GREY ADVERTISING INC /DE/, DEF 14A, 1994-06-08

GREY ADVERTISING INC /DE/
DEF 14A, 1994-06-08
ADVERTISING AGENCIES

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<PAGE> 1

SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Grey Advertising Inc.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

Grey Advertising Inc.
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.

(1) Title of each class of securities to which transaction applies:

- - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

- - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)

- - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

- - --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.

(1) Amount previously paid:

- - --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:

- - --------------------------------------------------------------------------------
(3) Filing party:

- - --------------------------------------------------------------------------------
(4) Date filed:

- - --------------------------------------------------------------------------------
- - ---------------
(1) Set forth the amount on which the filing fee is calculated and state
how it was determined.
<PAGE> 2

GREY ADVERTISING INC.
777 THIRD AVENUE
NEW YORK, NEW YORK 10017

------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

JUNE 27, 1994

To the Stockholders of
GREY ADVERTISING INC.

The Annual Meeting of Stockholders of Grey Advertising Inc. ("Company")
will be held at the offices of APCO Associates Inc., the Company's public
affairs subsidiary, 1155 21st Street, N.W., Washington, D.C., on June 27, 1994
at 8:00 A.M., local time, for the following purposes:

(1) To elect one director to hold office for a three year term.

(2) To consider and take action on a proposal to amend and restate the
Company's 1993 Senior Management Incentive Plan.

(3) To consider and take action on a proposal to approve the Company's
1994 Stock Incentive Plan.

(4) To consider and take action on a proposal to ratify the selection
of Ernst & Young as independent auditors for the Company for 1994.

(5) To transact such other business as may properly come before the
meeting.

Holders of record of the Company's Common Stock and Limited Duration Class
B Common Stock at the close of business on June 1, 1994, and holders of the
Company's Preferred Stock, will be entitled to vote at the meeting.

By Order of the Board of Directors

STEVEN G. FELSHER
Secretary

New York, New York
June 7, 1994

PLEASE SPECIFY YOUR CHOICES, DATE AND SIGN THE ENCLOSED PROXIES
AND MAIL THEM PROMPTLY IN THE ENCLOSED ENVELOPE.
<PAGE> 3

GREY ADVERTISING INC.
777 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 546-2000

---------------------

PROXY STATEMENT

---------------------

ANNUAL MEETING OF STOCKHOLDERS

JUNE 27, 1994

This Proxy Statement is being mailed to stockholders on or about June 7,
1994 in connection with the solicitation of proxies by the Board of Directors of
Grey Advertising Inc. ("Company") for the Annual Meeting of Stockholders to be
held at the offices of APCO Associates Inc., the Company's public affairs
subsidiary, 1155 21st Street, N.W., Washington, D.C., on June 27, 1994 at 8:00
A.M., local time, and at any and all adjournments thereof, for the purposes set
forth in the Notice of Annual Meeting of Stockholders.

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time prior to its exercise. A stockholder may effect revocation
of a proxy by delivering written notice to the Secretary of the Company, by
giving a later-dated proxy or by attending the meeting and voting in person. All
properly executed, unrevoked proxies will be voted as specified. Unless contrary
directions are given, proxies will be voted for the election of the nominee for
director proposed by the Board of Directors and in favor of the proposals set
forth in the notice. Shares represented by executed proxies received by the
Company will be counted for a quorum regardless of how or whether such shares
are voted on any particular matter. Where nominee stockholders of record do not
vote on specific issues because they did not receive instructions, such
"nonvotes" will not be treated as votes cast or shares present for a quorum for
such issues. The affirmative vote of the holders of a plurality of the votes
cast is required in the election of directors. The affirmative vote of the
holders of the majority of the shares present is required to approve each of the
other matters to be voted on at the meeting.

THE COMPANY WILL PROVIDE WITHOUT CHARGE TO ANY STOCKHOLDER A COPY OF ITS
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993 ("10-K").
STOCKHOLDERS DESIRING TO OBTAIN A COPY OF THE 10-K SHOULD ADDRESS WRITTEN
REQUESTS TO MS. LUCILLE J. CASERIO, ASSISTANT SECRETARY, GREY ADVERTISING INC.,
777 THIRD AVENUE, NEW YORK, NEW YORK 10017.

VOTING SECURITIES

Holders of record of the Company's Common Stock and Limited Duration Class
B Common Stock ("Class B Stock") at the close of business on June 1, 1994, and
holders of the Company's Preferred Stock permitted to do so, will be entitled to
vote at the meeting. On June 1, 1994, the Company had outstanding 908,525 shares
of Common Stock and 331,557 shares of Class B Stock. The Company also has
outstanding
<PAGE> 4

and entitled to vote at the meeting 20,000 shares of its Series I Preferred
Stock, and 5,000 shares each of its Series II Preferred Stock and Series III
Preferred Stock. At the meeting, each share of Common Stock will be entitled to
one vote; each share of Class B Stock will be entitled to ten votes; and each
share of Preferred Stock will be entitled to eleven votes.

To the knowledge of the Board of Directors, as of June 1, 1994, no
stockholder owned of record or beneficially more than 5% of the Company's
outstanding shares of Common Stock, Class B Stock or Preferred Stock except as
indicated below:

<TABLE>
<CAPTION>
AMOUNT OF
SHARES AND
NATURE
NAME AND ADDRESS OF OF BENEFICIAL OR PERCENTAGE
TITLE OF CLASS RECORD OR BENEFICIAL OWNER RECORD OWNERSHIP OF CLASS
- - ---------------------------- ------------------------------------ ---------------- ----------
<S> <C> <C> <C>
Common Stock................ Edward H. Meyer, as Voting Trustee 181,163(a) 19.9
under a Voting Trust Agreement,
dated as of February 24, 1986, and
as subsequently amended ("Voting
Trust Agreement"), among the Voting
Trustee, the Company and the
Beneficiaries of the Voting Trust
Agreement
777 Third Avenue
New York, New York 10017
Edward H. Meyer 131,453(b) 14.1
777 Third Avenue
New York, New York 10017
The committee administering the 50,849(c) 5.6
Company's Employee Stock
Ownership Plan
777 Third Avenue
New York, New York 10017
Nicholas Company, Inc. 116,900(d) 12.9
700 North Water Street
Milwaukee, Wisconsin 53202
Southeastern Asset Management, Inc. 58,111(e) 6.4
860 Ridgelake Boulevard
Memphis, Tennessee 38120
Quest Advisory Corp. 69,077(f) 7.6
1414 Avenue of the Americas
New York, New York 10019
T. Rowe Price Associates, Inc. 54,065(g) 6.0
100 E. Pratt Street
Baltimore, Maryland 21202
All executive officers and 274,201(h) 29.0
directors as a group
</TABLE>

2
<PAGE> 5

- - ------------
(a) Represents voting power only and includes certain shares subject to a voting
agreement pursuant to which shares owned by an executive officer of the
Company will be voted in the same manner as the Voting Trustee votes. Does
not include shares issuable upon exercise of options which are
contractually bound to be deposited pursuant to the Voting Trust Agreement.
In general, investment power over the shares deposited in the voting trust
established pursuant to the Voting Trust Agreement is retained by the
several beneficiaries of the Voting Trust Agreement. (See "Employment
Agreements and Other Transactions" below.)

(b) Includes shares of Common Stock and of Class B Stock, as the case may be,
issuable upon conversion of the Company's 8 1/2% Convertible Subordinated
Debentures owned by Mr. Meyer after giving effect to the assumed conversion
thereof, and Mr. Meyer's beneficial interest in shares of Common Stock and
Class B Stock deposited by him pursuant to the Voting Trust Agreement as to
which he retains investment power. Does not include shares of Common Stock
(5.6% of such class) and Class B Stock (17.2%) held in the Company's
Employee Stock Ownership Plan as to which Mr. Meyer exercises shared voting
power by virtue of his membership on the committee charged with its
administration. Does not include shares of Common Stock and Class B Stock
held in trust for Mr. Meyer's children which have been deposited with the
Voting Trustee under the Voting Trust Agreement, or shares of Common Stock
or of Class B Stock as to which Mr. Meyer exercises voting power by virtue
of being the Voting Trustee under the Voting Trust Agreement.

(c) The committee which administers the Company's Employee Stock Ownership Plan
exercises voting power over shares held in such plan, and is comprised of
Mr. Meyer and Steven G. Felsher.

