred Shares or capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date and at a time when the transfer books of the Company were open, such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, split, combination, consolidation or reclassification; provided, however, that in no event shall the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares of Preferred Shares or capital stock, as the case may be, issuable upon exercise of one Right. If an event occurs which would require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii).

(ii) Immediately upon the Stock Acquisition Date, proper provision shall be made so that each holder of a Right (except as otherwise provided in
Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement and subject to Sections 9(e), 11(a)(iii) and 24, in lieu of Preferred Shares, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-hundredths of a Preferred Share for which a Right was or would have been exercisable immediately prior to the Stock Acquisition Date (whether or not such Right was then exercisable) and (y) dividing that product by fifty percent (50%) of the current market price per share of the Common Stock (determined pursuant to Section 11(d) hereof) on the Stock Acquisition Date (such number of shares being hereinafter referred to as the "Adjustment Shares"); provided, however, if the transaction that would otherwise give rise to the foregoing adjustment is also subject to the provisions of Section 13 hereof, then only the provisions of Section 13 hereof shall apply and no adjustment shall be made pursuant to this Section 11(a)(ii).

(iii) In the event that the number of shares of Common Stock which are authorized by the Company's certificate of incorporation but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights is not sufficient to permit the exercise in full of the Rights in accordance with the foregoing clause (ii) of this Section 11(a), and the Rights become so exercisable, the Company (acting by resolution of the Board of Directors) shall:

(A) determine the excess of (1) the value of the Adjustment Shares issuable upon the exercise of a Right (the "Current Value") over
(2) the then current Purchase Price attributable to each Right (such excess being referred to herein as the "Spread"), and

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(B) with respect to each Right, make adequate provision to substitute for the Adjustment Shares, upon payment of the Purchase Price,
(1) shares of Common Stock or other equity securities of the Company (including, without limitation, shares, or units of shares, of preferred stock which the Board of Directors has deemed to have substantially the same value as shares of Common Stock (such shares of preferred stock being referred to herein as "Common Stock Equivalents")), (2) a reduction in the Purchase Price, (3) cash, (4) debt securities of the Company, (5) other assets, or (6) any combination of the foregoing (provided, that in making any such provision, Rights shall, to the fullest extent feasible in view of the number of authorized shares of Common Stock not outstanding or reserved for issuance for purposes other than upon exercise of the rights, be exercisable for shares of Common Stock), in each case having an aggregate value equal to the Current Value, where such aggregate value has been determined by the Board of Directors based upon the advice of a nationally recognized investment banking firm selected by the Board of Directors;

provided, however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (30) calendar days following the Stock Acquisition Date (the "Trigger Date"), then the Company shall be obligated to deliver, upon the surrender for exercise of a Right and without requiring payment of the Purchase Price, shares of Common Stock (to the extent available) and then, if necessary, cash, securities and/or assets that have an aggregate value equal to the Spread. Notwithstanding the immediately preceding sentence, if the Board of Directors shall determine in good faith that it is likely that sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, the thirty (30) calendar day period set forth above may be extended to the extent necessary, but not to more than ninety (90) calendar days after the Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares (such period, as it may be extended, being referred to herein as the "Substitution Period"). To the extent that the Company determines that some action need be taken pursuant to the foregoing provisions of this Section
11(a)(iii), the Company (x) shall provide, subject to Section 7(e), that such action shall apply uniformly to all outstanding Rights and (y) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek any authorization of additional shares and/or to decide the appropriate form of distribution to be made pursuant to the first sentence of this Section 11(a)(iii) and to determine the value thereof. In the event of any such suspension, the Company shall issue a public announcement stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as the suspension is no longer in effect, in each case with simultaneous notice to the Rights Agent. For purposes of this Section
11(a)(iii), the terms of any Common Stock Equivalent shall be determined so that the per share or per unit value of such Common Stock Equivalent shall have the same value as the "current market price" per

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share of Common Stock (as determined pursuant to Section 11(d) hereof on the date of the first occurrence of the Stock Acquisition Date).

(b) In case the Company shall fix a record date for the issuance of rights, options or warrants to all holders of Preferred Shares entitling them (for a period expiring within forty-five (45) calendar days after such record date) to subscribe for or purchase Preferred Shares (or shares having substantially the same rights, privileges, and preferences as the Preferred Shares ("Equivalent Preferred Shares")) or securities convertible into Preferred Shares or Equivalent Preferred Shares at a price per Preferred Share or Equivalent Preferred Share (or having a conversion price per share, if a security convertible into Preferred Shares or Equivalent Preferred Shares) less than the current market price per Preferred Share (as determined pursuant to
Section 11(d) hereof) on such record date, the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, of which the numerator shall be the number of Preferred Shares and Equivalent Preferred Shares outstanding on such record date plus the number of Preferred Shares which the aggregate offering price of the total number of Preferred Shares and/or Equivalent Preferred Shares to be so offered (and/or the aggregate initial conversion price of the convertible securities to be so offered) would purchase at such current market price and of which the denominator shall be the number of Preferred Shares and Equivalent Preferred Shares outstanding on such record date plus the number of additional Preferred Shares and/or Equivalent Preferred Shares to be offered for subscription or purchase (or into which the convertible securities so to be offered are initially convertible). In case such subscription price may be paid in a consideration part or all of which shall be in a form other than cash, the value of such consideration shall be as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent. Preferred Shares owned by or held for the account of the Company or any of its Subsidiaries shall not be deemed outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed; and in the event that such rights, options or warrants are not so issued, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

(c) In case the Company shall fix a record date for the making of a distribution to all holders of Preferred Shares (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation) of evidences of indebtedness or assets (other than a regular quarterly cash dividend at a rate per Preferred Share not in excess of the greater of (x) two hundred (200) times the rate of the last quarterly cash dividend per share of Common Stock theretofore paid and (y) $5.00 per quarter, or a dividend payable in Preferred Shares) or subscription rights or warrants (excluding those referred to in Section 11(b) hereof), the Purchase Price to be in effect after such record date shall be determined by multiplying the Purchase Price in effect immediately prior to such record date by a fraction, the numerator of which shall be the current market price per Preferred Share (as determined pursuant to

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Section 11(d) hereof) on such record date, less the fair market value (as determined in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent) of the portion of the assets or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to one Preferred Share and of which the denominator shall be such current market price per Preferred Share. Such adjustments shall be made successively whenever such a record date is fixed; and in the event that such distribution is not so made, the Purchase Price shall again be adjusted to be the Purchase Price which would then be in effect if such record date had not been fixed.

(d) (i) For the purpose of any computation hereunder, and subject to
Section 11(d)(ii), the "current market price" for any security (a "Security" for purposes of this Section 11(d)(i)) on any date shall be deemed to be the average of the daily closing prices per share of such Security for the thirty (30) consecutive Trading Days immediately prior to such date; provided, however, that in the event that the current market price per share of the Security is determined during a period following the announcement by the issuer of such Security of a dividend or distribution on such Security payable in such Security or securities convertible into or exercisable or exchangeable for such Security, or any subdivision, split, combination, consolidation or reclassification of such Security, and prior to the expiration of thirty (30) Trading Days after the ex-dividend date for such dividend or distribution or the record date for such subdivision, split, combination, consolidation or reclassification, then, and in each such case, the current market price shall be appropriately adjusted to reflect ex-dividend or ex-distribution trading. The closing price for each day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the New York Stock Exchange, Inc. ("NYSE") or, if the Security is not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Security is listed or admitted to trading or, if the Security is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or any successor ("NASDAQ") or such other system then in use, or, if on any such date the Security is not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Security selected by the Board of Directors. If on such date no such market maker is making a market in the Security, the fair value of such shares on such date as determined in good faith by the Board of Directors shall be used, such determination to be described in a statement filed with the Rights Agent. The term "Trading Day" shall mean a day on which the principal national securities exchange on which the Security is listed or admitted to trading is open for the transaction of business or, if the Security is not listed or admitted to trading on any national securities exchange but is quoted on NASDAQ, a day on which NASDAQ is

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in operation or if the Security is neither listed nor admitted to trading on any national securities exchange nor quoted on NASDAQ, a Business Day.

(ii) For the purpose of any computation hereunder, the "current market price" of the Preferred Shares shall be determined in accordance with the method set forth in Section 11(d)(i), except that if the Preferred Shares are not publicly traded, the "current market price" of the Preferred Shares shall be conclusively deemed to be the current per share market price of the Common Stock as determined pursuant to Section 11(d)(i), multiplied by one hundred (as such number may be appropriately adjusted for stock splits, stock dividends, recapitalizations and similar events after the date of this Agreement). If neither the shares of Common Stock nor the Preferred Shares are publicly held or so listed or traded, the "current per share market price" shall mean the fair value per share as determined in good faith by an independent investment banking firm selected in good faith by the Board of Directors, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes.

(e) Notwithstanding any other provision of this Agreement to the contrary, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (1%) in such price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Common Stock or other security or to the nearest one one-millionth of a Preferred Share. Notwithstanding the first sentence of this Section 11(e), any adjustment required by this Section 11 shall be made no later than the earlier of (i) three years from the date of the transaction which mandates such adjustment and (ii) the date of the expiration of the right to exercise any Rights.

(f) In the event that at any time, as a result of an adjustment made pursuant to Section 11(a) or Section 13(a), the holder of any Right thereafter exercised shall become entitled to receive any securities other than Preferred Shares, thereafter the number or amount of such other securities so receivable upon exercise of any Right shall be subject to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to the securities contained in Sections 11(a), (b), (c), (e), (g), (h),
(i), (j), (k) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 of this Agreement with respect to the Preferred Shares shall apply on like terms to any such other securities.

(g) All Rights originally issued by the Company subsequent to any adjustment made to the Purchase Price hereunder shall evidence the right to purchase, at the adjusted Purchase Price, the number of one one-hundredths of a Preferred Share purchasable from time to time hereunder upon exercise of the Rights, all subject to further adjustment as provided herein.

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(h) Unless the Company shall have exercised its election as provided in Section 11(i) of this Agreement, upon each adjustment of the Purchase Price as a result of the calculations made in Section 11(b) and (c) of this Agreement, each Right outstanding immediately prior to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-hundredths of a Preferred Share (calculated to the nearest one one-millionth of a Preferred Share) obtained by (i) multiplying (x) the number of one one-hundredths of a Preferred Share covered by a Right immediately prior to such adjustment by (y) the Purchase Price in effect immediately prior to such adjustment of the Purchase Price and (ii) dividing the product so obtained by the Purchase Price in effect immediately after such adjustment of the Purchase Price.

(i) The Company may elect on or after the date of any adjustment of the Purchase Price to adjust the number of Rights, in substitution for any adjustment in the number of one one-hundredths of a Preferred Share purchasable upon the exercise of a Right. Each of the Rights outstanding after such adjustment of the number of Rights shall be exercisable for the number of one one-hundredths of a Preferred Share for which it was exercisable immediately prior to such adjustment. Each Right held of record prior to such adjustment of the number of Rights shall become that number of Rights (calculated to the nearest one ten-thousandth) obtained by dividing the Purchase Price in effect immediately prior to adjustment of the Purchase Price by the Purchase Price in effect immediately after adjustment of the Purchase Price. The Company shall make a public announcement of its election to adjust the number of Rights, indicating the record date for the adjustment, and, if known at the time, the amount of the adjustment to be made. This record date may be the date on which the Purchase Price is adjusted or any day thereafter, but, if the Right Certificates have been issued, shall be at least ten (10) calendar days later than the date of the public announcement. If Right Certificates have been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i) the Company shall, as promptly as practicable, cause to be distributed to holders of record of Right Certificates on such record date, Right Certificates evidencing, subject to Section 14 hereof, the additional Rights to which such holders shall be entitled as a result of such adjustment, or, at the option of the Company, shall cause to be distributed to such holders of record in substitution and replacement for the Right Certificates held by such holders prior to the date of adjustment, and upon surrender thereof, if required by the Company, new Right Certificates evidencing all the Rights to which such holders shall be entitled after such adjustment. Right Certificates so to be distributed shall be issued, executed and countersigned in the manner provided for herein (and may bear, at the option of the Company, the adjusted Purchase Price) and shall be registered in the names of the holders of record of Right Certificates on the record date specified in the public announcement.

(j) Irrespective of any adjustment or change in the Purchase Price or the number of one one-hundredths of a Preferred Share issuable upon the exercise of the Rights, the Right Certificates theretofore and thereafter issued may continue to express the Purchase

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Price per share and the number of one one-hundredths of a Preferred Share which were expressed in the initial Right Certificates issued hereunder.

(k) Before taking any action that would cause an adjustment reducing the Purchase Price below one-hundredth of the then par value, if any, of the Preferred Shares issuable upon exercise of the Rights, the Company shall take any corporate action which may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue fully paid and nonassessable Preferred Shares at such adjusted Purchase Price.

(l) In any case in which this Section 11 shall require that an adjustment in the Purchase Price be made effective as of a record date for a specified event, the Company may elect to defer until the occurrence of such event the issuing to the holder of any Right exercised after such record date of the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the Preferred Shares and other capital stock or securities of the Company, if any, issuable upon such exercise on the basis of the Purchase Price in effect prior to such adjustment; provided, however, that the Company shall deliver to such holder a due bill or other appropriate instrument evidencing such holder's right to receive such additional shares upon the occurrence of the event requiring such adjustment.

(m) Notwithstanding any provision of this Section 11 to the contrary, the Company shall be entitled to make such reductions in the Purchase Price, in addition to those adjustments expressly required by this Section 11, as and to the extent that the Board of Directors shall, in its sole discretion determine to be advisable in order that any (i) consolidation or subdivision of the Preferred Shares, (ii) issuance wholly for cash of any Preferred Shares at less than the current market price, (iii) issuance wholly for cash of Preferred Shares or securities which by their terms are convertible into or exercisable or exchangeable for Preferred Shares, (iv) stock dividends or (v) issuance of rights, options or warrants referred to hereinabove in this Section 11, hereafter made by the Company to holders of its Preferred Shares shall not be taxable to such stockholders.

(n) The Company covenants and agrees that it shall not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a wholly-owned Subsidiary of the Company in a transaction which does not violate
Section 11(o) hereof), (ii) merge with or into any other Person (other than a wholly-owned Subsidiary of the Company in a transaction which does not violate
Section 11(o) hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a series of related transactions, assets or earning power aggregating more than fifty percent (50%) of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which does not violate Section 11(o) hereof), if (x) at the time of or immediately after such consolidation, merger, sale or transfer there are any charter or by-law provisions or any rights, warrants or other instruments or securities outstanding or

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agreements in effect or other actions taken, which would materially diminish or otherwise eliminate the benefits intended to be afforded by the Rights or (y) prior to, simultaneously with or immediately after such consolidation, merger or sale, the stockholders of the Person who constitutes, or would constitute, the "Principal Party" for purposes of Section 13(a) hereof shall have received a distribution of Rights previously owned by such Person or any of its Affiliates and Associates. The Company shall not consummate any such consolidation, merger, sale or transfer unless prior thereto the Company and such other Person shall have executed and delivered to the Rights Agent a supplemental agreement evidencing compliance with this Section 11(n).