3
<PAGE> 6

(d) Information based on the Company's understanding of publicly-filed material.
Nicholas Company, Inc. ("Nicholas"), a registered investment advisor which,
on behalf of its clients, has been a long-term investor in the Company, has
sole dispositive power with respect to the shares listed. Nicholas Fund,
Inc., a diversified mutual fund, has sole voting power with respect to
79,500 of Nicholas' listed shares (about 8.8% of the outstanding Common
Stock) and is located at the same address as Nicholas.

(e) Information based on the Company's understanding of publicly-filed material.
Southeastern Asset Management, Inc., a registered investment advisor which,
on behalf of its clients, has been a long-term investor in the Company, has
sole dispositive and voting power with respect to the shares listed.

(f) Information based on the Company's understanding of publicly-filed material.
Quest Advisory Corp., a registered investment advisor, which (together with
a related entity), on behalf of its clients, has been a long-term investor
in the Company, has sole dispositive and voting power with respect to the
shares listed.

(g) Information based on the Company's understanding of publicly-filed material.
T. Rowe Price Associates, Inc. ("TRP"), a registered investment advisor
which, on behalf of its clients, has been a long-term investor in the
Company, has sole dispositive power with respect to the shares listed. T.
Rowe Price Small Cap Value Fund, Inc., a diversified mutual fund, has sole
voting power with respect to 51,865 of the shares listed as beneficially
owned by TRP (about 5.7% of the outstanding Common Stock) and is located at
the same address at TRP.

(h) Includes shares of Common Stock (5.6% of such class) and of Class B Stock
(17.2%), as the case may be, as to which certain executive officers
exercise shared voting power by virtue of their membership on the committee
administering the Company's Employee Stock Ownership Plan. Includes shares
of Common Stock and Class B Stock as to which the Voting Trustee under the
Voting Trust Agreement exercises voting power. Includes shares of Common
Stock and of Class B Stock issuable upon conversion of the Company's 8 1/2%
Convertible Subordinated Debentures owned by Mr. Meyer, and shares of
Common Stock and of Class B Stock issuable upon exercise of stock options
which are exercisable by beneficiaries under the Voting Trust Agreement,
who are obliged, under the terms of the Voting Trust Agreement, to deposit
shares acquired subsequent to the execution of the Voting Trust Agreement
in accordance with the terms thereof, after giving effect to the assumed
conversion and exercise thereof. Does not include shares of Common Stock
and Class B Stock issuable to beneficiaries under the Voting Trust
Agreement upon exercise of stock options which are not presently
exercisable.

(i) Represents 20,000 of Series I Preferred Stock, and 5,000 shares of each of
the Company's Series II and Series III Preferred Stock, of which classes
Mr. Meyer owns 100% of the outstanding shares.

4
<PAGE> 7

ELECTION OF DIRECTOR

The Board of Directors presently consists of four members, one of whom is
elected by the holders of the Series I Preferred Stock, voting as a class, and
three of whom, divided into three classes, are elected by the holders of the
Common Stock, the Class B Stock and the Preferred Stock voting together. At each
Annual Meeting of Stockholders, directors of one class are elected to serve for
a three-year term or until the election of their successors.

Edward H. Meyer has been nominated to be elected at the meeting to serve as
a director until the Annual Meeting of Stockholders to be held in 1997. Mr.
Meyer is currently serving on the Board.

The Company's Certificate of Incorporation provides for cumulative voting
for elections of directors. Therefore, if more than one director is being
elected at a meeting, each stockholder is entitled to cast as many votes as
shall equal the number of votes represented by the shares owned by such
stockholder multiplied by the number of directors to be elected and such
stockholder may cast all of such votes for a single nominee for director, or may
distribute them among the number of nominees, as the stockholder determines.

Information relating to Mr. Meyer and to the directors not standing for
election who will continue in office following the meeting is set forth below.
Each person listed below is currently a director of the Company.

<TABLE>
<CAPTION>
TERM NO. OF SHARES OF PERCENT OF
OFFICE VOTING STOCK VOTES CAST
DIRECTOR WILL OWNED BY VOTING
NAME(A) AGE OCCUPATION(B) SINCE EXPIRE BENEFICIALLY(C) SHARES
- - -------------------------- ---- ------------------ -------- ------ ---------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mark N. Kaplan............ 64 Partner, Skadden, 1973 1996 2,200(e) --(f)
Arps, Slate,
Meagher & Flom,
law firm (d)
Edward H. Meyer........... 67 Chairman of the 1961 1994 577,040(g) 69.4
Board, President
and Chief
Executive Officer
Richard R. Shinn.......... 76 Retired Chairman 1990 --(h) 1,000(i) --(f)
of Metropolitan
Life Insurance
Company
John Shannon.............. 57 President, Grey- 1991 1995 1,000(j) --(f)
International
</TABLE>

- - ------------
(a) There is no family relationship between any director and any other director
or executive officer of the Company.

(b) The positions of Messrs. Meyer and Shannon are with the Company, and each
has served the Company for more than the past five years.

Mr. Kaplan also serves on the boards of directors of American Biltrite Inc.,
Diagnostic/Retrieval Systems, Inc., The Harvey Group Inc., REFAC Technology
Development Corporation and Volt Information Sciences, Inc.

5
<PAGE> 8

Mr. Meyer is also a director of Bowne & Co., Inc., Ethan Allen Interiors,
Inc., Harman International Industries, Inc. and The May Department Stores
Company. Mr. Meyer also serves as director or trustee of thirty-one mutual
funds advised by Merrill Lynch Asset Management, Inc. or its wholly-owned
subsidiary, Fund Asset Management, Inc.

(c) Represents beneficial interests in shares of the Company's Common Stock,
Class B Stock, and Series I, II and III Preferred Stock. (See "Voting
Securities" above.) Information is as of the record date.

(d) Skadden, Arps, Slate, Meagher & Flom, a law firm in which Mr. Kaplan is a
partner, has provided certain legal services to the Company in 1993 and
1994.

(e) Mr. Kaplan owns 1,100 shares of each of Common Stock and Class B Stock.

(f) Represents less than 1.0% of the votes entitled to be cast.

(g) Mr. Meyer beneficially owns 105,953 shares of Common Stock and 110,053
shares of Class B Stock, as to which he, as the Voting Trustee under the
Voting Trust Agreement, exercises voting power, and 20,000 shares of the
Series I Preferred Stock, and 5,000 shares of each of the Series II and of
the Series III Preferred Stock, representing approximately 11.7%, 33.2%,
100%, 100% and 100% of each class, respectively. Also includes shares held
pursuant to the Voting Trust Agreement, as to which Mr. Meyer, as the
Voting Trustee, exercises voting power, and shares of Common Stock and
Class B Stock held in the Company's Employee Stock Ownership Plan as to
which Mr. Meyer exercises shared voting power by virtue of his membership
on the committee charged with its administration. Also includes shares of
Common Stock (2.8%) and Class B Stock (7.7%) issuable on conversion of the
Company's 8 1/2% Convertible Subordinated Debentures owned by Mr. Meyer
after giving effect to the assumed conversion thereof. Does not separately
include 7,500 shares of each of the Common Stock and the Class B Stock held
in trust for Mr. Meyer's children, as to which Mr. Meyer, as the Voting
Trustee under the Voting Trust Agreement, exercises voting power.

(h) Mr. Shinn had been elected by the holder of the Series I Preferred Stock and
serves until the election of his successor.

(i) Mr. Shinn owns 1,000 shares of Common Stock.

(j) Mr. Shannon holds options to purchase 1,000 shares of Common Stock.
------------------------

The Board of Directors has no reason to believe Mr. Meyer will, for any
reason, be unable to serve as a director. If, however, Mr. Meyer becomes
unavailable to serve, for any reason, it is the intention of the persons named
in the enclosed form of proxy, unless otherwise instructed by stockholders, to
vote such proxy for the election of such other person as the Board of Directors
may in its discretion recommend.

Directors who are not employees of the Company receive a fee of $4,500 per
quarter and a fee of $3,000 for each meeting of the Board attended. Directors
who are also employees receive no remuneration for serving on the Board. Under a
separate agreement with the Company, Mr. Kaplan has elected to have payment of
his director's fees deferred until he retires from the Board.

During 1993, the Board met four times. Each director attended at least 75%
of the meetings of the Board. The Audit Committee, which is comprised of Messrs.
Kaplan and Shinn, reviews the services of the Company's independent auditors,
the preparation of the Company's financial statements and the maintenance of
internal controls by the Company. Messrs. Kaplan and Shinn also comprise the
Company's Compensation Committee, which is charged with overseeing matters
relating to senior executive compensation. The Company does not have a standing
nominating committee. Members of the Audit Committee and the

6
<PAGE> 9

Compensation Committee receive $1,000 for each meeting of each such committee
which does not fall on the same day as a meeting of the Board.

REMUNERATION OF MANAGEMENT

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

The following table provides certain summary information concerning
compensation paid or accrued by the Company to or on behalf of its Chief
Executive Officer and each of the four other most highly compensated executives
officers of the Company with respect to the three most recently completed fiscal
years of the Company, except as indicated below:

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------
ANNUAL COMPENSATION ALL
------------------------------- REST. STOCK OTHER
NAME AND POSITION YEAR SALARY BONUS STOCK($)(1) OPTION(#) COMP.(2)(3)
- - ----------------------------- ---- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Edward H. Meyer.............. 1993 $ 1,700,000 $ 300,000 -0- -0- $ 928,487
Chairman, President and Chief 1992 1,700,000 200,000 -0- -0- 1,009,578
Executive Officer 1991 1,700,000 100,000 -0- -0- --
Robert L. Berenson........... 1993 $ 442,500 $ 150,000 -0- -0- $ 336,530
President, Grey-N.Y. 1992 400,000 135,000 -0- -0- 113,271
1991 400,000 125,000 -0- -0- --
Barbara S. Feigin............ 1993 $ 331,000 $ 125,000 -0- -0- $ 260,006
Executive Vice President 1992 297,667 120,000 -0- -0- 87,162
1991 281,000 112,000 -0- -0- --
Stephen A. Novick............ 1993 $ 635,000 $ 85,000 -0- -0- $ 411,530
Executive Vice President 1992 570,000 75,000 -0- -0- 333,001
1991 483,333 75,000 445,000 5,000 --
John Shannon................. 1993 $ 407,000 $ 165,000 -0- -0- $ 52,139
President, Grey-International 1992 390,000 135,000 -0- -0- 41,199
1991 370,000 127,500 -0- -0- --
</TABLE>

- - ------------
(1) As at December 31, 1993, Messrs. Berenson and Novick owned, respectively,
500 shares and 5,500 shares issued under the Company's Restricted Stock Plan
as to which the restrictions thereon had not lapsed, having respective
aggregate net values of $63,500 and $758,500 on such date. All shares of
restricted stock are entitled to dividends on the same basis as other shares
of Common Stock or Class B Stock. (See "Employment Agreements and Other
Transactions".)

(2) Consistent with transitional provisions applicable to the revised rules on
executive officers' and directors' compensation disclosure adopted by the
Securities and Exchange Commission, amounts of All Other Compensation are
excluded for 1991.

(3) All Other Compensation includes: (i) contributions of $26,963 and $25,492 in
1992 and 1993, respectively, to the Company's qualified defined contribution
plans on behalf of the named executives other than Mr. Shannon, who, as a
United Kingdom resident, participated in local pension programs to which he
contributed funds out of his salary compensation; (ii) amounts shown for Mr.
Shannon represent deferred compensation pursuant to a subsidiary-sponsored
program for United Kingdom executives; (iii) respective premium expense
coverage or reimbursement of $54,949 and $54,787, $16,308 and $16,038,
$6,452 and $6,038, and $15,199 and $99,046, in 1992 and 1993, respectively,
for Messrs. Meyer, Berenson and Novick, and Ms. Feigin, of which amount for
Ms. Feigin included in 1993 the total

7
<PAGE> 10

premiums due under a long-term supplemental insurance policy; (iv) accruals
in the respective amounts of $203,766 and $161,058 for Mr. Meyer in 1992 and
1993, and $10,468 for Ms. Feigin in 1993 in respect of amounts which would
have been allocated to Mr. Meyer's and Ms. Feigin's accounts under the
Company's qualified defined contribution programs for such years but for
certain limitations determined under the federal tax laws; (v) respective
allocations under the Company's Senior Management Incentive Plan ("SMIP") in
respect of 1992 and 1993, respectively, for Messrs. Berenson, Meyer and
Novick, and Ms. Feigin of $125,000 and $140,000, $723,900 and $687,150,
$130,000 and $150,000, and $80,000 and $90,000, such 1993 amounts further
include $55,000, $30,000 and $35,000 for Messrs. Berenson and Novick, and
Ms. Feigin, respectively, accrued in 1992 as an advance to the five year
SMIP begun in 1993; and (vi) $100,000 for 1993 and $200,000 for each of 1992
and 1993 of loan forgiveness in respect of Messrs. Berenson's and Novick's
indebtedness to the Company, respectively. Does not include payments in 1992
(in 1993 for Mr. Berenson) in respect of SMIP allocations made in prior
years and which generally vested on December 31, 1992 in the respective
amounts of $350,000, $1,491,124, $375,060 and $265,997 for Messrs. Berenson,
Meyer and Novick, and Ms. Feigin.

AGGREGATED OPTION EXERCISES IN 1993 AND STOCK OPTION VALUE AS AT DECEMBER 31,
1993(1)

<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
DECEMBER 31, 1993 OPTIONS
----------------- DECEMBER 31, 1993
SHARES -----------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED(2) UNEXERCISABLE UNEXERCISABLE
- - ---------------------------------------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Robert L. Berenson...................... -- -- 666/334 $62,604/$31,396
Barbara S. Feigin....................... 333 28,305 0/334 0/31,396
Edward H. Meyer......................... -- -- 0/0 0/0
Stephen A. Novick....................... -- -- 2,332/3,668 138,407/183,093
John Shannon............................ -- -- 666/334 62,604/31,396
</TABLE>

- - ------------
(1) All options relate to shares of Common Stock.

(2) "Value Realized" represents the market price of the Common Stock on the date
of exercise less the exercise price payable.

8
<PAGE> 11

COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION

The Compensation Committee is comprised of the Company's outside directors.
The Committee is responsible for the definition of the goals of the Company's
compensation practices and the implementation of the compensation programs so
that they address properly these goals. The Compensation Committee reviews
regularly the development of the Company's operations, its revenue and profit
performance, its prospects for growth, the general trends in the advertising
agency industry and the particular needs of the Company.

The Compensation Committee reviews and approves allocations to or under
several long-term deferred and current compensation programs which have been
developed over the years. These programs, which have utilized both cash and
stock awards, are designed to foster a strong commitment by the Company's senior
executives to the interests of the Company's stockholders, clients and business
by rewarding excellent performance with current compensation, enhancing
motivation for continued profit performance, encouraging a strong community of
interests with the Company's stockholders through share awards and fostering the
long-term retention of key management personnel through extended vesting
periods.

These goals are particularly important, and not readily subject to a
short-term formula approach, in the advertising industry where compensation is
heavily negotiated and where there is great demand for talented people, thus
resulting in a high potential for executive turnover. The Compensation Committee
believes that the programs adopted by Grey have been helpful in retaining the
Company's executive officers who average more than 20 years of service with the
Company. This stability, which is not prevalent in the advertising agency
business, has, in the judgment of the Compensation Committee, been important in
enabling the Company to achieve its performance over the last 20 years. Over
such 20 year period, and as through the record date, the Company's stock price
has increased approximately 50 times with a resulting annual compounded return
before dividends in excess of 21%.

The Company's executive officers, as disclosed in this proxy statement, own
a substantial interest in the Company's stock, a significant portion of which
was acquired over many years through a number of the Company's stock programs.
As a result, the Company has made limited grants of stock or stock options in
recent years.

In recent years, a significant portion of executives' total compensation
has been provided through payment of discretionary annual bonuses and through
allocations under the Company's Senior Management Incentive Plan ("SMIP"). The
total amounts paid or allocated, as the case may be, are related to overall
corporate performance and have trended upwards in better years. In granting
annual bonuses, the Compensation Committee considers the executives' relative
contribution to the Company's overall success, the need for executives to
believe they are compensated competitively, the need for bonuses to be scaled to
reflect seniority and contribution, and other relevant factors. In approving the
annual bonus for 1993 to Mr. Meyer, the Compensation Committee also considered
that Mr. Meyer has been employed by the Company since 1956 and has served as
Chief Executive Officer since 1971, that despite the continued difficult
business conditions in many major markets, Mr. Meyer led the Company to record
earnings and significantly increased share performance during the course of
1993, and that the Company continued its strong and steady growth. The Committee
also considered Mr. Meyer's long-term contributions in creating value for the
Company and its stockholders by establishing and maintaining many significant
client relationships, and by overseeing the Company's expansion into new
disciplines and parts of the world. Overall, it is the generalized view of the
Committee that under Mr. Meyer's direction the Company has been and is well
organized, and managed for long-term, stable growth. Mr. Meyer's salary is set
by agreement which was entered into a number of years

9
<PAGE> 12

ago and reflects all adjustments since he became Chief Executive Officer of the
Company. In addition, the Committee deemed an increase of $100,000 in his bonus
compensation to be appropriate especially considering the Company's increased
profits.