(o) The Company covenants and agrees that, after a Stock Acquisition Date it will not, except as permitted by Section 24 or Section 27 hereof, take (or permit any Subsidiary to take) any action the purpose of which is to, or if at the time such action is taken it is reasonably foreseeable that the effect of such action is to, materially diminish or eliminate the benefits intended to be afforded by the Rights.

(p) Notwithstanding any other provision of this Agreement to the contrary, in the event that the Company shall, at any time after the date of this Agreement and prior to the Distribution Date, (i) declare or pay any dividend on the outstanding shares of Common Stock payable in shares of Common Stock (other than the Stock Split), (ii) subdivide the outstanding shares of Common Stock, (iii) combine or consolidate the outstanding shares of Common Stock into a smaller number of shares, or (iv) effect a reclassification of its outstanding shares of Common Stock, the number of one one-hundredths of a Preferred Share so purchasable after such event upon proper exercise of each Right shall be determined by multiplying the number of one one-hundredths of a Preferred Share so purchasable immediately prior to such event by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding immediately prior to such event and the denominator of which shall be the total number of shares of Common Stock outstanding immediately following such event. The adjustments provided for in this Section 11(p) shall be made successively whenever such a dividend is declared or paid or such a subdivision, combination or consolidation is effected. If an event occurs which would require an adjustment under Section 11(a)(ii) and this Section 11(p), the adjustments provided for in this Section 11(p) shall be in addition and prior to any adjustment required pursuant to Section 11(a)(ii).

Section 12. Certification of Adjusted Purchase Price or Number of Shares. Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the Company shall (a) promptly prepare a certificate setting forth such adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the Preferred Shares or the shares of Common Stock a copy of such certificate. The Rights Agent shall be fully protected in relying on such certificate and on any adjustment contained therein and shall not be deemed to have knowledge of any such adjustment unless and until it shall have received such certificate.

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Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power. (a) In the event (a "Section 13 Event") that, following the Stock Acquisition Date, directly or indirectly, (x) the Company shall consolidate with, or merge with and into, any Person or Persons, (y) any Person or Persons shall consolidate with, or merge with and into, the Company, and the Company shall be the continuing or surviving corporation of such consolidation or merger (other than, in the case of any transaction described in (x) or (y), a merger or consolidation which would result in all of the securities generally entitled to vote in the election of directors ("voting securities") of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into securities of the surviving entity) all of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and holders of such securities not having changed as a result of such merger or consolidation), or
(z) the Company shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise transfer), in one or a series of related transactions, assets or earning power aggregating more than fifty percent (50%) of the assets or earning power of the Company and its Subsidiaries (taken as a whole and calculated on the basis of the Company's most recent regularly prepared financial statements) to any Person or Persons (other than the Company or any Subsidiary of the Company in one or more transactions each of which does not violate Section 11(o) hereof), then, and in each such case (except as provided in Section 13(d) hereof), proper provision shall be made so that (i) each holder of a Right, except as provided in Section 7(e) hereof, shall thereafter have the right to receive, upon the exercise thereof at the then current Purchase Price in accordance with the terms of this Agreement and in lieu of the Preferred Shares, shares of Common Stock and other securities or assets of the Company, such number of validly authorized and issued, fully paid, non-assessable and freely tradable shares of Common Stock of the Principal Party, not subject to any liens, encumbrances, rights of first refusal, preemptive rights or other adverse claims, as shall be equal to the result obtained by (A) multiplying the then current Purchase Price by the number of one one-hundredths of a Preferred Share for which a Right was exercisable immediately prior to the first occurrence of a Section 13 Event (without taking into account any adjustment previously made pursuant to Section 11(a)(ii)) and
(y) dividing that product by fifty percent (50%) of the current market price per share of the Common Stock of such Principal Party (determined pursuant to
Section 11(d) hereof) on the date of consummation of such Section 13 Event; (ii) such Principal Party shall thereafter be liable for, and shall assume, by virtue of such Section 13 Event, all the obligations and duties of the Company pursuant to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Section 13 Event; and (iv) such Principal Party shall take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common Stock in accordance with Section 9 hereof (applying the provisions thereof with respect to Preferred Shares of the Company to the shares of Common Stock of such Principal Party)) in connection with such consummation as may be necessary to assure that the provisions hereof shall thereafter be

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applicable, as nearly as reasonably may be possible, in relation to the shares of its Common Stock thereafter deliverable upon the exercise of the Rights.

(b) "Principal Party" shall mean:

(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a): (A) the Person that is the issuer of any securities into which Common Stock of the Company is converted in such merger or consolidation, or, if there is more than one such issuer, the issuer of whose Common Stock has the greatest aggregate market value or (B) if no securities are so issued, the Person that is the other party to such merger or consolidation, or, if there is more than one such Person, the Person whose Common Stock has the greatest aggregate market value (including, if applicable, the Company if it is the surviving corporation); and

(ii) in the case of any transaction described in clause (z) of the first sentence of Section 13(a), the Person that is the party receiving the greatest portion of the assets or earning power transferred pursuant to such transaction or transactions or if the Person receiving the greatest portion of the assets or earning power cannot be determined, whichever of such Persons whose Common Stock has the greatest aggregate market value;

provided, however, that in any of the cases described in Section 13(b)(i) or
(b)(ii) above, (1) if the shares of Common Stock of such Person are not at such time and have not been continuously over the preceding twelve (12) month period registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the shares of Common Stock of which are and have been so registered, "Principal Party" shall refer to such other Person;
(2) in case such Person is a Subsidiary, directly or indirectly, of more than one Person, the shares of Common Stock of two or more of which are and have been so registered, "Principal Party" shall refer to whichever of such Persons whose Common Stock has the greatest aggregate market value; and (3) in case such Person is owned, directly or indirectly, by a joint venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in (1) and (2) above shall apply to each of the chains of ownership having an interest in such joint venture as if such party were a "Subsidiary" of both or all of such joint ventures and the Principal Parties in each such chain shall bear the obligations set forth in this Section 13 in the same ratio as their direct or indirect interests in such Person bear to the total of such interests.

(c) The Company shall not consummate any such consolidation, merger, sale or transfer unless the Principal Party shall have a sufficient number of its authorized shares of Common Stock which have not been issued or reserved for issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a

25

supplemental agreement providing for the terms set forth in paragraphs (a) and
(b) of this Section 13 and that all rights of first refusal or preemptive rights in respect of the issuance of shares of Common Stock of the Principal Party upon exercise of the outstanding Rights have been waived and that such transaction shall not result in a default by the Principal Party under this Agreement, and further providing that, as soon as practicable after the date of any consolidation, merger, sale or transfer mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense shall:

(i) prepare and file a registration statement under the Act with respect to the Rights and the securities purchasable upon the exercise of the Rights on an appropriate form, and use its best efforts to cause such registration statement to become effective as soon as practicable after such filing and to remain effective (with a prospectus at all times meeting the requirements of the Act) until the Final Expiration Date;

(ii) use its best efforts to qualify or register the Rights and the securities purchasable upon exercise of the Rights under the blue sky laws of such jurisdictions as may be necessary or appropriate;

(iii) deliver to holders of the Rights historical financial statements for the Principal Party which comply in all respects with the requirements for registration on Form 10 under the Exchange Act; and

(iv) use its best efforts to list (or continue the listing of) the Rights and the securities purchasable upon exercise of the Rights on a national securities exchange or to meet the eligibility requirements for quotation on NASDAQ.

The provisions of this Section 13 shall similarly apply to successive mergers or consolidations or sales or other transfers. In the event that a Section 13 Event shall occur at any time after the occurrence of a Stock Acquisition Date, the Rights which have not theretofore been exercised pursuant to Section 11(a)(ii) shall thereafter become exercisable in the manner described in Section 13(a).

(d) Notwithstanding any other provision of this Agreement to the contrary, Section 13 shall not be applicable to a transaction described in subparagraphs (x) and (y) of Section 13(a) if: (i) such transaction is consummated with a Person or Persons who acquired shares of Common Stock pursuant to an Approved Offer (or an Affiliate of any such Person or Persons) as promptly as reasonably practical (and in any event within one year) following consummation of such Approved Offer; (ii) the price per share of Common Stock offered in such transaction is not less than the price per share of Common Stock paid to all holders of Common Stock whose shares were purchased pursuant to such Approved Offer; and (iii) the form of consideration offered in such transaction is the same as the form of consideration paid pursuant to such Approved Offer. Upon consummation of any such transaction contemplated by this Section 13(d), all Rights hereunder shall expire.

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(e) In case the Principal Party which is to be a party to a transaction referred to in this Section 13 has provision in any of its authorized securities or in its Certificate of Incorporation or By-Laws or other instrument governing its corporate affairs, which provision would have the effect of (i) causing such Principal Party to issue, in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, shares of Common Stock of such Principal Party at less than the then current market price per share (determined pursuant to Section 11(d) hereof) or securities exercisable or exchangeable for, or convertible into, Common Stock of such Principal Party at less than such then current market price (other than to holders of Rights pursuant to this Section 13) or (ii) providing for any special payment, tax or similar provisions in connection with the issuance of the Common Stock of such Principal Party pursuant to the provisions of Section 13, then, in such event, the Company shall not consummate any such transaction unless prior thereto the Company and such Principal Party shall have executed and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party shall have been cancelled, waived or amended, or that the authorized securities shall be redeemed, so that the applicable provision will have no effect in connection with, or as a consequence of, the consummation of the proposed transaction.

(f) In no event shall the Rights Agent have any liability in respect of any such Principal Party transaction, including without limitation, the propriety thereof. The Rights Agent may rely and be fully protected in relying upon a certificate of the Company stating that the provisions of this Section 13 have been fulfilled. Notwithstanding anything in this Agreement to the contrary, the prior written consent of the Rights Agent must be obtained in connection with any supplemental agreement which alters the rights or duties of the Rights Agent.

Section 14. Fractional Rights and Fractional Shares. (a) The Company shall not be required to issue fractions of Rights (except, prior to the Distribution Date, as provided in Section 11 hereof) or to distribute Right Certificates which evidence fractional Rights. In lieu of such fractional Rights, there shall be paid to the registered holders of the Right Certificates with regard to which such fractional Rights would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole Right. For the purposes of this Section 14(a), the current market value of a whole Right shall be the closing price of the Rights for the Trading Day immediately prior to the date on which such fractional Rights would have been otherwise issuable. The closing price of the Rights for any day shall be the last sale price, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if the Rights are not listed or admitted to trading on the NYSE, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Rights are listed or admitted to trading or, if the Rights are not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and

27

low asked prices in the over-the-counter market, as reported by NASDAQ or such other system then in use or, if on any such date the Rights are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in the Rights, as selected by the Board of Directors. If on any such date the Rights are not quoted by any such organization and no professional market maker is making such a market in the Rights, the fair value of the Rights on such date as determined in good faith by the Board of Directors shall be used.

(b) The Company shall not be required to issue fractions of Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Share) upon exercise of the Rights or to distribute certificates which evidence fractional Preferred Shares (other than fractions which are integral multiples of one one-hundredth of a Preferred Shared). Fractions of Preferred Shares in integral multiples of one one-hundredth of a Preferred Share may, at the election of the Company, be evidenced by depositary receipts, pursuant to an appropriate agreement between the Company and a depositary selected by it, provided that such agreement shall provide that the holders of such depositary receipts shall have all the rights, privileges and preferences to which they are entitled as beneficial owners of the Preferred Shares represented by such depositary receipts. In lieu of fractional Preferred Shares that are not integral multiples of one one-hundredth of a Preferred Share, the Company shall pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one Preferred Share. For purposes of this Section 14(b), the current market value of a Preferred Share shall be the closing price of a Preferred Share (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of such exercise.

(c) Following the occurrence of the Stock Acquisition Date or a
Section 13 Event, the Company shall not be required to issue fractions of shares of its Common Stock upon exercise of the Rights or to distribute certificates which evidence fractional shares of its Common Stock. In lieu of fractional shares of its Common Stock, the Company may pay to the registered holders of Right Certificates at the time such Rights are exercised as herein provided an amount in cash equal to the same fraction of the current market value of one share of its Common Stock. For purposes of this Section 14(c), the current market value of one share of Common Stock of the Company shall be the closing price of one share of Common Stock of the Company (as determined pursuant to
11(d)(i)) for the Trading Day immediately prior to the date of such exercise.

(d) The holder of a Right by the acceptance thereof expressly waives any right to receive any fractional Rights or any fractional shares upon exercise of a Right (except as provided above).

Section 15. Rights of Action. All rights of action in respect of this Agreement, other than the rights of action vested in the Rights Agent pursuant to Section 18,

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are vested in the respective registered holders of the Right Certificates (and, prior to the Distribution Date, the registered holders of the shares of Common Stock); and any registered holder of any Right Certificate (or, prior to the Distribution Date, of the shares of Common Stock), without the consent of the Rights Agent or of the holder of any other Right Certificate (or, prior to the Distribution Date, any holder of the shares of Common Stock), may, on his or her own behalf and for his or her own benefit, enforce, and may institute and maintain any suit, action or proceeding against the Company to enforce, or otherwise act in respect of, his or her right to exercise the Rights evidenced by such Right Certificate in the manner provided in such Right Certificate and in this Agreement. Without limiting the foregoing or any remedies available to the holders of Rights, it is specifically acknowledged that the holders of Rights would not have an adequate remedy at law for any breach of this Agreement and will be entitled to specific performance of the obligations under, and injunctive relief against actual or threatened violations of the obligations of any Person subject to, this Agreement.

Section 16. Agreement of Right Holders. Every holder of a Right by accepting the same, consents and agrees with the Company and the Rights Agent and with every other holder of a Right that:

(a) prior to the Distribution Date, the Rights will be transferable only simultaneously and together with the transfer of shares of Common Stock;

(b) after the Distribution Date, the Right Certificates are transferable only on the registry books of the Rights Agent if surrendered at the principal office or such other office of the Rights Agent designated for such purpose, duly endorsed or accompanied by a proper instrument of transfer and with the appropriate forms and certificates fully executed;

(c) subject to Section 6, Section 7(f) and Section 11(a) hereof, the Company and the Rights Agent may deem and treat the person in whose name the Right Certificate (or, prior to the Distribution Date, the associated Common Stock certificate) is registered as the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Right Certificates or the associated Common Stock certificate made by anyone other than the Company or the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent shall be required to be affected by any notice to the contrary; and

(d) notwithstanding any other provision of this Agreement to the contrary, neither the Company nor the Rights Agent shall have any liability to any holder of a Right or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority, prohibiting or otherwise restraining performance of

29

such obligation; provided, however, that the Company must use its best efforts to have any such injunction, order, decree or ruling lifted, dissolved or otherwise overturned as soon as possible.

Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder, as such, of any Right Certificate shall be entitled to vote, receive dividends or be deemed for any purpose the holder of Preferred Shares or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Right Certificate be construed to confer upon the holder of any Right Certificate as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in Section 25 hereof), or to receive dividends or other distributions or to exercise any preemptive or subscription rights, or otherwise, until the Right or Rights evidenced by such Right Certificate shall have been exercised in accordance with the provisions hereof.

Section 18. Concerning the Rights Agent. The Company agrees to pay to the Rights Agent such compensation as shall be agreed in writing between the Company and the Rights Agent for all services rendered by it hereunder and, from time to time, on demand of the Rights Agent, its reasonable expenses and counsel fees and other disbursements incurred in the administration and execution of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent for, and to hold it harmless against, any and all loss, liability, damage, claim or expense, incurred without gross negligence, bad faith or willful misconduct on the part of the Rights Agent, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability.

The Rights Agent shall be protected and shall incur no liability for or in respect of any action taken, suffered or omitted by it in connection with its administration of this Agreement in reliance upon any Right Certificate or certificate for Common Stock or for other securities of the Company, instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate, opinion, statement, or other paper or document believed by it to be genuine and to be signed and executed by the proper person or persons and, where necessary, to be verified or acknowledged.

The provisions of this Section 18 shall survive the expiration of the Rights and the termination of this Agreement.

Section 19. Merger or Consolidation or Change of Name of Rights Agent. Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or

30

consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any corporation succeeding to all or substantially all the corporate trust or stock transfer business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 21 hereof. In case at the time such successor Rights Agent shall succeed to the agency created by this Agreement, any of the Right Certificates shall have been countersigned but not delivered, any such successor Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such Right Certificate so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, any successor Rights Agent may countersign such Right Certificate either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such Right Certificate shall have the full force provided in the Right Certificate and in this Agreement.

In case at any time the name of the Rights Agent shall be changed and at such time any of the Right Certificates shall have been countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Right Certificates so countersigned; and in case at that time any of the Right Certificates shall not have been countersigned, the Rights Agent may countersign such Right Certificates either in its prior name or in its changed name; and in all such cases such Right Certificates shall have the full force provided in the Right Certificates and in this Agreement.

Section 20. Duties of Rights Agent. The Rights Agent undertakes only those duties and obligations imposed by this Agreement upon the following terms and conditions, and no implied duties or obligations shall be read into this Agreement against the Rights Agent, by all of which the Company and the holders of Right Certificates, by their acceptance thereof, shall be bound:

(a) The Rights Agent may consult with legal counsel of its own selection (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion.

(b) Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person or any Affiliate or Associate thereof and the determination of the current market price per share of any Security) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer or the Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full

31

authorization to the Rights Agent for any action taken or omitted by it in good faith under the provisions of this Agreement in reliance upon such certificate.

(c) The Rights Agent shall be liable hereunder only for its own gross negligence, bad faith or willful misconduct.

(d) The Rights Agent shall not be liable for or by reason of any of the statements of fact or recitals contained in this Agreement or in the Right Certificates (except its countersignature thereof), or be required to verify the same, but all such statements and recitals are and shall be deemed to have been made by the Company only.

(e) The Rights Agent shall not be under any responsibility in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Right Certificate (except its countersignature thereof); nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Right Certificate; nor shall it be responsible for any change in the exercisability of the Rights (including Rights becoming null and void pursuant to Section 7(e) hereof); nor shall it be responsible for any adjustment required under the provisions of Sections 11 or 13 hereof or responsible for the manner, method or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment (except with respect to the exercise of Rights evidenced by Right Certificates after the Rights Agent's actual receipt of a certificate described in Section 12 hereof); nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any Preferred Shares or shares of Common Stock or other securities to be issued pursuant to this Agreement or any Right Certificate or as to whether any Preferred Shares or shares of Common Stock or other securities will, when issued, be validly authorized and issued, fully paid and nonassessable; and nor shall it be responsible for the legality of the terms hereof in its capacity as an administrative agent.

(f) The Company agrees that it will perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, instruments and assurances as may reasonably be required by the Rights Agent for the carrying out or performing by the Rights Agent of the provisions of this Agreement.

(g) The Rights Agent is hereby authorized and directed to accept instructions with respect to the performance of its duties hereunder from the Chairman of the Board, the Chief Executive Officer, the President, any Vice President, the Treasurer or the Secretary of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer or for any delay in acting while waiting for such instructions. Any application by the Rights Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action

32

proposed to be taken or omitted by the Rights Agent under this Rights Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Rights Agent shall not be liable for any action taken by, or omission of, the Rights Agent in accordance with a proposal included in any such application on or after the date specified in such application (which date shall not be less than five (5) Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to an earlier date) unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.

(h) The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for any other legal entity, except it may not act for an Acquiring Person in an investment banking capacity, or otherwise assist an Acquiring Person in ways hostile to the Company, without the written consent of the Company.

(i) The Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself or by or through its attorneys or agents, and the Rights Agent shall not be answerable or accountable for any act, omission, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company resulting from any such act, omission, default, neglect or misconduct, provided reasonable care was exercised in the selection thereof.

(j) If, with respect to any Right Certificate surrendered to the Rights Agent for exercise or transfer, the certificate attached to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative response to any item therein, the Rights Agent shall not take any further action with respect to such requested exercise or transfer without first consulting with the Company.

(k) No provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights if there shall be reasonable grounds for

33

believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured to it.

(l) In addition to the foregoing, the Rights Agent shall be protected and shall incur no liability for, or in respect of, any action taken or omitted by it in connection with its administration of this Agreement if such acts or omissions are in reliance upon (i) the proper execution of the certificates concerning beneficial ownership appended to the form of assignment and the form of election to purchase attached hereto unless the Rights Agent shall have actual knowledge that, as executed, any such certificate is untrue, or (ii) the non-execution of any such certificate including, without limitation, any refusal to honor any otherwise permissible assignment or election by reason of such non-execution.

(m) The Company agrees to give the Rights Agent prompt written notice of any event or ownership which would prohibit the exercise or transfer of the Right Certificates.

Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon thirty (30) days' notice in writing mailed to the Company and to each transfer agent of the Common Stock by registered or certified mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty
(30) days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Stock and Preferred Shares by registered or certified mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of sixty (60) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his or her Right Certificate for inspection by the Company), then the Rights Agent or the registered holder of any Right Certificate may apply at the expense of the Company to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation, bank or trust company organized and doing business under the laws of the United States or of the State of New York (or any other state of the United States so long as such corporation is authorized to do business as a banking institution in the State of New York) in good standing, having an office in the State of New York, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further

34

assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Stock and Preferred Shares, and mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. Notwithstanding the foregoing provision, in the event of resignation, removal or incapacity of the Rights Agent, the Company shall have the authority to act as the Rights Agent until a successor Rights Agent shall have assumed the duties of the Rights Agent hereunder.

Section 22. Issuance of New Right Certificate. Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the Company may, at its option, issue new Right Certificates evidencing Rights in such form as may be approved by the Board of Directors to reflect any adjustment or change in the Purchase Price and the number or kind or class of shares of stock or other securities or property purchasable under the Right Certificates made in accordance with the provisions of this Agreement.

In addition, in connection with the issuance or sale of shares of Common Stock following the Distribution Date (other than upon exercise or exchange of a Right) and prior to the Expiration Date, the Company, subject to
Section 7(e) hereof, (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities, notes or debentures issued by the Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board of Directors, issue Right Certificates representing the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) the Company shall not be obligated to issue any Right Certificate if, and to the extent that, the Company shall be advised by counsel that such issuance would create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would be issued, and (ii) no such Rights Certificate shall be issued if, and to the extent that, appropriate adjustment shall otherwise have been made in lieu of the issuance thereof.

Section 23. Redemption. (a) The Company may, by resolution of the Board of Directors, at its option, at any time prior to the earlier of (x) the Stock Acquisition Date and (y) the close of business on the Final Expiration Date, redeem all but not less than all of the then outstanding Rights at a redemption price of $0.01 per Right, as such amount may be appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such redemption price being hereinafter referred to as the "Redemption Price"). The redemption of the Rights by the Board of Directors may be made effective at such time, on such basis and with such conditions as the Board of Directors in its sole discretion may establish. The Company may, at its option, pay the Redemption Price in cash, shares of Common Stock (based on the current market price of the Common Stock

35

determined pursuant to Section 11(d)(i) hereof) or any other form of consideration deemed appropriate by the Board of Directors.

(b) Immediately upon adoption of an effective resolution of the Board of Directors ordering the redemption of the Rights in compliance with
Section 23(a) (or upon the subsequent satisfaction of all conditions to such redemption established by such resolution), evidence of which shall have been filed with the Rights Agent, and without any further action and without any notice, the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the Redemption Price. Within ten (10) Business Days after the action of the Board of Directors ordering the redemption of the Rights (or such subsequent satisfaction of all such conditions), the Company shall give notice of such redemption to the holders of the then outstanding Rights by mailing such notice to all such holders at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent for the shares of Common Stock. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of redemption will state the method by which the payment of the Redemption Price will be made. Neither the Company nor any of its Affiliates or Associates may redeem, acquire or purchase any Rights at any time in any manner other than that specifically set forth in this Section 23 or in
Section 24 hereof, and other than in connection with the repurchase of shares of Common Stock of the Company prior to the Distribution Date.

(c) In the event that the Board of Directors adopts an effective resolution ordering the redemption of the Rights in compliance with Section
23(a), the Company may, at its option, discharge all of its obligations with respect to the Rights by (i) issuing a press release announcing the manner of redemption of the Rights in accordance with this Agreement and (ii) mailing payment of the Redemption Price to the registered holders of the Rights at their last addresses as they appear on the registry books of the Rights Agent or, prior to the Distribution Date, on the registry books of the transfer agent of the Common Stock, and upon such action, all outstanding Rights and Right Certificates shall be null and void without any further action by the Company.

Section 24. Exchange. (a) The Board of Directors may, at its option, at any time after the Stock Acquisition Date exchange all or part of the then-outstanding and exercisable Rights (which shall not include Rights that have become void pursuant to the provisions of Section 7(e) hereof) for shares of Common Stock (or Common Stock Equivalents) at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof (such exchange ratio being hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors shall not be empowered to effect such exchange at any time after any Person (other than any Company Entity), together with all

36

Affiliates and Associates of such Person, becomes the Beneficial Owner of fifty percent (50%) or more of the shares of Common Stock then outstanding.

(b) Immediately upon the action of the Board of Directors ordering the exchange of Rights pursuant to and in compliance with subsection (a) of this
Section 24 and without any further action and without any notice, the right to exercise such Rights shall terminate and the only right thereafter of a holder of such Rights, which excludes Rights that have become void pursuant to the provisions of Section 7(e) hereof, shall be to receive that number of shares of Common Stock, or Common Stock Equivalents, equal to the number of such Rights held by such holder multiplied by the Exchange Ratio. The Company shall promptly file notice of such Board action with the Rights Agent and give public notice of any such exchange; provided, however, that the failure to give, or any defect in, such notice shall not affect the validity of such exchange. The Company shall promptly mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear upon the registry books of the Rights Agent. Any notice which is mailed in the manner herein provided shall be deemed given, whether or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares of Common Stock for Rights will be effected and, in the event of any partial exchange, the number of Rights which will be exchanged. Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights which have become void pursuant to the provisions of Section 7(e)) held by each holder of Rights.

(c) In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights.

(d) The Company shall not be required, pursuant to this Section 24, to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, the Company shall pay to the registered holders of the Right Certificates, with regard to which such fractional shares of Common Stock would otherwise be issuable, an amount in cash equal to the same fraction of the current market value of a whole share of Common Stock. For the purposes of this paragraph (d), the current market value of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24, and the value of any Common Stock Equivalent shall be deemed to have the same current market value as the Common Stock on such date.

Section 25. Notice of Certain Events. (a) In case the Company shall propose (a) to pay any dividend payable in stock of any class to the holders of its Preferred Shares (or, after the Distribution Date, holders of the shares of Common Stock) or to make any

37

other distribution to the holders of its Preferred Shares (or, after the Distribution Date, holders of the shares of Common Stock), other than a regular quarterly cash dividend at a rate per Preferred Share not in excess of the greater of (x) two hundred (200) times the rate of the last quarterly cash dividend per share of Common Stock theretofore paid and (y) $5.00 per quarter or
(b) to offer to the holders of its Preferred Shares (or, after the Distribution Date, holders of the shares of Common Stock) rights, options or warrants to subscribe for or to purchase any additional Preferred Shares or shares of stock of any class or any other securities, rights or options, or (c) to effect any reclassification of its Preferred Shares (other than a reclassification involving only the subdivision of outstanding Preferred Shares), or (d) after the Distribution Date, to effect any merger, consolidation or other combination with or into any Person (other than a Subsidiary of the Company in a transaction which does not violate Section 11(o) hereof), or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect any sale or other transfer), in one or more transactions, of more than fifty percent (50%) of the assets or earning power of the Company and its Subsidiaries (taken as a whole) to any Person or Persons (other than the Company and/or any of its Subsidiaries in one or more transactions each of which does not violate Section 11(o) hereof), or (e) after the Distribution Date, to effect the liquidation, dissolution or winding up of the Company, then, in each such case, the Company shall give to each holder of a Right, in accordance with Section 26 hereof, a notice of such proposed action to the extent feasible and file a certificate with the Rights Agent to that effect, which shall specify the record date for the purposes of such stock dividend, distribution of rights or Rights, or the date on which such reclassification, consolidation, merger, sale, transfer, liquidation, dissolution, or winding up is to take place and the date of participation therein by the holders of shares of Common Stock and/or Preferred Shares, if any such date is to be fixed, and such notice shall be so given in the case of any action covered by clause (a) or (b) above at least ten (10) days prior to the record date for determining holders of the Preferred Shares for purposes of such action, and in the case of any such other action, at least twenty (20) days prior to the date of the taking of such proposed action or the date of participation therein by the holders of shares of Common Stock and/or Preferred Shares, whichever shall be earlier. The failure to give notice required by this Section 24 or any defect therein shall not affect the legality or validity of the action taken by the Company or the vote upon any such action.