Under the SMIP, participants are credited with compensation in an aggregate
amount equal to a percentage (between 8% and 12%) of the Company pre-tax
earnings for each year from 1993 through 1997, as determined by the Board
annually. For 1993, the Board determined to credit 11% of the Company's pre-tax
earnings to SMIP. Because of Mr. Meyer's senior position and his substantial
interest in the equity of the Company, the Compensation Committee, as agreed in
prior years, awarded Mr. Meyer with respect to 1993 an amount corresponding to
15% of the aggregate amount credited for 1993 under SMIP. As discussed below,
the stockholders are being asked to approve a proposal to amend and restate SMIP
for 1994 and years following.

Effective in 1994, the tax law was amended to deny tax deductions to
publicly-held corporations for annual compensation paid to certain executive
officers in excess of $1,000,000, subject to certain exceptions. The Committee
believes the Company should take appropriate steps to be in a position to
preserve the tax deductibility of compensation payments, to the extent such
steps are consistent with providing competitive compensation to its executives
and the Company otherwise satisfies the requirements of the tax law. Proposals 2
and 3 in this proxy statement are designed to further this policy, including,
inter alia, by allowing for the possibility under the Restated Plan (discussed
in proposal 2) to defer payments thereunder.

Mark N. Kaplan
Richard R. Shinn

SENIOR EMPLOYEE PENSION PLAN

The Senior Employee Pension Plan provides that certain qualified officers
of the Company and its subsidiaries will be entitled upon retirement at or after
the age of 60 to a lifetime supplemental pension of a maximum of $50,000 per
year. Persons who are executive vice presidents of the Company, or more senior,
or are designated senior executive officers of certain of the Company's
subsidiaries, and who have met certain age and length of service requirements
are participants under the plan. In addition, a surviving spouse of a recipient
of a pension under the plan is entitled to an annual pension equal to a maximum
of $25,000 for the shorter of such spouse's life and 20 years. Each of the named
executives (other than Mr. Shannon) are participants under the plan. In
addition, the Company has certain understandings whereby certain additional
pension amounts may be paid to Messrs. Berenson and Novick, and Ms. Feigin.

EMPLOYMENT AGREEMENTS AND OTHER TRANSACTIONS

Messrs. Berenson, Meyer and Novick, and Ms. Feigin have employment
agreements with the Company. The Company has entered into an employment
agreement with Mr. Berenson providing for his continued employment with the
Company through December 31, 1995 at a minimum annual compensation of $485,000
per year. In addition, the agreement with Mr. Berenson provided that the Company
would advance him a compensatory loan in an amount not to exceed $500,000 to
facilitate the purchase of a primary residence which would secure the loan. Such
loan was to be repayable five years after it was made or upon termination of Mr.
Berenson's employment with the Company under certain circumstances (except that
the Company was to forgive 20% of the loan each December 31 on which Mr.
Berenson was employed after the closing of the loan). Mr. Berenson's agreement
also contemplates that following a change in control as defined in his
agreement, and if Mr. Berenson terminates his employment upon a breach of the
agreement by the Company

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<PAGE> 13

or the Company terminates his agreement without cause, the remainder of any
outstanding loan would be forgiven. During 1993, in lieu of making the loan to
Mr. Berenson and forgiving it as contemplated, the Company assisted Mr. Berenson
in securing a loan from a commercial bank by agreeing to amortize up to $100,000
per year for up to five years of the principal on the mortgage loan Mr. Berenson
secured from such bank. The Company's obligation to reimburse is essentially
parallel to the obligation it would have had to Mr. Berenson to forgive the loan
his agreement comtemplated being made to him and, therefore, it is considered
the equivalent of a loan forgiveness. In addition, following a change of control
and upon the termination of Mr. Berenson's employment under the circumstances
mentioned above, he shall thereupon vest in his currently-owned unvested stock
options and restricted stock, and be entitled to a lump sum payment equal to
three times the sum of his then annual salary and his most recent annual bonus,
provided that all of such consideration shall not exceed the maximum limitations
on the tax deductibility thereof imposed by Sections 280G and 4999 of the
Internal Revenue Code. In addition, in early 1994, the Company loaned Mr.
Berenson $50,000 which is forgivable by the Company assuming his continued
employment through 1998.

In 1984, the Company entered into an employment agreement, which has been
amended subsequently, with Mr. Meyer, which provides for Mr. Meyer's employment
with the Company through December 31, 1997. The agreement also provides for a
minimum annual salary of $1,700,000 for Mr. Meyer's services as Chief Executive
Officer. If the Company terminates Mr. Meyer's full-time employment as Chief
Executive Officer without cause (as defined in the agreement), or if Mr. Meyer
effects such termination due to a change of control of the Company or other good
reason specified in the agreement, Mr. Meyer will receive $3,000,000 in
consideration of his employment. The agreement further provides that the Company
will defray premiums on life insurance policies on Mr. Meyer's life payable to a
beneficiary designated by him; the Company paid $40,005 in premiums in respect
of these policies in 1993. The employment agreement also provides that Mr. Meyer
may, for a period subsequent to his termination of full-time employment as Chief
Executive Officer, provide the Company with consulting services for compensation
at the rate of $10,000 per month. If the Company terminates Mr. Meyer's
full-time employment as Chief Executive Officer without cause, or if Mr. Meyer
effects such termination due to a change in control of the Company or for other
good reason, Mr. Meyer will receive a lump sum payment equal to his then current
aggregate remuneration multiplied by the greater of the number of years
remaining in the term of the employment agreement and the number three. In such
event, Mr. Meyer will also have an option to sell to the Company each share of
the Common Stock and the Class B Stock which he then owns at the per share
market value of the Common Stock. Mr. Meyer's agreement also provides that, for
the ten year period (subject to reduction or suspension in the event Mr. Meyer
becomes disabled or is in breach of his agreement) following his termination of
employment, the Company will, among other things, provide Mr. Meyer with an
office and related office staff and facilities, and the continued use of a car
and driver. The Company has also agreed to reimburse Mr. Meyer for certain
business expenses incurred by him following termination of his employment up to
$100,000 per year during the first five years of such period and $50,000 per
year during the remainder of such period, with such amounts being adjusted
annually for increases in the consumer's price index until the date of
termination of his employment. During such ten year period, Mr. Meyer has also
been charged with the responsibility of overseeing a certain portion of the
Company's charitable contributions and, thus, will see to the contribution to
charities of $100,000 per year of the Company's funds during the first five
years of the period and of $50,000 per year during the remainder of the period.
In 1983, the Company sold and issued $3,025,000 principal amount of its 8 1/2%
Convertible Subordinated Debentures, currently due December 10, 1997, to Mr.
Meyer in consideration of a purchase price of equal amount, of which $25,000 was
paid in cash and the remainder by delivery of Mr. Meyer's long-term 9% full
recourse promissory note in the principal amount of $3,000,000. The Debentures
are convertible at any time into one share of Common Stock and one share of
Class B Stock,

11
<PAGE> 14

at a current conversion price of $118.63, subject to adjustment upon the
occurrence of certain events. During 1992, Mr. Meyer exercised certain stock
options which had been granted to him in 1984, and, in connection therewith
pursuant to the stock option agreement, issued to the Company his promissory
note in the amount of $3,169,690, representing the exercise price in excess of
the par value of the shares issued on exercise, which amount was paid in cash,
and his promissory note in the amount of $2,339,998, representing the amount of
tax required to be withheld in connection with such option excercise. The
promissory notes each are full recourse, mature on December 22, 2001 and bear
interest at the rate of 6.06% per year. Mr. Meyer is also indebted to the
Company in the aggregate amount of $762,950 pursuant to long-term 9%, full
recourse promissory notes delivered to the Company in 1981, 1982 and 1983 as
part payment for Mr. Meyer's purchase shares of Series 1, 2 and Series 3
Preferred Stock (collectively, "Original Preferred Stock"). In 1994, the Company
and Mr. Meyer entered into an Exchange Agreement pursuant to which Mr. Meyer
exchanged the Original Preferred Stock for a like number of shares of new
Preferred Stock, designated Series I Preferred Stock, Series II Preferred Stock
and Series III Preferred Stock (collectively, the "New Preferred Stock"). The
terms of the New Preferred Stock, including the basic economic terms relating
thereto, are essentially the same as the Original Preferred Stock, except that
the redemption date of the New Preferred Stock is fixed at April 7, 2004 rather
than on a date determined by reference to Mr. Meyer's termination of full-time
employment with the Company as was the case with the Original Preferred Stock.
The terms of the New Preferred Stock also give Mr. Meyer, his estate or legal
representative, as the case may be, the option to require the Company to redeem
his Preferred Stock for a period of 12 months following his (i) death, (ii)
permanent disability or permanent mental disability, (iii) termination of
full-time employment for good reason and (iv) termination of full-time
employment by the Company without cause.