(b) Upon the Stock Acquisition Date (i) the Company shall as soon as practicable thereafter give to the Rights Agent and each holder of a Right Certificate, to the extent feasible and in accordance with Section 26 hereof, a notice of the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under Sections 7(e) and 11(a) hereof and (ii) all references in Section 25(a) hereof to Preferred Shares shall be deemed thereafter to refer also to shares of Common Stock or other securities issuable in respect of the Rights.

Section 26. Notices. Notices or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Right Certificate to or on the

38

Company shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Rights Agent) as follows:

Young & Rubicam Inc.
285 Madison Avenue
New York, New York 10017-6486 Attention: General Counsel

Subject to the provisions of Section 21, any notice or demand authorized by this Agreement to be given or made by the Company or by the holder of any Right Certificate to or on the Rights Agent shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed (until another address is filed in writing with the Company) as follows:

The Bank of New York
101 Barclay Street, Floor 12W New York, New York 10286
Attention: Stock Transfer Administration

Notices or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Right Certificate (or, if prior to the Distribution Date, to the holder of any certificate for shares of Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to such holder at the address of such holder as shown on the registry books of the Company.

Section 27. Supplements and Amendments. Prior to the Stock Acquisition Date, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates or certificates representing shares of Common Stock. From and after the Stock Acquisition Date, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Right Certificates or certificates representing shares of Common Stock in order (i) to cure any ambiguity, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder or (iv) to change or supplement the provisions hereunder in any manner which the Company may deem necessary or desirable and which shall not adversely affect the interests of the holders of Right Certificates (other than an Acquiring Person or an Affiliate or Associate thereof); provided, however, that this Agreement may not be supplemented or amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time period relating to when the Rights may be redeemed or to modify the ability (or inability) of the Board of Directors to redeem the Rights, in either case at such time as the Rights are not then redeemable or (B) any other time period unless such lengthening is for the purpose of protecting, enhancing or clarifying the rights of and/or the benefits to the holders of Rights (other than an Acquiring Person or an Affiliate or Associate of any such Person). Upon the delivery of a certificate

39

from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 27, the Rights Agent shall execute such supplement or amendment provided that such supplement or amendment does not adversely affect the rights or obligations of the Rights Agent under Section 18 or Section 20 hereof. Prior to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders of shares of Common Stock.

Section 28. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

Section 29. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any Person other than the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, of the shares of Common Stock of the Company) any legal or equitable right, remedy or claim under this Agreement; but this Agreement shall be for the sole and exclusive benefit of the Company, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, of the shares of Common Stock of the Company).

Section 30. Severability. If any term, provision, covenant or restriction of this Agreement or the Rights is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of this Agreement and the Rights shall remain in full force and effect and shall in no way be affected, impaired or invalidated; provided, however, that notwithstanding any other provision of this Agreement to the contrary, if any such term, provision, covenant or restriction is held by such court or authority to be invalid, void or unenforceable and the Board of Directors determines in its good faith judgment that severing the invalid language from this Agreement would adversely affect the purpose or effect of this Agreement, the right of redemption set forth in Section 23 hereof shall be reinstated and shall not expire until the close of business on the tenth (10th) Business Day following the date of such determination by the Board of Directors.

Section 31. Determination and Actions by the Board of Directors, etc. The Board of Directors shall have the exclusive power and authority to administer this Agreement and to exercise all rights and powers specifically granted to the Board of Directors or to the Company, or as may be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power to (i) interpret the provisions of this Agreement, and (ii) make all determinations deemed necessary or advisable for the administration of this Agreement (including, without limitation, a determination to redeem or not to redeem the Rights pursuant to Section 23 hereof or to supplement or amend the Agreement and whether any proposed supplement or amendment adversely affects the interests of the holders of Right Certificates and comports with the requirements of Section 27 hereof, or to approve any tender offer or exchange offer for

40

purposes of the definition of "Approved Offer," or to determine whether any acquisition of beneficial ownership of shares of Common Stock is inadvertent within the meaning of the definition of "Acquiring Person," or to find or to announce publicly that any Person has become an Acquiring Person). All such actions, calculations, interpretations and determinations (including for purpose of clause (y) below, all omissions with respect to the foregoing) which are done or made by the Board of Directors in good faith, shall (x) be final, conclusive and binding on the Company, the Rights Agent, the holders of the Right Certificates and all other parties, and (y) not subject the Board of Directors or any director to any liability to the holders of the Right Certificates.

Section 32. Governing Law. This Agreement and each Right Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State, provided, however, that the rights and obligations of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York.

Section 33. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

Section 34. Descriptive Headings. Descriptive headings of the several Sections of this Agreement are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

41

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the date and the year first above written.

Young & Rubicam Inc.

By

Name:


Title:

The Bank of New York, as Rights Agent

By

Name:


Title:

42

Exhibit A

FORM

of

CERTIFICATE OF DESIGNATIONS

of

CUMULATIVE PARTICIPATING JUNIOR PREFERRED STOCK

of

YOUNG & RUBICAM INC.

(Pursuant to Section 151 of the
Delaware General Corporation Law)


Young & Rubicam Inc., a corporation organized and existing under the Delaware General Corporation Law (hereinafter called the "Corporation"), hereby certifies that the following resolution was duly adopted by the Board of Directors of the Corporation as required by Section 151 of the Delaware General Corporation Law at a meeting duly called and held on [__________], 1998:

RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation (hereinafter called the "Board of Directors" or the "Board") in accordance with the provisions of the Amended and Restated Certificate of Incorporation of the Corporation, the Board of Directors hereby creates a series of Preference Stock, no par value, of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows:

Cumulative Participating Junior Preferred Stock

Section 1. Designation and Amount. The shares of such series shall be designated as "Cumulative Participating Junior Preferred Stock" (the "Junior Preferred Stock") and the number of shares initially constituting the Junior Preferred Stock shall be 2,500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no such decrease shall reduce the number of authorized shares of


Junior Preferred Stock to a number less than the number of shares of Junior Preferred Stock then outstanding plus the number of shares of Junior Preferred Stock then reserved for issuance upon the exercise of any outstanding options, rights or warrants or upon the exercise of any conversion or exchange privilege contained in any outstanding securities issued by the Corporation. The Corporation's stated capital with respect to each issued and outstanding share of Junior Preferred Stock shall be $1.00.

Section 2. Dividends and Distributions.

(A) Subject to the rights of the holders of any shares of any series of Preference stock ranking senior to the Junior Preferred stock with respect to dividends, including the Corporation's Money Market Preferred Stock, the holders of shares of Junior Preferred Stock, in preference to the holders of shares of Common Stock, par value $0.01 per share (the "Common Stock"), of the Corporation, and in preference to the holders of shares of any other class of capital stock of the Corporation ranking junior to the Junior Preferred Stock with respect to dividends, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first days of January, April, July and October in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Junior Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 and (b) subject to the provision for adjustment hereinafter set forth, one hundred (100) times the aggregate per share amount of all cash dividends, and one hundred (100) times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Junior Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock (other than any and all dividends declared on the outstanding Shares of Common Stock payable in Common Stock, if the declaration of such dividends occurs prior to the date on which the Common Stock is registered under the Exchange Act, regardless of when such dividends are payable or are paid (a "Stock Split")), or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise), then in each such case the amount to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is

A-2

the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) The Corporation shall declare, out of funds legally available therefor, a dividend or distribution on the Junior Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Junior Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Junior Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares of Junior Preferred Stock is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Junior Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Junior Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Junior Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than fifty (50) calendar days prior to the date fixed for the payment thereof.

Section 3. Voting Rights. In addition to any other voting rights required by applicable law, the holders of shares of Junior Preferred Stock shall have the following voting rights:

(A) Each share of Junior Preferred Stock shall entitle the holder thereof to one hundred (100) votes (subject to adjustment as set forth below) on all matters submitted to a vote of the stockholders of the Corporation (including, without limitation, the election of directors). In the event the Corporation shall at any time declare any dividend on the Common Stock payable in shares of Common Stock (other than the Stock Split), or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise), then in each such case the number of votes per share to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the

A-3

number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) Except as otherwise provided herein, in the Amended and Restated Certificate of Incorporation, in any other Certificate of Designations creating a series of Preference Stock or any similar stock or by law, the holders of shares of Junior Preferred Stock, the holders of shares of Common Stock and the holders of any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

(C) (i) If at any time dividends on any Junior Preferred Stock in an amount equal to the full accrued dividends for six (6) or more quarterly dividend periods, whether or not consecutive, shall not have been paid or declared and a sum sufficient for the payment thereof irrevocably set aside in trust for the holders of all of such shares, the Board of Directors of the Corporation shall promptly take all necessary actions to increase the authorized number of directors of the Corporation by one (1) and the holders of the shares of the Junior Preferred Stock then outstanding shall be entitled (by series, voting as a single class) to elect one (1) person as a director to the Board of Directors of the Corporation (such right to elect one (1) director being hereinafter sometimes referred to as the "special voting rights"), each outstanding share having such right being entitled for such purpose to one vote; provided, however, that at such time as the arrearage in payment of dividends which gave rise to the exercise of the special voting rights has been cured with regard to the Junior Preferred Stock by waiver or payment of all accrued dividends, the right of the holders of such shares so to vote as provided in this paragraph (C)(i) of this Section 3 shall cease (subject to renewal from time to time upon the same terms and conditions) and the term of office of the person who is at that time a director elected by such holders shall terminate and the number of directors of the Corporation shall be automatically reduced by one (1).

(ii) At any time after the special voting rights shall have become vested in the holders of the shares of the Junior Preferred Stock as provided in paragraph (C)(i) of this Section 3, the Secretary of the Corporation, as promptly as possible but in any event within twenty (20) calendar days after receipt of the written request of the holders of not less than ten percent (10%) of the shares of the Junior Preferred Stock then outstanding, addressed to the Corporation at its principal office, shall call a special meeting of the holders of the shares of the Junior Preferred Stock for the purpose of electing such additional director, such meeting to be held at any place as provided by the By-Laws of the Corporation for meetings of the Corporation's stockholders, and upon not less than ten (10) nor more than sixty (60) calendar days' notice. If such meeting shall not be so called within sixty (60) calendar days after receipt of the request by the Secretary of the Corporation, then the holders of not less than ten percent (10%) of the shares of the Junior Preferred Stock then outstanding may, by

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written notice to the Secretary of the Corporation, designate any person to call such meeting, and the person so designated may call such meeting, at any such place as provided above and upon not less than ten (10) nor more than sixty (60) calendar days' notice and for that purpose shall have access to the stockholder record books of the Corporation. No such special meeting of the holders of the shares of the Junior Preferred Stock and no adjournment thereof shall be held on a date later than thirty (30) calendar days before the annual meeting of stockholders of the Corporation. At any meeting so called or at any annual meeting held at any time when the special voting rights are in effect, the holders of a majority of the shares of the Junior Preferred Stock then outstanding, present in person or by proxy, shall be sufficient to constitute a quorum for the election of such additional director, and such additional director, together with any and all other directors who are then members of the Board of Directors, shall constitute the duly elected directors of the Corporation.

(iii) With respect to a vacancy arising in the directorship referred to in paragraph (C)(i) of this Section 3 at any time when the special voting rights are in effect pursuant to paragraph (C)(i) of this Section 3, upon the written request of the holders of not less than ten percent (10%) of the shares of the Junior Preferred Stock then outstanding, addressed to the Corporation at its principal office, the Secretary of the Corporation shall give notice of a special meeting of holders of the shares of the Junior Preferred Stock of the election of a director to fill such vacancy caused by the death, resignation or other inability to serve as a director elected by such holders, to be held not less than ten (10) nor more than twenty (20) calendar days following receipt by the Secretary of the Corporation of such written request. So long as special voting rights are in effect pursuant to paragraph (c)(i) of this Section 3, any director who shall have been so elected by the holders of the Junior Preferred Stock may be removed at any time, either with or without cause, only by the affirmative vote of the holders of the shares at the time entitled to cast a majority of the votes entitled to be cast for the election of such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders.

(D) Except as set forth herein, or as otherwise provided by the Amended and Restated Certificate of Incorporation or by law, holders of Junior Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

(E) Holders of Junior Preferred Stock shall be entitled to such notice of each meeting of stockholders as is furnished to the holders of Common Stock with respect to such meeting.

Section 4. Certain Restrictions.

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(A) Subject to the provisions of the Amended and Restated Certificate of Incorporation, whenever quarterly dividends or other dividends or distributions payable on the Junior Preferred Stock as provided in Section 2 are in arrears as of any Quarterly Dividend Payment Date, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Junior Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock;

(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except dividends paid ratably on the Junior Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (both as to dividends and upon dissolution, liquidation or winding up) to the Junior Preferred Stock; or

(iv) purchase or otherwise acquire for consideration any shares of Junior Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock or redeem any shares of such parity stock, except in accordance with the terms of the Amended and Restated Certificate of Incorporation and with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

Section 5. Reacquired Shares. Any shares of Junior Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after such purchase or acquisition. All such shares shall upon

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their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preference Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein, in the Amended and Restated Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preference Stock or any similar stock or as otherwise required by law.

Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock unless, prior thereto, the holders of shares of Junior Preferred Stock shall have received $1.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Junior Preferred Liquidation Preference"). Following the payment of the full amount of the Junior Preferred Liquidation Preference, no additional distributions shall be made to the holders of shares of Junior Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Junior Preferred Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph (C) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause
(ii) immediately above being referred to as the "Adjustment Number"). Following the payment of the full amount of the Junior Preferred Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Junior Preferred Stock and Common Stock, respectively, holders of Junior Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to one (1) with respect to such Junior Preferred Stock and Common Stock, on a per share basis, respectively.

(B) In the event, however, that there are not sufficient assets available to permit payment in full of the Junior Preferred Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Junior Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock.

(C) In the event the Corporation shall at any time (i) declare any dividend on Common Stock payable in shares of Common Stock (other than the Stock Split), (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock

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into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Junior Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to one hundred (100) times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare any dividend on the Common Stock payable in shares of Common Stock (other than the Stock Split), or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Junior Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 8. Ranking. The Junior Preferred Stock shall rank senior, as to dividends and upon liquidation, dissolution or winding up, to the Common Stock, and junior, as to dividends and upon liquidation, dissolution or winding up, to all other classes and series of capital stock of the Corporation, including all series of Preference Stock of the Corporation, unless the terms of any such class or series shall expressly provide otherwise.

Section 9. No Redemption. The shares of Junior Preferred Stock shall not be redeemable.

Section 10. Fractional Shares. The Junior Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of shares of Junior Preferred Stock.

IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its [Chief Executive Officer] as of the ___ day of ________, 1998.

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[Chief Executive Officer]

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Exhibit B

[Form of Right Certificate]

Certificate No. R-_____________ Rights

NOT EXERCISABLE AFTER May 1, 2008 OR EARLIER IF NOTICE OF REDEMPTION IS GIVEN BY THE COMPANY OR IF EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR ANY ASSOCIATES OR AFFILIATES THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.

Right Certificate

YOUNG & RUBICAM INC.

This certifies that , or registered assigns, is the registered owner of the number of Rights set forth above, each of which entitles the owner thereof, subject to the terms, provisions and conditions of the Rights Agreement dated as of April [_], 1998 (the "Rights Agreement") between Young & Rubicam Inc., a Delaware corporation (the "Company"), and The Bank of New York (the "Rights Agent"), to purchase from the Company at any time after the Distribution Date and prior to 5:00 P.M. (New York City time) on the Expiration Date (as such terms are defined in the Rights Agreement) at the principal stock transfer office or such other office of the Rights Agent designated for such purpose, or of its successors as Rights Agent, one one-hundredth of a fully-paid, nonassessable share of Cumulative Participating Junior Preferred Stock, no par value (the "Junior Preferred Shares"), of the Company, at a purchase price of $[____] per one one-hundredth of a Junior Preferred Share (the "Purchase Price"), upon presentation and surrender of this Right Certificate with the Form of Election to Purchase Shares and related Certificate duly executed. The number of Rights evidenced by this Right Certificate (and the number of shares which may be purchased upon exercise thereof) set forth above, and the Purchase Price per share set forth above, are the number and Purchase Price as of April [_], 1998.


From and after the Stock Acquisition Date (as such term is defined in the Rights Agreement), if the Rights evidenced by any Right Certificate are beneficially owned by (i) an Acquiring Person or any Affiliate or Associate thereof (as such terms are defined in the Rights Agreement), (ii) a transferee of an Acquiring Person (or of any Affiliate or Associate thereof), (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person who, after such transfer, became an Acquiring Person or any Affiliate or Associate thereof or (iv) a subsequent transferee of any of the foregoing, such Rights shall become null and void and no holder hereof shall have any rights whatsoever with respect to such Rights, whether under any provision of the Rights Agreement or otherwise.

As provided in the Rights Agreement, the Purchase Price and the number and kind of Junior Preferred Shares or other securities which may be purchased upon the exercise of the Rights evidenced by this Right Certificate are subject to modification and adjustment upon the happening of certain events, and in certain circumstances may be exercised to purchase securities of issuers other than the Company.

This Right Certificate is subject to all of the terms, provisions and conditions of the Rights Agreement, which terms, provisions and conditions are hereby incorporated herein by reference and made a part hereof and to which Rights Agreement reference is hereby made for a full description of the rights, limitations of rights, obligations, duties and immunities hereunder of the Rights Agent, the Company and the holders of the Right Certificates, which limitations of rights include the temporary suspension of the exercisability of such Rights under the circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file at the above-mentioned office of the Rights Agent and are available free of charge upon written request from the Company at:

Young & Rubicam Inc.
285 Madison Avenue
New York, New York 10017-6486 Attention: General Counsel

This Right Certificate, with or without other Right Certificates, upon surrender at the principal office of the Rights Agent or such other office designated by it for such purpose, may be exchanged for another Right Certificate or Right Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one one-hundredths of a Junior Preferred Share as the Rights evidenced by the Right Certificate or Right Certificates surrendered shall have entitled such holder to purchase. If this Right Certificate shall be exercised in part, the holder shall be entitled to receive, upon surrender hereof, another Right Certificate or Right certificates for the number of whole Rights not exercised.

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Subject to the provisions of the Rights Agreement, the Rights evidenced by this Right Certificate (i) may be redeemed by the Company at its option at a redemption price of $0.01 per Right (payable in cash, shares of Common Stock or other consideration), appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after the date hereof, at any time prior to the earlier of (x) the Stock Acquisition Date and
(y) the Final Expiration Date, or (ii) exchanged, in whole or in part, for Common Stock or Common Stock Equivalents.

Subject to the provisions of the Rights Agreement, the Rights evidenced by this Right Certificate (and the Rights Agreement itself) may be amended by action of the Company's Board of Directors without the approval of the holders of any of the Rights.

No fractional Junior Preferred Shares will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-hundredth, which may, at the election of the Company, be evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.

No holder of this Right Certificate, as such, shall be entitled to vote or receive dividends or be deemed for any purpose the holder of Junior Preferred Shares or of any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription rights, or otherwise, until the Right or Rights evidenced by this Right Certificate shall have been exercised as provided in the Rights Agreement.

This Right Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent.

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WITNESS the facsimile signature of the proper officers of the Company.

Dated as of _____________, 19__

YOUNG & RUBICAM INC.

By

Name:


Title:

Countersigned:

The Bank of New York, as Rights Agent

By

Authorized Signatory

Date of Countersignature:

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[Form of Reverse Side of Right Certificate]

FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder desires to transfer the Right Certificate)

FOR VALUE RECEIVED ________________________ hereby sells, assigns and transfers unto _______________________________________________ _____________________________________________ (Please print name and address of transferee) this Right Certificate, together with all right, title and interest therein, and does hereby irrevocably constitute and appoint __________________________ Attorney, to transfer the within Right Certificate on the books of the within-named Company, with full power of substitution.

Dated: _________________, 19__


Signature

Signature Guaranteed:

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Certificate

The undersigned hereby certifies by checking the appropriate boxes that:

(1) this Right Certificate is |_| is not |_| being sold, assigned or transferred by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement);

(2) after due inquiry and to the best knowledge of the undersigned, it did |_| did not |_| acquire the Rights evidenced by this Right Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

Dated: ________________, 19__ ---------------------------- Signature

Signature Guaranteed:

NOTICE

The signature of the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.

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FORM OF ELECTION TO PURCHASE SHARES

(To be executed if holder desires

to exercise Rights represented by the Right Certificate)

To Young & Rubicam Inc.:

The undersigned hereby irrevocably elects to exercise _________________ Rights represented by this Right Certificate to purchase the Junior Preferred Shares issuable upon the exercise of the Rights (or such other securities of the Company or of any other person which may be issuable upon the exercise of the Rights) and requests that certificates for such shares be issued in the name of and delivered to:

Please insert Social Security or other identifying number: ____________________


(Please print name and address)

If such number of Rights shall not be all the Rights evidenced by this Right Certificate, a new Right Certificate for the balance of such Rights shall be registered in the name of and delivered to:

Please insert Social Security or other identifying number: ____________________


(Please print name and address)


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Dated: __________________, 19__


Signature

Signature Guaranteed:

B-8

Certificate

The undersigned hereby certifies by checking the appropriate boxes that:

(1) the Rights evidenced by this Right Certificate are |_| are not |_| being exercised by or on behalf of a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement);

(2) after due inquiry and to the best knowledge of the undersigned, it did |_| did not |_| acquire the Rights evidenced by this Right Certificate from any Person who is, was or became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

Dated: ___________________, 19__


Signature

Signature Guaranteed:

NOTICE

The signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Right Certificate in every particular, without alteration or enlargement or any change whatsoever.

B-9

Exhibit 4.3

FORM

of

CERTIFICATE OF DESIGNATIONS

of

CUMULATIVE PARTICIPATING JUNIOR PREFERRED STOCK

of

YOUNG & RUBICAM INC.

(Pursuant to Section 151 of the
Delaware General Corporation Law)


Young & Rubicam Inc., a corporation organized and existing under the Delaware General Corporation Law (hereinafter called the "Corporation"), hereby certifies that the following resolution was duly adopted by the Board of Directors of the Corporation as required by Section 151 of the Delaware General Corporation Law at a meeting duly called and held on [__________], 1998:

RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation (hereinafter called the "Board of Directors" or the "Board") in accordance with the provisions of the Amended and Restated Certificate of Incorporation of the Corporation, the Board of Directors hereby creates a series of Preference Stock, no par value, of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences, and limitations thereof as follows:

Cumulative Participating Junior Preferred Stock

Section 1. Designation and Amount. The shares of such series shall be designated as "Cumulative Participating Junior Preferred Stock" (the "Junior Preferred Stock") and the number of shares initially constituting the Junior Preferred Stock shall be 2,500,000. Such number of shares may be increased or decreased by resolution of the Board of Directors; provided, that no such decrease shall reduce the number of authorized shares of


Junior Preferred Stock to a number less than the number of shares of Junior Preferred Stock then outstanding plus the number of shares of Junior Preferred Stock then reserved for issuance upon the exercise of any outstanding options, rights or warrants or upon the exercise of any conversion or exchange privilege contained in any outstanding securities issued by the Corporation. The Corporation's stated capital with respect to each issued and outstanding share of Junior Preferred Stock shall be $1.00.

Section 2. Dividends and Distributions.

(A) Subject to the rights of the holders of any shares of any series of Preference stock ranking senior to the Junior Preferred stock with respect to dividends, including the Corporation's Money Market Preferred Stock, the holders of shares of Junior Preferred Stock, in preference to the holders of shares of Common Stock, par value $0.01 per share (the "Common Stock"), of the Corporation, and in preference to the holders of shares of any other class of capital stock of the Corporation ranking junior to the Junior Preferred Stock with respect to dividends, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the first days of January, April, July and October in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Junior Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $1.00 and (b) subject to the provision for adjustment hereinafter set forth, one hundred (100) times the aggregate per share amount of all cash dividends, and one hundred (100) times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Junior Preferred Stock. In the event the Corporation shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock (other than any and all dividends declared on the outstanding Shares of Common Stock payable in Common Stock, if the declaration of such dividends occurs prior to the date on which the Common Stock is registered under the Exchange Act, regardless of when such dividends are payable or are paid (a "Stock Split")), or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise), then in each such case the amount to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is

2

the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) The Corporation shall declare, out of funds legally available therefor, a dividend or distribution on the Junior Preferred Stock as provided in paragraph (A) of this Section immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Junior Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

(C) Dividends shall begin to accrue and be cumulative on outstanding shares of Junior Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares of Junior Preferred Stock is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Junior Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Junior Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Junior Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be not more than fifty (50) calendar days prior to the date fixed for the payment thereof.

Section 3. Voting Rights. In addition to any other voting rights required by applicable law, the holders of shares of Junior Preferred Stock shall have the following voting rights:

(A) Each share of Junior Preferred Stock shall entitle the holder thereof to one hundred (100) votes (subject to adjustment as set forth below) on all matters submitted to a vote of the stockholders of the Corporation (including, without limitation, the election of directors). In the event the Corporation shall at any time declare any dividend on the Common Stock payable in shares of Common Stock (other than the Stock Split), or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise), then in each such case the number of votes per share to which holders of shares of Junior Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction, the numerator of which is the

3

number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

(B) Except as otherwise provided herein, in the Amended and Restated Certificate of Incorporation, in any other Certificate of Designations creating a series of Preference Stock or any similar stock or by law, the holders of shares of Junior Preferred Stock, the holders of shares of Common Stock and the holders of any other capital stock of the Corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation.

(C) (i) If at any time dividends on any Junior Preferred Stock in an amount equal to the full accrued dividends for six (6) or more quarterly dividend periods, whether or not consecutive, shall not have been paid or declared and a sum sufficient for the payment thereof irrevocably set aside in trust for the holders of all of such shares, the Board of Directors of the Corporation shall promptly take all necessary actions to increase the authorized number of directors of the Corporation by one (1) and the holders of the shares of the Junior Preferred Stock then outstanding shall be entitled (by series, voting as a single class) to elect one (1) person as a director to the Board of Directors of the Corporation (such right to elect one (1) director being hereinafter sometimes referred to as the "special voting rights"), each outstanding share having such right being entitled for such purpose to one vote; provided, however, that at such time as the arrearage in payment of dividends which gave rise to the exercise of the special voting rights has been cured with regard to the Junior Preferred Stock by waiver or payment of all accrued dividends, the right of the holders of such shares so to vote as provided in this paragraph (C)(i) of this Section 3 shall cease (subject to renewal from time to time upon the same terms and conditions) and the term of office of the person who is at that time a director elected by such holders shall terminate and the number of directors of the Corporation shall be automatically reduced by one (1).

(ii) At any time after the special voting rights shall have become vested in the holders of the shares of the Junior Preferred Stock as provided in paragraph (C)(i) of this Section 3, the Secretary of the Corporation, as promptly as possible but in any event within twenty (20) calendar days after receipt of the written request of the holders of not less than ten percent (10%) of the shares of the Junior Preferred Stock then outstanding, addressed to the Corporation at its principal office, shall call a special meeting of the holders of the shares of the Junior Preferred Stock for the purpose of electing such additional director, such meeting to be held at any place as provided by the By-Laws of the Corporation for meetings of the Corporation's stockholders, and upon not less than ten (10) nor more than sixty (60) calendar days' notice. If such meeting shall not be so called within sixty (60) calendar days after receipt of the request by the Secretary of the Corporation, then the holders of not less than ten percent (10%) of the shares of the Junior Preferred Stock then outstanding may, by

4

written notice to the Secretary of the Corporation, designate any person to call such meeting, and the person so designated may call such meeting, at any such place as provided above and upon not less than ten (10) nor more than sixty (60) calendar days' notice and for that purpose shall have access to the stockholder record books of the Corporation. No such special meeting of the holders of the shares of the Junior Preferred Stock and no adjournment thereof shall be held on a date later than thirty (30) calendar days before the annual meeting of stockholders of the Corporation. At any meeting so called or at any annual meeting held at any time when the special voting rights are in effect, the holders of a majority of the shares of the Junior Preferred Stock then outstanding, present in person or by proxy, shall be sufficient to constitute a quorum for the election of such additional director, and such additional director, together with any and all other directors who are then members of the Board of Directors, shall constitute the duly elected directors of the Corporation.

(iii) With respect to a vacancy arising in the directorship referred to in paragraph (C)(i) of this Section 3 at any time when the special voting rights are in effect pursuant to paragraph (C)(i) of this Section 3, upon the written request of the holders of not less than ten percent (10%) of the shares of the Junior Preferred Stock then outstanding, addressed to the Corporation at its principal office, the Secretary of the Corporation shall give notice of a special meeting of holders of the shares of the Junior Preferred Stock of the election of a director to fill such vacancy caused by the death, resignation or other inability to serve as a director elected by such holders, to be held not less than ten (10) nor more than twenty (20) calendar days following receipt by the Secretary of the Corporation of such written request. So long as special voting rights are in effect pursuant to paragraph (c)(i) of this Section 3, any director who shall have been so elected by the holders of the Junior Preferred Stock may be removed at any time, either with or without cause, only by the affirmative vote of the holders of the shares at the time entitled to cast a majority of the votes entitled to be cast for the election of such director at a special meeting of such holders called for that purpose, and any vacancy thereby created may be filled by the vote of such holders.