During 1994, the Company entered into an agreement with Mr. Novick pursuant
to which his employment by the Company was continued at a minimum annual
compensation of $635,000 per year. The agreement provides that Mr. Novick shall
remain employed with the Company through 1998, and that, during the term of his
agreement, he shall have an annual allocation pursuant to the SMIP of not less
than $150,000 and an annual bonus of not less than $75,000. The agreement also
provided for the Company to lend to Mr. Novick $600,000 to acquire a new
residence intended to be used, in part, for business entertaining. This loan is
forgivable in three annual installments of $200,000 at the end of each of 1996,
1997 and 1998, provided Mr. Novick is still then employed by the Company. Mr.
Novick's agreement also provides that, if prior to the end of 1995, there is a
change in control, as defined in the agreement, and either Mr. Novick terminates
his employment upon breach thereof by the Company or the Company terminates his
employment without cause under such circumstances, the remaining balances of his
loans shall be forgiven; in addition, and under such circumstances, he shall
thereupon vest in his currently-owned unvested stock options and restricted
stock, and be entitled to a lump sum payment equal to three times the sum of his
then annual salary and his most recent annual bonus, provided that all such
consideration shall not exceed the maximum limitations on the tax deductibility
thereof imposed by Sections 280G and 4999 of the Internal Revenue Code.
Furthermore, as at December 31, 1993, Mr. Novick had outstanding $400,000 of a
compensatory loan in the original amount of $1,000,000 made to him pursuant to
an earlier employment agreement and used to facilitate the financing of his
purchase of a residence. Such advance was secured and shall be repayable on
December 31, 1995 (except one-fifth of the loan shall be forgiven by the Company
each December 31 during which Mr. Novick is employed); during 1993 the Company
forgave $200,000 of this loan.

In 1993, the Company entered into an employment agreement with Ms. Feigin
providing for her continued employment by the Company at least through December
31, 1996, at a minimum annual compensation of $331,000 per year. The agreement
also provides that the Company will pay for certain life and disability
insurance coverages for Ms. Feigin. Ms. Feigin's agreement also provides that if
there is a

12
<PAGE> 15

change in control, as defined in her agreement, and either Ms. Feigin terminates
her employment upon a breach thereof by the Company or the Company terminates
her employment without cause under such circumstances, she shall thereupon vest
in her currently-owned unvested stock options and restricted stock, and be
entitled to a lump sum payment equal to three times the sum of her then annual
salary and her most recent annual bonus, provided that all of such consideration
shall not exceed the maximum limitations on the tax deductibility thereof
imposed by Sections 280G and 4999 of the Internal Revenue Code.

If Messrs. Berenson, Meyer and Novick, and Ms. Feigin had been terminated
effective December 31, 1993 upon a change in control or under circumstances
which would have resulted in payment of the special severance detailed in the
foregoing description of their respective agreements, amounts then payable
(inclusive of loan forgivenesses) to each would have been $2,042,839,
$15,294,800, $2,342,049 and $1,368,000, respectively. Other than pursuant to the
loans described above in connection with Mr. Meyer's securities, and Messrs.
Berenson's and Novick's arrangements, no named executive is indebted to the
Company for more than $60,000. Certain key employees of the Company, including
the named executives and certain members of their immediate families
("Beneficiaries"), have entered into the Voting Trust Agreement, as amended in
1987 and 1994, pursuant to which the Beneficiaries have deposited the shares of
Common Stock and Class B Stock owned by them into a voting trust. The
Beneficiaries have also agreed to deposit into the voting trust shares of Common
Stock or Class B Stock hereafter acquired by them. The trust was extended in
1994 and will continue until 2004. Mr. Meyer has been designated the sole Voting
Trustee. Beneficiaries retain the sole authority to receive dividends and, in
general, to dispose of their shares held in the voting trust. The Company has
entered into indemnification agreements with each of the members of the Board of
Directors providing, generally, for the fullest indemnification permitted by
law.

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<PAGE> 16

PERFORMANCE GRAPH

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN FOR THE COMPANY,
THE S&P 500 INDEX AND FIVE OTHER PUBLICLY-TRADED ADVERTISING AGENCIES.

<TABLE>
<CAPTION>
MEASUREMENT PERIOD GREY ADVER- PEER GROUP S&P 500 TO-
(FISCAL YEAR COVERED) TISING INDEX TAL RETURN
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 147.88 112.84 131.69
1990 118.29 78.78 127.61
1991 106.03 127.55 166.49
1992 130.05 159.06 179.18
1993 181.00 165.01 197.24
</TABLE>

The Company's peer group is comprised of Foote, Cone & Belding
Communications, Inc., The Interpublic Group of Companies, Inc., Omnicom Group
Inc., Saatchi & Saatchi Company, plc and WPP Group, plc. The graph assumes the
initial investment of $100 on December 31, 1988 and the reinvestment of
dividends thereafter.

14
<PAGE> 17

PROPOSAL TO AMEND AND RESTATE THE GREY ADVERTISING INC.
1993 SENIOR MANAGEMENT INCENTIVE PLAN

The Company has maintained the Grey Advertising Inc. 1993 Senior Management
Incentive Plan ("Prior Plan") in its present form since its adoption by the
Board of Directors ("Board"). On March 17, 1994, the Board adopted, subject to
stockholder approval, an amendment and restatement of the Prior Plan ("Restated
Plan") in order to, among other things, authorize the use of the shares of
Common Stock for payment of awards with respect to participants who are subject
to the reporting and short-swing profits provisions of Section 16 of the
Securities Exchange Act of 1934, as amended ("Exchange Act"). Accordingly, the
Restated Plan is being submitted to the stockholders for approval at the meeting
so that the Restated Plan may comply with the requirements of Rule 16b-3 under
the Exchange Act ("Rule 16b-3").

In addition, the Restated Plan is intended to provide performance-based
compensation so as to be eligible for compliance with Section 162(m) of the
Internal Revenue Code of 1986, as amended ("Code"), assuming all other
conditions of Section 162(m) are met. Section 162(m) denies a deduction by an
employer for certain compensation in excess of $1,000,000 per year paid by a
publicly held corporation to the following individuals who are employed at the
end of the employer's taxable year ("Covered Employees"): the chief executive
officer, and the four most highly compensated executive officers (other than the
chief executive officer) for whom compensation disclosure is required under the
proxy rules. Certain compensation, including compensation based on the
attainment of performance goals, is excluded from this deduction limit if
certain requirements are met. Among the requirements for compensation to qualify
for this exception is that the material terms pursuant to which the compensation
is to be paid be disclosed to and approved by the stockholders in a separate
vote prior to the payment of any such compensation, and that the plan be
administered by "outside directors." Accordingly, if the conditions of the
Section 162(m) relating to performance-based compensation and the other
conditions of the Section are satisfied, compensation paid to Covered Employees
on a current basis will not be subject to the deduction limit of Section 162(m).
In this regard, the proposed regulations under Section 162(m) contain a
definition of (and other rules regarding) "outside directors" which, if
finalized in their current form, would not permit Mr. Kaplan to qualify as an
"outside director" after the 1995 annual meeting, although Mr. Kaplan would
continue to qualify as a "disinterested person" under Rule 16b-3. The Restated
Plan contains deferral features (described below) which are designed to enable
the Company to preserve (if appropriate) the deductibility of all payments made
thereunder even if the aforementioned definition and other rules are finalized
in their current form.

The following description of the Restated Plan is not intended to be
complete and is qualified in its entirety by the complete text of the Restated
Plan, a copy of which is attached hereto as Exhibit A. Capitalized terms used
herein shall, unless otherwise defined herein, have the meanings assigned to
them in the text of the Restated Plan. If the Restated Plan is not approved by
stockholders, the Prior Plan will remain in effect in its present form subject
to amendment by the Board as permitted therein.