(D) Except as set forth herein, or as otherwise provided by the Amended and Restated Certificate of Incorporation or by law, holders of Junior Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action.

(E) Holders of Junior Preferred Stock shall be entitled to such notice of each meeting of stockholders as is furnished to the holders of Common Stock with respect to such meeting.

Section 4. Certain Restrictions.

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(A) Subject to the provisions of the Amended and Restated Certificate of Incorporation, whenever quarterly dividends or other dividends or distributions payable on the Junior Preferred Stock as provided in Section 2 are in arrears as of any Quarterly Dividend Payment Date, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Junior Preferred Stock outstanding shall have been paid in full, the Corporation shall not:

(i) declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock;

(ii) declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock, except dividends paid ratably on the Junior Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled;

(iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares of any stock of the Corporation ranking junior (both as to dividends and upon dissolution, liquidation or winding up) to the Junior Preferred Stock; or

(iv) purchase or otherwise acquire for consideration any shares of Junior Preferred Stock, or any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Junior Preferred Stock or redeem any shares of such parity stock, except in accordance with the terms of the Amended and Restated Certificate of Incorporation and with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes.

(B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner.

Section 5. Reacquired Shares. Any shares of Junior Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after such purchase or acquisition. All such shares shall upon

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their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preference Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein, in the Amended and Restated Certificate of Incorporation, or in any other Certificate of Designations creating a series of Preference Stock or any similar stock or as otherwise required by law.

Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Junior Preferred Stock unless, prior thereto, the holders of shares of Junior Preferred Stock shall have received $1.00 per share, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Junior Preferred Liquidation Preference"). Following the payment of the full amount of the Junior Preferred Liquidation Preference, no additional distributions shall be made to the holders of shares of Junior Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Junior Preferred Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph (C) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause
(ii) immediately above being referred to as the "Adjustment Number"). Following the payment of the full amount of the Junior Preferred Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Junior Preferred Stock and Common Stock, respectively, holders of Junior Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to one (1) with respect to such Junior Preferred Stock and Common Stock, on a per share basis, respectively.

(B) In the event, however, that there are not sufficient assets available to permit payment in full of the Junior Preferred Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Junior Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock.

(C) In the event the Corporation shall at any time (i) declare any dividend on Common Stock payable in shares of Common Stock (other than the Stock Split), (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock

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into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 7. Consolidation, Merger, etc. In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case each share of Junior Preferred Stock shall at the same time be similarly exchanged or changed into an amount per share, subject to the provision for adjustment hereinafter set forth, equal to one hundred (100) times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time declare any dividend on the Common Stock payable in shares of Common Stock (other than the Stock Split), or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise) into a greater or lesser number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Junior Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event.

Section 8. Ranking. The Junior Preferred Stock shall rank senior, as to dividends and upon liquidation, dissolution or winding up, to the Common Stock, and junior, as to dividends and upon liquidation, dissolution or winding up, to all other classes and series of capital stock of the Corporation, including all series of Preference Stock of the Corporation, unless the terms of any such class or series shall expressly provide otherwise.

Section 9. No Redemption. The shares of Junior Preferred Stock shall not be redeemable.

Section 10. Fractional Shares. The Junior Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder's fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of shares of Junior Preferred Stock.

IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its [Chief Executive Officer] as of the ___ day of ________, 1998.

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[Chief Executive Officer]

9

Exhibit 10.6

YOUNG & RUBICAM INC.

1997 Incentive Compensation Plan

3/16/98


YOUNG & RUBICAM INC.

1997 Incentive Compensation Plan

                                                                   Page
                                                                   ----

1.   Purpose.......................................................   1

2.   Definitions...................................................   1

3.   Administration................................................   4
     (a)    Authority of the Committee.............................   4
     (b)    Manner of Exercise of Committee Authority..............   4
     (c)    Limitation of Liability................................   5

4.   Stock Subject to Plan.........................................   5
     (a)    Overall Number of Shares Available for Delivery........   5
     (b)    Application of Limitation to Grants of Awards..........   5
     (c)    Availability of Shares Not Delivered under Awards......   5

5.   Eligibility; Per-Person Award Limitations.....................   6

6.   Specific Terms of Awards......................................   6
     (a)    General................................................   6
     (b)    Options................................................   6
     (c)    Stock Appreciation Rights..............................   7
     (d)    Restricted Stock.......................................   7
     (e)    Deferred Stock.........................................   8
     (f)    Bonus Stock and Awards in Lieu of Obligations..........   9
     (g)    Dividend Equivalents...................................   9
     (h)    Other Stock-Based Awards...............................  10

7.   Certain Provisions Applicable to Awards.......................  10
     (a)    Stand-Alone, Additional, Tandem, and Substitute Awards   10
     (b)    Term of Awards.........................................  10
     (c)    Form and Timing of Payment under Awards; Deferrals ....  10
     (d)    Exemptions from Section 16(b) Liability................  11
     (e)    Cancellation and Rescission of Awards .................  11


                                                         3/16/98


YOUNG & RUBICAM INC.

1997 Incentive Compensation Plan

                                                                    Page
                                                                    ----

 8.   Performance and Annual Incentive Awards.......................  12
      (a)    Performance Conditions.................................  12
      (b)    Performance Awards Granted to
             Designated Covered Employees...........................  12
      (c)    Annual Incentive Awards Granted to
             Designated Covered Employees.                            14
      (d)    Written Determinations.................................  15
      (e)    Status of Section 8(b) and 8(c)
             Awards under Code Section 162(m).......................  15

 9.   Change in Control.............................................  16
      (a)    Effect of "Change in Control"..........................  16
      (b)    Definition of "Change in Control"......................  16
      (c)    Tender Offer...........................................  18

10.   General Provisions............................................  18
      (a)    Compliance with Legal and Other Requirements...........  18
      (b)    Limits on Transferability; Beneficiaries...............  19
      (c)    Adjustments............................................  19
      (d)    Taxes..................................................  20
      (e)    Changes to the Plan and Awards.........................  20
      (f)    Limitation on Rights Conferred under Plan..............  21
      (g)    Unfunded Status of Awards; Creation of Trusts..........  21
      (h)    Nonexclusivity of the Plan.............................  22
      (i)    Payments in the Event of Forfeitures;
             Fractional Shares.....................................   22
      (j)    Governing Law..........................................  22
      (k)    Awards under Preexisting Plans.........................  22
      (l)    Plan Effective Date and Shareholder Approval...........  22


                                                          3/16/98


YOUNG & RUBICAM INC.

1997 Incentive Compensation Plan

1. Purpose. The purpose of this 1997 Incentive Compensation Plan (the "Plan"), which is an amendment and restatement of the Young & Rubicam Holdings Inc. Restricted Stock Plan, is to assist Young & Rubicam Inc., a Delaware corporation (the "Corporation"), and its Affiliates in attracting, retaining, and rewarding high-quality executives, employees, and other persons who provide services to the Corporation and/or its Affiliates, enabling such persons to acquire or increase a proprietary interest in the Corporation in order to strengthen the mutuality of interests between such persons and the Corporation's shareholders, and providing such persons with annual and long-term performance incentives to expend their maximum efforts in the creation of shareholder value. The Plan is also intended to qualify certain compensation awarded under the Plan for tax deductibility under Code Section 162(m) (as hereafter defined) to the extent deemed appropriate by the Committee (or any successor committee) of the Board of Directors of the Corporation.

2. Definitions. For purposes of the Plan, the following terms shall be defined as set forth below, in addition to such terms defined in Section 1 hereof:

(a) "Affiliate" shall mean any entity (whether or not incorporated) which, by reason of its relationship with the Corporation, is required to be aggregated with the Corporation under Section 414(b), 414(c), 414(m) or 414(o) of the Code, and any joint venture or partnership 10% or more of the profits or capital interest of which is owned by the Corporation or an Affiliate.

(b) "Annual Incentive Award" means a conditional right granted to a Participant under Section 8(c) hereof to receive a cash payment, Stock or other Award, unless otherwise determined by the Committee, after the end of a specified fiscal year.

(c) "Award" means any Option, SAR (including Limited SAR), Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual Incentive Award, together with any other right or interest granted to a Participant under the Plan.

(d) "Beneficiary" means the person, persons, trust or trusts which have been designated by a Participant in his or her most recent written beneficiary designation filed with the Committee to receive the benefits specified under the Plan upon such Participant's death or to which Awards or other rights are transferred if and to the extent permitted under Section 10(b) hereof. If, upon a Participant's death, there is no

1

designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary means person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits.

(e) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 under the Exchange Act and any successor to such Rule.

(f) "Board" means the Corporation's Board of Directors.

(g) "Change in Control" means Change in Control as defined with related terms in Section 9 of the Plan.

(h) "Code" means the Internal Revenue Code of 1986, as amended from time to time, including regulations thereunder and successor provisions and regulations thereto.

(i) "Committee" means a committee of two or more directors designated by the Board to administer the Plan; provided, however, that, unless otherwise determined by the Board, the Committee shall consist solely of two or more directors, each of whom shall be (i) a "non-employee director" within the meaning of Rule 16b-3 under the Exchange Act, unless administration of the Plan by "non-employee directors" is not then required in order for exemptions under Rule 16b-3 to apply to transactions under the Plan, and (ii) an "outside director" as defined under Code Section 162(m), unless administration of the Plan by "outside directors" is not then required in order to qualify for tax deductibility under Code Section 162(m).

(j) "Covered Employee" means an Eligible Person who is a Covered Employee as specified in Section 8(e) of the Plan.

(k) "Deferred Stock" means a right, granted to a Participant under Section 6(e) hereof, to receive Stock, cash or a combination thereof at the end of a specified deferral period.

(l) "Dividend Equivalent" means a right, granted to a Participant under Section 6(g), to receive cash, Stock, other Awards or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments.

(m) "Effective Date" means December 16, 1997.

(n) "Eligible Person" means each Executive Officer and other officers and employees of the Corporation or of any Affiliate, including such persons who may also be directors of the Corporation, and each other person who provides services to the Corporation and/or its Affiliates. An employee on leave of absence may be considered as still in the employ of the Corporation or an Affiliate for purposes of eligibility for participation in the Plan.

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(o) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, including rules thereunder and successor provisions and rules thereto.

(p) "Executive Officer" means an executive officer of the Corporation as defined under the Exchange Act.

(q) "Fair Market Value" means the fair market value of Stock, Awards or other property as determined by the Committee or under procedures established by the Committee. Unless otherwise determined by the Committee, the Fair Market Value of Stock following the date the Stock is listed or admitted to trading on the New York Stock Exchange shall be the average closing price per share of Stock for the ten trading day period ending on such given day, as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading in the New York Stock Exchange or, if the Stock is not listed or admitted to trading on the New York Stock Exchange, as reported in the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Stock is listed or admitted to trading or, if the Stock is not listed or admitted to trading on any national securities exchange, the last quoted price or, if not so quoted, the average of the high bid and low asked prices in the over-the counter market, as reported by NASDAQ.

(r) "Incentive Stock Option" or "ISO" means any Option intended to be and designated as an incentive stock option within the meaning of Code Section 422 or any successor provision thereto.

(s) "Limited SAR" means a right granted to a Participant under Section 6(c) hereof.

(t) "Option" means a right, granted to a Participant under Section 6(b) hereof, to purchase Stock at a specified price during specified time periods.

(u) "Other Stock Based Awards" means Awards granted to a Participant under Section 6(h) hereof.

(v) "Participant" means a person who has been granted an Award under the Plan which remains outstanding, including a person who is no longer an Eligible Person.

(w) "Performance Award" means a right, granted to a Participant under Section 8 hereof, to receive Awards based upon performance criteria specified by the Committee.

(x) "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and shall include a "group" as defined in Section 13(d) thereof.

(y) "Preexisting Plans" mean the Young & Rubicam Holdings Inc. Restricted Stock Plan and the Young & Rubicam Holdings Inc. Management Stock Option Plan.

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(z) "Qualified Member" means a member of the Committee who is a "Non- Employee Director" within the meaning of Rule 16b-3(b)(3) and an "outside director" within the meaning of Regulation 1.162-27 under Code Section 162(m).

(aa) "Restricted Stock" means Stock, granted to a Participant under Section 6(d) hereof, that is subject to certain restrictions and to a risk of forfeiture.

(bb) "Rule 16b-3" means Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.

(cc) "Stock" means the Corporation's Common Stock, and such other securities as may be substituted (or resubstituted) for Stock pursuant to Section 10(c) hereof.

(dd) "Stock Appreciation Rights" or "SAR" means a right granted to a Participant under Section 6(c) hereof.

3. Administration.

(a) Authority of the Committee. The Plan shall be administered by the Committee except to the extent the Board elects to administer the Plan, in which case references herein to the "Committee" shall be deemed to include references to the "Board". The Committee shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to select Eligible Persons to become Participants, grant Awards, determine the type, number and other terms and conditions of, and all other matters relating to, Awards, prescribe Award agreements (which need not be identical for each Participant) and rules and regulations for the administration of the Plan, construe and interpret the Plan and Award agreements and correct defects, supply omissions or reconcile inconsistencies therein, and to make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan.

(b) Manner of Exercise of Committee Authority. At any time that a member of the Committee is not a Qualified Member, any action of the Committee relating to an Award granted or to be granted to a Participant who is then subject to Section 16 of the Exchange Act in respect of the Corporation, or relating to an Award intended by the Committee to qualify as "performance-based compensation" within the meaning of Code Section 162(m) and regulations thereunder, may be taken either (i) by a subcommittee, designated by the Committee, composed solely of two or more Qualified Members, or (ii) by the Committee but with each such member who is not a Qualified Member abstaining or recusing himself or herself from such action; provided, however, that, upon such abstention or recusal, the Committee remains composed solely of two or more Qualified Members. Such action, authorized by such a subcommittee or by the Committee upon the abstention or recusal of such non-Qualified Member(s), shall be the action of the Committee for purposes of the Plan. Any action of the Committee shall be final, conclusive and binding on all persons, including the Corporation, its Affiliates, Participants,

4

Beneficiaries, transferees under Section 10(b) hereof or other persons claiming rights from or through a Participant, and shareholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Corporation or any Affiliate, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions, including administrative functions, as the Committee may determine, to the extent that such delegation will not result in the loss of an exemption under Rule 16b- 3(d)(1) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Corporation and will not cause Awards intended to qualify as "performance-based compensation" under Code Section 162(m) to fail to so qualify. The Committee may appoint agents to assist it in administering the Plan.

(c) Limitation of Liability. The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any executive officer, other officer or employee of the Corporation or an Affiliate, the Corporation's independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee and any officer or employee of the Corporation or an Affiliate acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Corporation with respect to any such action or determination.

4. Stock Subject to Plan.

(a) Overall Number of Shares Available for Delivery. Subject to adjustment as provided in Section 10(c) hereof, the total number of shares of Stock reserved and available for delivery in connection with Awards under the Plan shall be (i) 1.275 million, plus (ii) the number of shares of Stock subject to awards under Preexisting Plans that become available in accordance with Section 4(c) hereof after the Effective Date; provided, however, that the total number of shares of Stock with respect to which ISOs may be granted shall not exceed one million. Any shares of Stock delivered under the Plan shall consist of authorized and unissued shares or treasury shares.

(b) Application of Limitation to Grants of Awards. No Award may be granted if the number of shares of Stock to be delivered in connection with such Award or, in the case of an Award relating to shares of Stock but settleable only in cash (such as cash-only SARs), the number of shares to which such Award relates, exceeds the number of shares of Stock remaining available under the Plan minus the number of shares of Stock issuable in settlement of or relating to then-outstanding Awards. The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award.

(c) Availability of Shares Not Delivered under Awards. Shares of Stock subject to

5

an Award under the Plan or award under a Preexisting Plan that is canceled, expired, forfeited, settled in cash or otherwise terminated without a delivery of shares to the Participant or the participant in such Preexisting Plan will again be available for Awards under the Plan, except that if any such shares could not again be available for Awards to a particular Participant under any applicable law or regulation, such shares shall be available exclusively for Awards to Participants who are not subject to such limitation.

5. Eligibility; Per-Person Award Limitations. Awards may be granted under the Plan only to Eligible Persons. In each fiscal year during any part of which the Plan is in effect, an Eligible Person may not be granted Awards relating to more than 200,000 shares of Stock, subject to adjustment as provided in Section
10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g),
6(h), 8(b) and 8(c). In addition, the maximum cash amount that may be earned under the Plan as a final Annual Incentive Award or other cash annual Award in respect of any fiscal year by any one Participant shall be $10 million, and the maximum cash amount that may be earned under the Plan as a final Performance Award or other cash Award in respect of a performance period other than an annual period by any one Participant on an annualized basis shall be $10 million.

6. Specific Terms of Awards.

(a) General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section
10(e)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of employment or service by the Participant and terms permitting a Participant to make elections relating to his or her Award. The Committee shall retain full power and discretion to accelerate, waive or modify, at any time, any term or condition of an Award that is not mandatory under the Plan. Except in cases in which the Committee is authorized to require other forms of consideration under the Plan, or to the extent other forms of consideration must by paid to satisfy the requirements of the Delaware General Corporation Law, no consideration other than services may be required for the grant (but not the exercise) of any Award.

(b) Options. The Committee is authorized to grant Options to Participants on the following terms and conditions:

(i) Exercise Price. The exercise price per share of Stock purchasable under an Option shall be determined by the Committee, provided that such exercise price shall be not less than the Fair Market Value of a share of Stock on the date of grant of such Option except as provided under Section 7(a) hereof.

(ii) Time and Method of Exercise. The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the methods by which such exercise price may be paid or

6

deemed to be paid, the form of such payment, including, without limitation, cash, Stock, other Awards or awards granted under other plans of the Corporation or any Affiliate, or other property (including notes or other contractual obligations of Participants to make payment on a deferred basis), and the methods by or forms in which Stock will be delivered or deemed to be delivered to Participants.

(iii) ISOs. The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Code Section 422. Any Award agreement relating to an ISO shall contain all provisions required to be included in order to comply with Code Section 422. Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to ISOs (including any SAR in tandem therewith) shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify either the Plan or any ISO under Code Section 422, unless the Participant has first requested the change that will result in such disqualification.

(c) Stock Appreciation Rights. The Committee is authorized to grant SAR's to Participants on the following terms and conditions:

(i) Right to Payment. A SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the grant price of the SAR as determined by the Committee, provided that such grant price shall not be less than the Fair Market Value of a share of Stock on the date of grant of such SAR except as provided under
Section 7(a) hereof.

(ii) Other Terms. The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Stock will be delivered or deemed to be delivered to Participants, whether or not a SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR. Limited SARs that may only be exercised in connection with a Change in Control or other event as specified by the Committee may be granted on such terms, not inconsistent with this Section 6(c), as the Committee may determine. SARs and Limited SARs may be either freestanding or in tandem with other Awards.

(d) Restricted Stock. The Committee is authorized to grant Restricted Stock to Participants on the following terms and conditions:

(i) Grant and Restrictions. Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of

7

performance goals and/or future service requirements), in such installments or otherwise, as the Committee may determine at the date of grant or thereafter. Except to the extent restricted under the terms of the Plan and any Award agreement relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends thereon (subject to any mandatory reinvestment or other requirement imposed by the Committee). During the restricted period applicable to the Restricted Stock, subject to Section 10(b) below, the Restricted Stock may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the Participant.

(ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of employment or service during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Corporation; provided that the Committee may provide, by rule or regulation or in any Award agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Stock.

(iii) Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Corporation retain physical possession of the certificates, and that the Participant deliver a stock power to the Corporation, endorsed in blank, relating to the Restricted Stock.

(iv) Dividends and Splits. As a condition to the grant of an Award of Restricted Stock, the Committee may require that any cash dividends paid on a share of Restricted Stock be automatically reinvested in additional shares of Restricted Stock or applied to the purchase of additional Awards under the Plan. Unless otherwise determined by the Committee, Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed.

(e) Deferred Stock. The Committee is authorized to grant Deferred Stock to Participants, which are rights to receive Stock, cash, or a combination thereof at the end of a specified deferral period, subject to the following terms and conditions:

(i) Award and Restrictions. Satisfaction of an Award of Deferred Stock shall occur upon expiration of the deferral period specified for such Deferred Stock by the Committee (or, if permitted by the Committee, as elected by the Participant). In

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addition, Deferred Stock shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, in installments or otherwise, as the Committee may determine. Deferred Stock may be satisfied by delivery of Stock, cash equal to the Fair Market Value of the specified number of shares of Stock covered by the Deferred Stock, or a combination thereof, as determined by the Committee at the date of grant or thereafter.

(ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of employment or service during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award agreement evidencing the Deferred Stock), all Deferred Stock that is at that time subject to deferral (other than a deferral at the election of the Participant) shall be forfeited; provided that the Committee may provide, by rule or regulation or in any Award agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Deferred Stock shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Deferred Stock.

(iii) Dividend Equivalents. Unless otherwise determined by the Committee at date of grant, Dividend Equivalents on the specified number of shares of Stock covered by an Award of Deferred Stock shall be either (A) paid with respect to such Deferred Stock at the dividend payment date in cash or in shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such Deferred Stock and the amount or value thereof automatically deemed reinvested in additional Deferred Stock, other Awards or other investment vehicles, as the Committee shall determine or permit the Participant to elect.

(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of obligations to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, provided that, in the case of Participants subject to Section 16 of the Exchange Act, the amount of such grants remains within the discretion of the Committee to the extent necessary to ensure that acquisitions of Stock or other Awards are exempt from liability under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall be subject to such other terms as shall be determined by the Committee.

(g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to a Participant, entitling the Participant to receive cash, Stock, other Awards, or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to

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have been reinvested in additional Stock, Awards, or other investment vehicles, and subject to such restrictions on transferability and risks of forfeiture, as the Committee may specify.

(h) Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Corporation or any other factors designated by the Committee, and Awards valued by reference to the book value of Stock or the value of securities of or the performance of specified Affiliates. The Committee shall determine the terms and conditions of such Awards. Stock delivered pursuant to an Award in the nature of a purchase right granted under this
Section 6(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms, including, without limitation, cash, Stock, other Awards, or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, may also be granted pursuant to this Section 6(h).

7. Certain Provisions Applicable to Awards.

(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Corporation, any Affiliate, or any business entity to be acquired by the Corporation or an Affiliate, or any other right of a Participant to receive payment from the Corporation or any Affiliate. Such additional, tandem, and substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another Award or award, the Committee shall require the surrender of such other Award or award in consideration for the grant of the new Award. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Corporation or any Affiliate, in which the value of Stock subject to the Award is equivalent in value to the cash compensation (for example, Deferred Stock or Restricted Stock), or in which the exercise price, grant price or purchase price of the Award in the nature of a right that may be exercised is equal to the Fair Market Value of the underlying Stock minus the value of the cash compensation surrendered (for example, Options granted with an exercise price "discounted" by the amount of the cash compensation surrendered).

(b) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee; provided that in no event shall the term of any Option or SAR exceed a period of ten years (or such shorter term as may be required in respect of an ISO under Code Section 422).

(c) Form and Timing of Payment under Awards; Deferrals. Subject to the terms of

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the Plan and any applicable Award agreement, payments to be made by the Corporation or an Affiliate upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Stock, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis. The settlement of any Award may be accelerated, and cash paid in lieu of Stock in connection with such settlement, in the discretion of the Committee or upon occurrence of one or more specified events (in addition to a Change in Control). Installment or deferred payments may be required by the Committee (subject to Section 10(e) of the Plan, including the consent provisions thereof in the case of any deferral of an outstanding Award not provided for in the original Award agreement) or permitted at the election of the Participant on terms and conditions established by the Committee. Payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Stock.

(d) Exemptions from Section 16(b) Liability. It is the intent of the Corporation that the grant of any Awards to or other transaction by a Participant who is subject to Section 16 of the Exchange Act shall be exempt under Rule 16b-3 (except for transactions acknowledged in writing to be non-exempt by such Participant). Accordingly, if any provision of this Plan or any Award agreement does not comply with the requirements of Rule 16b-3 as then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that such Participant shall avoid liability under Section 16(b).

(e) Cancellation and Rescission of Awards. Unless the Award agreement specifies otherwise, the Committee may cancel any unexpired, unpaid, or deferred Awards at any time, and the Corporation shall have the additional rights set forth in
Section 7(e)(iv) below, if the Participant is not in compliance with all applicable provisions of the Award agreement and the Plan including the following conditions:

(i) A Participant shall not render services for any organization or engage directly or indirectly in any business which, in the judgment of the Chief Executive Officer of the Corporation or other senior officer designated by the Committee, is or becomes competitive with the Corporation. For Participants whose employment or service has terminated, the judgment of the Chief Executive Officer or other senior officer designated by the Committee shall be based on the Participant's position and responsibilities while employed by, or rendering services to, the Corporation, the Participant's post-employment or post-service responsibilities and position with the other organization or business, the extent of past, current and potential competition or conflict between the Corporation and the other organization or business, the effect on the Corporation's shareholders and clients of the Participant assuming the post-employment or post-service position and such other considerations as are deemed relevant given the applicable facts and circumstances.

(ii) A Participant shall not, without prior written authorization from the

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Corporation, disclose to anyone outside the Corporation, or use in other than the Corporation's business, any confidential information or material relating to the business of the Corporation that is acquired by the Participant either during or after employment or service with the Corporation.

(iii) A Participant shall disclose promptly and assign to the Corporation all right, title, and interest in any invention or idea, patentable or not, made or conceived by the Participant during employment or service with the Corporation, relating in any manner to the actual or anticipated business, research or development work of the Corporation and shall do anything reasonably necessary to enable the Corporation to secure a patent where appropriate in the United States and in foreign countries.

(iv) Upon exercise, settlement, payment or delivery pursuant to an Award, the Participant shall certify on a form acceptable to the Committee that he or she is in compliance with the terms and conditions of the Plan. Failure to comply with the provisions of this Section 7(e) prior to, or during the one-year period after, any exercise, payment or delivery pursuant to an Award shall cause such exercise, payment or delivery to be rescinded. The Corporation shall notify the Participant in writing of any such rescission within three years after such exercise, payment or delivery. Within ten days after receiving such a notice from the Corporation, the Participant shall pay to the Corporation the amount of any gain realized or payment received as a result of the rescinded exercise, payment or delivery pursuant to an Award. Such payment shall be made either in cash or by returning to the Corporation the number of shares of Stock that the Participant received in connection with the rescinded exercise, payment or delivery.

8. Performance and Annual Incentive Awards.

(a) Performance Conditions. The right of a Participant to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions, and may exercise its discretion to reduce or increase the amounts payable under any Award subject to performance conditions, except as limited under Sections 8(b) and 8(c) hereof in the case of a Performance Award or Annual Incentive Award intended to qualify under Code Section 162(m).

(b) Performance Awards Granted to Designated Covered Employees. If the Committee determines that a Performance Award to be granted to an Eligible Person who is designated by the Committee as likely to be a Covered Employee should qualify as "performance-based compensation" for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Performance Award shall be contingent upon achievement of preestablished performance goals and other terms set forth in this Section 8(b).

(i) Performance Goals Generally. The performance goals for such

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Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 8(b). Performance goals shall be objective and shall otherwise meet the requirements of Code Section 162(m) and regulations thereunder (including Regulation 1.162-27 and successor regulations thereto), including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being "substantially uncertain." The Committee may determine that such Performance Awards shall be granted, exercised and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such Performance Awards. Performance goals may differ for Performance Awards granted to any one Participant or to different Participants.

(ii) Business Criteria. One or more of the following business criteria for the Corporation, on a consolidated basis, and/or for specified Affiliates or business units of the Corporation (except with respect to the total shareholder return and earnings per share criteria), shall be used by the Committee in establishing performance goals for such Performance Awards: (1) earnings per share; (2) increase in revenues; (3) cash flow; (4) cash flow return on investment; (5) return on net assets, return on assets, return on investment, return on capital, return on equity; (6) economic value added; (7) operating margin; (8) net income; net income before taxes; operating profits; earnings before interest, taxes and amortization; earnings before interest, taxes, depreciation and amortization; (9) total shareholder return; (10) ratio of staff cost to revenues or gross margin; and (11) any of the above goals as compared to the performance of a published or special index deemed applicable by the Committee including, but not limited to, the Standard & Poor's 500 Stock Index or a group of comparator companies. One or more of the foregoing business criteria shall also be exclusively used in establishing performance goals for Annual Incentive Awards granted to a Covered Employee under
Section 8(c) hereof.

(iii) Performance Period; Timing for Establishing Performance Goals. Achievement of performance goals in respect of such Performance Awards shall be measured over a performance period of up to ten years, as specified by the Committee. Not later than 90 days after the beginning of any performance period applicable to such Performance Awards, or at such other date as may be required or permitted in the case of Awards intended to be "performance-based compensation" under Code Section
162(m), the Committee shall determine the Eligible Persons who will potentially receive Performance Awards, and the amounts potentially payable thereunder, for that performance period.