DESCRIPTION OF THE 1994 AMENDMENTS

Subject to stockholder approval, the Prior Plan will be amended to provide,
among other things (i) for an increase of 50,000 in the number of shares of
Common Stock originally reserved for issuance under the Prior Plan (which would
bring to 200,000 the aggregate number of shares reserved for issuance over the
life of the Restated Plan, subject to adjustment in the event that the number of
outstanding shares of Common Stock changes as a result of stock splits,
combinations or exchanges of shares, or through reorganization, merger,
consolidation or similar events); (ii) that participants who are "executive
officers" of the Company for

15
<PAGE> 18

purposes of Section 16 of the Exchange Act may receive awards under the Plan
which are denominated in Stock; (iii) that no amounts will be credited to any
participant in each Plan Year commencing with calendar year 1994 unless a
minimum level of Earnings is attained; and (iv) for a limit on the Allocation
Percentage (as defined below) of the Plan Year Pool available to any individual
participant in each Plan Year commencing with calendar year 1994.

DESCRIPTION OF PRINCIPAL FEATURES OF THE RESTATED PLAN

The Restated Plan is intended to provide additional compensation to certain
key executives of the Company and its subsidiaries based on the earnings of the
Company and its subsidiaries and, thereby, to advance the continued success of
the Company and its subsidiaries by providing additional incentive to such
individuals to promote the success of the business and enable the Company and
its subsidiaries to attract and retain the services of such key executives.

The Restated Plan is administered by the Compensation Committee of the
Board ("Compensation Committee"), which has the authority to make all
determinations deemed necessary or advisable for the administration of the
Restated Plan. The Compensation Committee has full and final authority to
interpret the Restated Plan, to prescribe, amend and rescind rules and
regulations relating to it, and to make all determinations necessary or
advisable for its administration. To the extent permitted by Rule 16b-3 and by
Section 162(m) of the Code, however, the Compensation Committee may delegate
some or all of its functions under the Restated Plan to the chief executive
officer of the Company. The Compensation Committee or the chief executive
officer, as the case may be, is referred to hereinafter as the "Committee".

Key executives of the Company and its subsidiaries (including executive
officers and directors who are employees) are eligible to become participants in
the Restated Plan. The Committee, in its sole discretion, shall determine which
key executives shall become participants in the Restated Plan. In selecting
participants, the Committee shall consider such factors as it shall, in its sole
discretion, deem relevant in connection with accomplishing the purposes of the
Restated Plan.

For each Plan Year commencing with calendar year 1994, there shall be
credited by the Committee to the Restated Plan for the benefit of the
participants an amount equal to 12% of the Earnings (as defined below) for such
Plan Year; provided, however, that such crediting shall be made only if the
Earnings for such Plan Year exceed $15,000,000. (The amount credited to the
Restated Plan for any Plan Year is the "Plan Year Pool".)

"Earnings" for any Plan Year means the Company's net income as determined
for financial reporting purposes, determined in accordance with generally
accepted accounting principles consistently applied, after deduction of all
expenses incurred by the Company and its subsidiaries, but before deduction of
any amounts to be credited under this Restated Plan and any deduction for the
provision for taxes on income. In determining Earnings for a particular year,
the Committee has the authority to make adjustments in recognition of unusual or
non-recurring events affecting the Company or its financial statements, or in
response to changes in applicable laws, regulations or accounting principles.

For each Plan Year commencing with calendar year 1994, the Committee shall
allocate to each participant a percentage (the "Allocation Percentage") of the
Plan Year Pool for such Plan Year. The Allocation Percentage of a participant
may not exceed 30% with respect to any Plan Year. Allocations with respect to a
Plan Year shall be made by the Committee not later than June 30th of each year
following the Plan Year to which such allocations apply.

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<PAGE> 19

Each participant shall be designated as either a Cash Participant or a
Stock Participant (as such terms are defined in the Restated Plan). Allocations
to a Stock Participant shall be made corresponding to the number of shares of
Common Stock equalling (1) the dollar value of the cash credits which would
otherwise be allocated to such Stock Participant, divided by (2) the fair market
value of the Common Stock (determined based on the average of the means of the
daily high bid and low asked prices of the Common Stock during the last 15 days
on which Common Stock traded during December of the Plan Year to which
allocations are attributable). All allocations to individuals shall be made at
the absolute discretion of the Committee.

At the end of each Plan Year, an amount will be determined for each Stock
Participant ("Dividend Amount") equal to the number of shares in each Stock
Participant's stock account ("Stock Accumulated Account") as at the end of the
previous year multiplied by the amount of the dividend per share of Common Stock
paid by the Company during the Plan Year. The Dividend Amount will then be
divided by the then fair market value of the Common Stock and the Stock
Participant's Stock Accumulated Account will be credited with the number of
shares of Common Stock equalling the resulting quotient.

A participant's account may either be vested or contingent. A participant's
account shall be vested from and after the participant's Vesting Date as to all
amounts or Common Stock in such account on the Vesting Date and as to all
amounts or Common Stock credited thereafter. The Vesting Date of a participant
shall be the date on which there occurs the earliest of (i) the date the
participant becomes a "Vested Participant" (defined as a participant who has
reached age 65 when becoming a participant prior to December 31, 1993); (ii) the
date the participant has completed five full calendar years of continuous
employment with the Company or a subsidiary after becoming a participant in the
Restated Plan, provided that any person who became a participant in the Prior
Plan prior to or during 1993 shall be deemed to have completed such five full
calendar years if he/she shall have remained continuously employed with the
Company or a subsidiary through December 31, 1997; and (iii) the date the
participant has died or become permanently disabled while an employee of the
Company or a subsidiary.

Payments from vested accounts will be made to participants in the
discretion of the Committee as follows: (i) cash payments to Cash Participants
may be made in a lump sum, on or before June 30th following the Vesting Date;
(ii) Common Stock distributions to Stock Participants may be made in a single
payment on or before June 30th following the Vesting Date; and (iii) cash
payments and/or Common Stock distributions may be made in no less than two nor
more than five equal annual installments, the first installment to be paid on or
before June 30th, following the Vesting Date until the amount of cash or Common
Stock in the participant's vested account has been paid or distributed, as the
case may be, in full. Notwithstanding the foregoing, the Committee may defer the
payment of funds or distribution of Common Stock to participants until such time
and to the extent necessary to ensure that such payment or distribution shall
not be rendered nondeductible to the Company by any reason of Section 162(m) of
the Code.

A participant with a contingent account whose employment terminates for any
reason (except for death or permanent disability) shall forfeit his/her account.
Any forfeited contingent account in the discretion of the Committee may be
reallocated and applied to participants (other than participants who are Covered
Employees) or may be returned to the Company.

The Board may amend or terminate the Restated Plan at any time; provided,
however, that any such termination or amendment shall not adversely affect any
amounts previously credited to the participants under the Restated Plan without
the consent of the affected participants; and provided, further, that no such
amendment may be made without the requisite approval of stockholders of the
Company if such approval is required by Rule 16b-3.

17
<PAGE> 20

Inasmuch as benefits under the Restated Plan are based directly on the
financial performance of the Company over the Plan Year, such benefits are not
determinable. Awards made to the named executive officers in respect of 1993
under the Prior Plan are noted in the Summary Compensation Table above.

STOCKHOLDER APPROVAL

The affirmative vote of a majority of the shares present in person or
represented by proxy and entitled to vote is required to adopt this proposal. In
accordance with Delaware law, in determining whether the proposal has received
the requisite number of affirmative votes, abstentions will be counted as being
present and will have the same effect as a vote against this proposal. Broker
nonvotes will not be counted as present and, accordingly, will not effect the
vote on this proposal.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

PROPOSAL TO APPROVE THE GREY ADVERTISING INC. 1994 STOCK INCENTIVE PLAN

The Grey Advertising Inc. 1994 Stock Incentive Plan ("1994 Plan") was
adopted by the Board on March 17, 1994, subject to stockholder approval. The
1994 Plan will, if so approved, replace the Grey Advertising Inc. Restricted
Stock Plan and the Grey Advertising Inc. 1987 Stock Option Plan ("Prior Stock
Plans") and, therefore, upon the approval of the 1994 Plan, the Prior Stock
Plans shall terminate and any shares of Common Stock available for the granting
of awards under the Prior Stock Plans shall no longer be available for such
awards. If the 1994 Plan is not approved by stockholders, the Prior Stock Plans
will remain in effect in their present forms and Common Stock previously
authorized for awards under such plans shall remain available.