(iv) Performance Award Pool. The Committee may establish a Performance Award pool, which shall be an unfunded pool, for purposes of measuring performance of the Corporation in connection with Performance Awards. The amount of such Performance Award pool shall be based upon the achievement of a performance goal or goals based on one or more of the business criteria set forth in

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Section 8(b)(ii) hereof during the given performance period, as specified by the Committee in accordance with
Section 8(b)(iii) hereof. The Committee may specify the amount of the Performance Award pool as a percentage of any of such business criteria, a percentage thereof in excess of a threshold amount, or as another amount which need not bear a strictly mathematical relationship to such business criteria.

(v) Settlement of Performance Awards; Other Terms. After the end of each performance period, the Committee shall determine the amount, if any, of (A) the Performance Award pool, and the maximum amount of potential Performance Award payable to each Participant in the Performance Award pool, or (B) the amount of potential Performance Award otherwise payable to each Participant. Settlement of such Performance Awards shall be in cash, Stock, other Awards or other property, in the discretion of the Committee. The Committee may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with such Performance Awards, but may not exercise discretion to increase any such amount payable to a Covered Employee in respect of a Performance Award subject to this Section 8(b). The Committee shall specify the circumstances in which such Performance Awards shall be paid or forfeited in the event of termination of employment or service by the Participant prior to the end of a performance period or settlement of Performance Awards.

(c) Annual Incentive Awards Granted to Designated Covered Employees. If the Committee determines that an Annual Incentive Award to be granted to an Eligible Person who is designated by the Committee as likely to be a Covered Employee should qualify as "performance-based compensation" for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Annual Incentive Award shall be contingent upon achievement of preestablished performance goals and other terms set forth in this Section 8(c).

(i) Annual Incentive Award Pool. The Committee may establish an Annual Incentive Award pool, which shall be an unfunded pool, for purposes of measuring performance of the Corporation in connection with Annual Incentive Awards. The amount of such Annual Incentive Award pool shall be based upon the achievement of a performance goal or goals based on one or more of the business criteria set forth in Section 8(b)(ii) hereof during the given performance period, as specified by the Committee in accordance with Section 8(b)(iii) hereof. The Committee may specify the amount of the Annual Incentive Award pool as a percentage of any of such business criteria, a percentage thereof in excess of a threshold amount, or as another amount which need not bear a strictly mathematical relationship to such business criteria.

(ii) Potential Annual Incentive Awards. Not later than the end of the 90th day of each fiscal year, or at such other date as may be required or permitted in the case of Awards intended to be "performance-based compensation" under Code Section 162(m), the Committee shall determine the Eligible Persons who will potentially receive Annual Incentive Awards, and the amounts potentially payable thereunder,

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for that fiscal year, either out of an Annual Incentive Award pool established by such date under Section 8(c)(I) hereof or as individual Annual Incentive Awards. In the case of individual Annual Incentive Awards intended to qualify under Code Section 162(m), the amount potentially payable shall be based upon the achievement of a performance goal or goals based on one or more of the business criteria set forth in Section 8(b)(ii) hereof in the given performance year, as specified by the Committee; in other cases, such amount shall be based on such criteria as shall be established by the Committee. In all cases, the maximum Annual Incentive Award of any Participant shall be subject to the limitation set forth in Section 5 hereof.

(iii) Payout of Annual Incentive Awards. After the end of each fiscal year, the Committee shall determine the amount, if any, of (A) the Annual Incentive Award pool, and the maximum amount of potential Annual Incentive Award payable to each Participant in the Annual Incentive Award pool, or (B) the amount of potential Annual Incentive Award otherwise payable to each Participant. Settlement of such Annual Incentive Awards shall be in cash, Stock, other Awards or other property, in the discretion of the Committee. The Committee may, in its discretion, determine that the amount payable to any Participant as a final Annual Incentive Award shall be increased or reduced from the amount of his or her potential Annual Incentive Award, including a determination to make no final Award whatsoever, but may not exercise discretion to increase any such amount in the case of an Annual Incentive Award intended to qualify under Code Section 162(m). The Committee shall specify the circumstances in which an Annual Incentive Award shall be paid or forfeited in the event of termination of employment or service by the Participant prior to the end of a fiscal year or settlement of such Annual Incentive Award.

(d) Written Determinations. All determinations by the Committee as to the establishment of performance goals, the amount of any Performance Award pool or potential individual Performance Awards and as to the achievement of performance goals relating to Performance Awards under Section 8(b), and the amount of any Annual Incentive Award pool or potential individual Annual Incentive Awards and the amount of final Annual Incentive Awards under Section 8(c), shall be made in writing in the case of any Award intended to qualify under Code Section 162(m). The Committee may not delegate any responsibility relating to such Performance Awards or Annual Incentive Awards.

(e) Status of Section 8(b) and Section 8(c) Awards under Code Section 162(m). It is the intent of the Corporation that Performance Awards and Annual Incentive Awards under Sections 8(b) and 8(c) hereof granted to persons who are designated by the Committee as likely to be Covered Employees within the meaning of Code Section 162(m) and regulations thereunder (including Regulation 1.162-27 and successor regulations thereto) shall, if so designated by the Committee, constitute "performance-based compensation" within the meaning of Code
Section 162(m) and regulations thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e), including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m) and regulations thereunder. The foregoing

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notwithstanding, because the Committee cannot determine with certainty whether a given Participant will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Committee, at the time of grant of Performance Awards or an Annual Incentive Award, as likely to be a Covered Employee with respect to that fiscal year. If any provision of the Plan as in effect on the date of adoption or any agreements relating to Performance Awards or Annual Incentive Awards that are designated as intended to comply with Code Section 162(m) does not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements.

9. Change in Control.

(a) Effect of "Change in Control." In the event of a "Change in Control," the following provisions shall apply unless otherwise provided in the Award agreement:

(i) Any Award carrying a right to exercise that was not previously exercisable and vested shall become fully exercisable and vested as of the time of the Change in Control;

(ii) The restrictions, deferral of settlement, and forfeiture conditions applicable to any other Award granted under the Plan shall lapse and such Awards shall be deemed fully vested as of the time of the Change in Control, except to the extent of any waiver by the Participant and subject to applicable restrictions set forth in Section 10(a) hereof; and

(iii) With respect to any outstanding Award subject to achievement of performance goals and conditions under the Plan, such performance goals and other conditions will be deemed to be met if and to the extent so provided by the Committee in the Award agreement relating to such Award.

(b) Definition of "Change in Control." A "Change in Control" shall be deemed to have occurred if:

(i) any Person (other than the Corporation, any trustee or other fiduciary holding securities under any employee benefit plan of the Corporation, or any company owned, directly or indirectly, by the stockholders of the Corporation immediately prior to the occurrence with respect to which the evaluation is being made in substantially the same proportions as their ownership of the common stock of the Corporation immediately prior to the occurrence with respect to which the evaluation is being made) becomes the Beneficial Owner (except that a Person shall be deemed to be the Beneficial Owner of all shares that any such Person has the right to acquire pursuant to any agreement or arrangement or upon exercise of conversion rights, warrants or options or otherwise, without regard to the sixty day period referred to in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation (A) representing 40% or more of the combined voting

16

power of the Corporation's then outstanding securities and (B) for so long as the Management Voting Trust is extant, representing a greater percentage of the combined voting power of the Corporation's then outstanding securities than is represented by the securities of the Corporation then held by the Management Voting Trust; provided, that for purposes of this Section 9(b)(i), all shares of Stock subject to Options granted pursuant to the Plan and stock options granted pursuant to the Young & Rubicam Holdings Inc. Management Stock Option Plan that are then fully vested and immediately exercisable (not including any shares of Stock subject to Options which would become fully vested and immediately exercisable as a result of the Change in Control having occurred) shall be treated as outstanding securities of the Corporation;

(ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clause (i), (iii), or (iv) of this paragraph) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved but excluding for this purpose any such new director whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity or Person other than the Board (the "Continuing Directors"), cease for any reason to constitute at least a majority of the Board;

(iii) the consummation of a merger or consolidation of the Corporation with any other entity, which merger or consolidation would result in either (A) the voting securities of the Corporation outstanding immediately prior to such merger or consolidation failing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or resulting entity) 40% or more of the combined voting power of the surviving or resulting entity outstanding immediately after such merger or consolidation or (B) (x) the voting securities of the Corporation outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or resulting entity) at least 40% but less than 60% of the combined voting power of the surviving or resulting entity outstanding immediately after such merger or consolidation and (y) as a result of the occurrence of such merger or consolidation, there is an acceleration of the vesting or exercisability of any material amount of, or material percentage of, outstanding stock options or other stock awards granted by the entity with which such merger or consolidation is taking place or any of its affiliates;

(iv) the stockholders of the Corporation approve a plan or agreement for the

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sale or disposition of all or substantially all of the consolidated assets of the Corporation (other than such a sale or disposition immediately after which such assets will be owned directly or indirectly by the stockholders of the Corporation in substantially the same proportions as their ownership of the common stock of the Corporation immediately prior to such sale or disposition) in which case the Board shall determine the effective date of the Change in Control resulting therefrom; or

(v) any other event occurs which the Board determines, in its discretion, would materially alter the structure of the Corporation or its ownership.

(c) Tender Offer. For purposes of Section 9(a) hereof, a Change in Control shall be deemed to have occurred immediately prior to the consummation of (A) a tender offer for securities of the Corporation representing more than 50% of the combined voting power of the Corporation's then outstanding securities in which the Schedule 14D-1 filed with the Securities and Exchange Commission with respect to such tender offer does not disclose any intention to follow the consummation of the tender offer with a merger, reorganization, consolidation, share exchange or similar transaction or (B) a tender offer for securities of the Corporation representing any percentage of the combined voting power of the Corporation's then outstanding securities in which the Schedule 14D-1 filed with the Securities and Exchange Commission with respect to such tender offer discloses an intention to follow the consummation of the tender offer with a merger, reorganization, consolidation, share exchange or similar transaction in which the value of the consideration to be offered for such securities is lower than the value of the consideration offered for such securities in the tender offer (as determined by the Board at the time). The Corporation intends by this Section 9(c) to protect Participants from being disadvantaged by being unable to participate in a tender offer with respect to shares of Stock subject to Options and will take reasonably appropriate steps to help Participants avoid being so disadvantaged by establishing procedures to allow Participants to exercise Options the exercisability of which is accelerated pursuant to this
Section 9(c) and tender the resulting shares of Stock in the tender offer, including, to the extent feasible in compliance with applicable law, by permitting Participants to exercise Options provisionally upon the consummation of the tender offer and by permitting Participants to pay the exercise price of Options by means of a recourse note to the Corporation with such terms and conditions as the Board may require, including a pledge of the related shares.

10. General Provisions.

(a) Compliance with Legal and Other Requirements. The Corporation may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Stock or payment of other benefits under any Award until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule or regulation, listing or other required action with respect to any stock exchange or automated quotation system upon which the Stock or other securities of the Corporation are listed or quoted, or compliance with any other obligation of the Corporation, as the Committee may consider appropriate, and may require any Participant

18

to make such representations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Stock or payment of other benefits in compliance with applicable laws, rules, and regulations, listing requirements, or other obligations. The Corporation shall not be required to issue or deliver any certificates evidencing shares of Stock in connection with an Award (i) unless and until the Committee has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any exchange on which the shares of Stock are listed or traded, and (ii) if the effect of such issuance or delivery would be to require the Corporation to register any class of any securities of the Corporation under the Exchange Act. The Corporation shall in no event be obligated to register such shares of Stock or to take any other action in order to comply with any such law, regulation or requirement with respect to the issuance and delivery of such certificates. The foregoing notwithstanding, in connection with a Change in Control, the Corporation shall take or cause to be taken no action, and shall undertake or permit to arise no legal or contractual obligation, that results or would result in any postponement of the issuance or delivery of Stock or payment of benefits under any Award or the imposition of any other conditions on such issuance, delivery or payment, to the extent that such postponement or other condition would represent a greater burden on a Participant than existed on the 90th day preceding the Change in Control.

(b) Limits on Transferability; Beneficiaries. No Award or other right or interest of a Participant under the Plan shall be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of such Participant to any party (other than the Corporation or an Affiliate), or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, except that Awards and other rights (other than ISOs and SARs in tandem therewith) may be transferred to one or more Beneficiaries or other transferees during the lifetime of the Participant, and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent such transfers are permitted by the Committee pursuant to the express terms of an Award agreement (subject to any terms and conditions which the Committee may impose thereon). A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.

(c) Adjustments. In the event that any dividend or other distribution (whether in the form of cash, Stock, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the Stock such that an adjustment is determined by the Committee to be appropriate under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares of Stock which may be delivered in connection with

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Awards granted thereafter, (ii) the number and kind of shares of Stock by which annual per-person Award limitations are measured under Section 5 hereof, (iii) the number and kind of shares of Stock subject to or deliverable in respect of outstanding Awards and (iv) the exercise price, grant price or purchase price relating to any Award and/or make provision for payment of cash or other property in respect of any outstanding Award. In addition, the Committee is authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards (including Performance Awards and performance goals, and Annual Incentive Awards and any Annual Incentive Award pool or performance goals relating thereto) in recognition of unusual or nonrecurring events (including, without limitation, events described in the preceding sentence, as well as acquisitions and dispositions of businesses and assets) affecting the Corporation, any Affiliate or any business unit, or the financial statements of the Corporation or any Affiliate, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions or in view of the Committee's assessment of the business strategy of the Corporation, any Affiliate or business unit thereof, performance of comparable organizations, economic and business conditions, personal performance of a Participant, and any other circumstances deemed relevant; provided that no such adjustment shall be authorized or made if and to the extent that such authority or the making of such adjustment would cause Options, SARs, Performance Awards granted under Section 8(b) hereof or Annual Incentive Awards granted under Section 8(c) hereof to Participants designated by the Committee as Covered Employees and intended to qualify as "performance-based compensation" under Code Section 162(m) and regulations thereunder to otherwise fail to qualify as "performance-based compensation" under Code Section 162(m) and regulations thereunder.

(d) Taxes. The Corporation and any Affiliate is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a distribution of Stock, or any payroll or other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Corporation and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant's tax obligations, either on a mandatory or elective basis in the discretion of the Committee.

(e) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue or terminate the Plan or the Committee's authority to grant Awards under the Plan without the consent of shareholders or Participants, except that any amendment or alteration to the Plan shall be subject to the approval of the Corporation's shareholders not later than the annual meeting next following such Board action if such shareholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the