The following description of the 1994 Plan is not intended to be complete
and is qualified in its entirety by the complete text of the 1994 Plan, a copy
of which is attached hereto as Exhibit B. Capitalized terms used herein shall,
unless otherwise defined herein, have the meaning assigned to them in the text
of the 1994 Plan.

The 1994 Plan is intended to comply with the requirements of Rule 16b-3 and
is intended to provide performance based compensation so as to be eligible for
compliance with Section 162(m) of the Code, if the conditions of that section
are satisfied. (See preceding proposal for a discussion of Rule 16b-3 and
Section 162(m) of the Code.)

DESCRIPTION OF PRINCIPAL FEATURES OF THE 1994 PLAN

The purposes of the 1994 Plan are to encourage ownership of Common Stock by
eligible key employees of the Company and its subsidiaries, and thereby to
provide increased incentive for such employees to put forth maximum effort for
the success of the Company and its subsidiaries, and to enable the Company
better to attract, retain and reward such employees.

The 1994 Plan is to be administered by a committee ("Committee") of the
Board consisting of no less than two persons, each of whom is a "disinterested
person" within the meaning of Rule 16b-3. Key employees of the Company and its
subsidiaries are eligible to receive Awards (as hereinafter described).
Directors of the Company who are not full-time employees of the Company or of
any of its subsidiaries are not eligible to receive Awards.

18
<PAGE> 21

Awards under the 1994 Plan ("Awards") may be granted in the form of Stock
Options ("Options") or restricted stock ("Restricted Stock"), subject to the
applicable terms and conditions set forth in or determined pursuant to the 1994
Plan. A maximum of 250,000 shares of Common Stock shall be available for grant
of Options and Restricted Stock under the 1994 Plan. Such number of shares is
less than the number of shares, in the aggregate, of Common Stock currently
authorized and available for grant under the Prior Stock Plans. Such shares may
be authorized and unissued shares or may be treasury shares. Common Stock
available for the grant of Awards, Common Stock subject to outstanding Awards
and the limits (described below) on the number of Options or shares of
Restricted Stock that may be granted to any employee over the term of the 1994
Plan shall be appropriately adjusted in the event that the number of shares of
Common Stock changes as a result of stock splits, combinations or exchanges of
shares, or through reorganization, merger, consolidation or similar events. Upon
the expiration, termination or cancellation in whole or in part of any
unexercised Options or upon the forfeiture or repurchase by the Company of any
shares of Restricted Stock, shares of Common Stock covered by such unexercised
Options or forfeited or repurchased shares of Restricted Stock shall be
available again for new Awards of Options and Restricted Stock, respectively,
under the 1994 Plan. No employee may be granted Options for more than 75,000
shares or more than 75,000 shares of Restricted Stock over the term of the 1994
Plan.

Options granted under the 1994 Plan shall be designated as either
"incentive stock options" (within the meaning of Section 422 of the Code) or as
"nonqualified stock options". Option prices shall be not less than 100% of the
fair market value of a share of Common Stock on the date the option is granted.
Unless sooner terminated by the terms of the Plan or by the terms of any
specific grant, each Option shall expire not later than ten years from the date
of grant. Additional requirements apply to Options granted to "ten percent
stockholders". Options shall be exercisable over their term at such times, in
such installments and subject to such conditions as the Committee may prescribe.
Upon termination of an optionee's employment, each Option previously granted to
such person shall expire if not exercised before the earlier of the expiration
date provided in the option agreement applicable to each such Option or such
earlier date as may be set forth in such option agreement. The 1994 Plan further
provides that each Option granted to a participant expires if such participant,
without the written consent of the Company, engages in any business or activity
competitive with the business conducted by the Company or any of its
subsidiaries.

Shares of Restricted Stock may be sold to participants at a purchase price
per share determined by the Committee (which may be less than the then fair
market value per share). Shares of Restricted Stock may be issued or sold under
the 1994 Plan for a per share purchase price below fair market value only if the
Company's "Earnings" for its fiscal year immediately prior to the year of such
issuance or sale exceed $15,000,000. "Earnings" for a particular year is defined
in the 1994 Plan as the Company's net income as determined for financial
reporting purposes, determined in accordance with generally accepted accounting
principles consistently applied, after deduction of all expenses incurred by the
Company, but before deduction of any amounts credited for such year under the
Company's 1993 Senior Management Incentive Plan (or any successor plan thereto)
and any deduction for the provision for taxes on income. An employee who is
granted the right to purchase shares of Restricted Stock may exercise such right
during such period after the time of grant as may be determined by the
Committee, provided that he or she is still an employee of the Company or any of
its subsidiaries on the date of such exercise.

19
<PAGE> 22

stockholder with respect to any purchased shares until he or she has made such
full payment and has had issued to him or her a certificate or certificates
evidencing the shares so purchased.

Shares of Restricted Stock issued to or purchased by an employee under the
1994 Plan shall be subject to such restrictions as may be imposed by the
Committee at the time of issuance or at the time of the grant of the right to
purchase shares. Such restrictions may vary from employee to employee and may
also vary among several grants to the same employee.

The Board may from time to time amend the 1994 Plan in any manner which it
deems in the best interests of the Company, but may not, without the approval of
the Company's stockholders, adopt any amendment for which stockholder approval
is required by Rule 16b-3. The 1994 Plan becomes effective upon stockholder
approval. No Awards may be granted after the tenth anniversary of the effective
date of the 1994 Plan.

Inasmuch as Awards granted under the 1994 Plan are subject to the
discretion of the Committee, benefits under the 1994 Plan are not determinable.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following discussion is a brief summary of the principal United States
Federal income tax consequences under current Federal income tax laws relating
to awards under the 1994 Plan. This summary is not intended to be exhaustive
and, among other things, does not describe state, local or foreign income and
other tax consequences.

NONQUALIFIED STOCK OPTIONS ("NQSO"). An optionee will not recognize any
taxable income upon the grant of NQSO. The Company will not be entitled to tax
deduction with respect to the grant of NQSO's.

Upon exercise of an NQSO, the excess of the fair market value of the Common
Stock on the exercise date over the exercise price will be taxable as
compensation income to the optionee and will be subject to applicable
withholding taxes. The Company will generally be entitled to a tax deduction at
that time in the amount of such compensation income subject to the possible
limitations of Section 162(m) of the Code. The optionee's tax basis for the
Common Stock received pursuant to the exercise of an NQSO will equal the sum of
the compensation income recognized and the exercise price.

In the event of a sale of Common Stock received upon the exercise of an
NQSO any appreciation or depreciation after the exercise date generally will be
taxed as capital gain or loss and will be long-term capital gain or loss if the
holding period for such Common Stock is more than one year.

INCENTIVE STOCK OPTIONS ("ISO"). An optionee will not recognize any
taxable income at the time of grant or timely exercise of an ISO and the Company
will not be entitled to a tax deduction with respect to such grant or exercise.
Exercise of an ISO may, however, give rise to taxable compensation income
subject to applicable withholding taxes, and a tax deduction to the Company, if
the ISO is not exercised on a timely basis (generally, while the optionee is
employed by the Company or within 90 days after termination of employment) or if
the optionee engages in a "disqualifying disposition" as described below. The
amount of the excess of the fair market value, on the date of exercise of an
ISO, of the shares acquired through such exercise over the exercise price
constitutes an item of tax adjustment for purposes of the federal alternative
minimum tax.

A sale or exchange by an optionee of shares acquired upon the exercise of
an ISO more than one year after the transfer of the shares to such optionee and
more than two years after the date of grant of the ISO will

20
<PAGE> 23

result in any difference between the net sale proceeds and the exercise price
being treated as long-term capital gain (or loss) to the optionee. If such sale
or exchange takes place within two years after the date of grant of the ISO or
within one year from the date of transfer of the ISO shares to the optionee,
such sale or exchange will generally constitute a "disqualifying disposition" of
such shares that will have the following results: any excess of (i) the lesser
of (a) the fair market value of the shares at the time of exercise of the ISO
and (b) the amount realized on such disqualifying disposition of the shares over
(ii) the exercise price of such options will be ordinary income to the optionee,
subject to applicable withholding taxes and the Company will be entitled to a
tax deduction in the amount of such income. Any further gain or loss after the
date of exercise generally will qualify as capital gain or loss and will not
result in any deduction by the Company.

RESTRICTED STOCK. A grantee will not recognize any income upon the receipt
of Restricted Stock unless the holder elects under Section 83(b) of the Code,
within 30 days of such receipt, to recognize ordinary income in an amount equal
to the fair market value of the Restricted Stock at the time of receipt, less
any amount paid for the shares. If the election is made, the holder will not be
allowed a deduction of amounts subsequently required to be returned to the
Company. If the election is not made, the holder will recognize ordinary income,
on the date that the restrictions to which the Restricted Stock are subject are
removed, in an amount equal to the fair market value of such shares on such
date, less any amount paid for the shares. At the time the holder recognizes
ordinary income, the Company generally will be entitled to a compensation
deduction of a corresponding amount subject to the possible limitations of Code
Section 162(m).

Generally, upon a sale or other disposition of restricted stock in respect
to which the holder has recognized ordinary income (i.e., a Section 83(b)
election was previously made or the restrictions were previously removed), the
holder will recognize capital gain or loss in an amount equal to the difference
between the amount realized on such sale or other disposition and the holder's
basis in such shares. Such gain or loss will be long-term capital gain or loss
if the holding period for such shares is more than one year.

STOCKHOLDER APPROVAL

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

RELATIONSHIP WITH INDEPENDENT AUDITORS

The Board of Directors of the Company has selected its present auditors,
the firm of Ernst & Young, as independent auditors to examine and report on the
financial statements of the Company for the year ending December 31, 1994. A
representative of Ernst & Young is expected to be present at the meeting to make
such statements as are deemed appropriate and to respond to appropriate
stockholder questions. The Board has determined that, although not required, it
would be desirable to request from the stockholders an expression as to whether
they concur in the foregoing selection. The Board recommends that stockholders
vote to ratify such selection. If the holders of a majority of the votes
represented at the meeting do not ratify the selection of Ernst & Young, the
selection of independent auditors will be reconsidered by the Board.

21
<PAGE> 24

STOCKHOLDER PROPOSALS

Any stockholder who wishes to submit a proposal to be presented at the 1995
Annual Meeting of stockholders must forward such proposal to the Secretary of
the Company at the address of the Company which is given above, so that it is
received by him no later than February 7, 1995.

SOLICITATION OF PROXIES

The solicitation of proxies will be conducted primarily by mail. However,
employees of the Company may solicit proxies by telephone, telegraph or personal
contact, but at no additional compensation. Bankers, brokers and others holding
stock in their names or in the names of nominees will be reimbursed for
out-of-pocket expenses incurred in forwarding proxies and proxy material to the
beneficial owners of such shares. The total cost of solicitation will be borne
by the Company.

OTHER MATTERS

The Board of Directors is not aware of any other matters which may be
brought before the meeting. If other matters not known come before the meeting,
the persons named in the accompanying form of proxy or their substitutes will
vote such proxy in accordance with their best judgment.

STEVEN G. FELSHER
Secretary

June 7, 1993

22
<PAGE> 25

EXHIBIT A

GREY ADVERTISING INC.
1993 SENIOR MANAGEMENT INCENTIVE PLAN

1. PURPOSES OF THE PLAN

The 1993 Senior Management Incentive Plan ("Plan") is intended to provide
additional compensation to certain key executives of Grey Advertising Inc., a
Delaware corporation ("Grey"), and its subsidiaries (collectively, the
"Corporation"), based on the earnings of the Corporation and, thereby, to
advance the continued success of the Corporation by providing additional
incentive for them to promote the success of the business and to enable the
Corporation to attract and retain the services of such key executives. In
furtherance of these goals, a percentage of the Earnings (as hereinafter
defined) of the Corporation for each of the calendar years (each of which is
hereinafter called a "Plan Year") 1993 through 1997 shall be allocated to the
Plan and credited and distributed to Participants (as hereinafter defined) in
accordance with and subject to the terms of the Plan. Executives who are
designated as participants under the Plan are herein called "Participants". In
addition, in order to encourage the greatest community of interest with the
stockholders of the Corporation, certain awards under the Plan shall be in the
form of the common stock, par value $1 per share ("Stock"), of the Corporation.

2. SHARES SUBJECT TO THE PLAN

Except as hereinafter provided in this Section 2, the aggregate number of
shares of Stock which may be allocated under the Plan shall not exceed 200,000
shares ("Shares"). Shares shall be made available, at the discretion of the
Committee (as hereinafter defined), either from the authorized but unissued
shares of Stock or from shares of Stock held in the hands of the treasury of the
Corporation.

In the event that the number of outstanding shares of Stock of the
Corporation shall be changed (or converted into other consideration) as a result
of stock splits, combinations or exchanges of shares, or through reorganization,
merger, consolidation or similar events, the number of Shares which may be
allocated under the Plan and the number of Shares represented by outstanding
allocations (as well as the consideration to be issued or paid under the Plan)
shall be appropriately adjusted as determined by the Committee so as to reflect
any such change.

3. ELIGIBILITY

Key executives of the Corporation (including executive officers and
directors who are employees) shall be eligible to become Participants in the
Plan. The Compensation Committee of the Board of Directors ("Compensation
Committee"), in its sole discretion, shall determine which key executives shall
become Participants in the Plan. In selecting participants, the Compensation
Committee shall consider such factors as it shall, in its sole discretion, deem
relevant in connection with accomplishing the purposes of the Plan. An employee
shall become a Participant upon the allocation to him/her of cash credits or
Stock Allocations (as hereinafter provided) under the Plan.
<PAGE> 26

4. PARTICIPANTS

There shall be three types of Participants in the Plan as follows:

(a) Participants who have achieved the age of 65 when they become
Participants prior to December 31, 1993 ("Vested Participants");

(b) Participants who may be considered "executive officers" of the
Corporation for purposes of Section 16 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), but only with respect to awards
granted in respect of periods prior to 1994, and any other Participants
specifically designated by the Committee. (Participants described in this
paragraph (b) are referred to herein as "Affiliated Participants," and
Affiliated Participants and Vested Participants are collectively referred
to herein as "Cash Participants"); and

5. AMOUNTS CREDITED TO THE PLAN; ALLOCATIONS TO PARTICIPANTS

(a) For each Plan Year, there shall be credited by the Committee (as
defined in Section 9 of the Plan) to the Plan for the benefit of the
Participants an amount equal to 12% of the Earnings (as hereinafter defined) for
such Plan Year; provided, however, that for Plan Years commencing with calendar
year 1994, such crediting shall be made only if the Earnings for such Plan Year
exceed $15,000,000. (The amount credited to the Plan for any Plan Year is
hereinafter referred to as the "Plan Year Pool.")

(b) For each Plan Year commencing with calendar year 1994, the Committee
shall allocate to each Participant a percentage (the "Allocation Percentage") of
the Plan Year Pool for such Plan Year. For Plan Years commencing with calendar
year 1994, the Allocation Percentage of a Participant may not exceed 30% with
respect to any Plan Year. Allocations with respect to a Plan Year shall be made
by the Committee not later than June 30th of each year following the Plan Year
to which such allocations apply. Any portion of the Plan Year Pool which is not
allocated to Participants may not be allocated for any other Plan Year.

(c) Allocations to each Cash Participant shall be made in the form of cash
credits. Allocations ("Stock Allocations") to each Stock Participant shall be
made (in lieu of such cash credits) corresponding to such number of shares of
Stock as shall equal (i) the dollar value of the cash credits which would
otherwise be allocated to such Stock Participant, divided by (ii) the average of
the means of the daily high bid and low asked prices of the Stock as reported in
the Wall Street Journal during the last 15 days on which the Stock traded during
December of the Plan Year to which the allocations are attributable. (If the
Stock is traded on fewer than 15 days during such December, the average of the
means of the high bid and low asked prices on days on which trading occurred
shall be used.)

(d) As at the end of each Plan Year, there shall be determined for each
Stock Participant an amount ("Dividend Amount") equal to the number of shares in
each Stock Participant's Stock Accumulated Account (as hereinafter defined) as
at the end of the previous Plan Year multiplied by the amount of the dividends
per share of Stock paid by Grey during the Plan Year. (A Stock Participant's
"Stock Accumulated Account" shall be such number of shares of Stock in the Plan
as shall have theretofore been allocated to such Stock Participant.) The
Dividend Amount shall then be divided by the price of the Stock determined in
the preceding paragraph (c) and there shall be credited to the Stock
Participant's Stock Accumulated Account, Stock Allocations representing such
number of shares of Stock as shall be equal to the resulting quotient.

A-2
<PAGE> 27

(e) "Earnings" as used herein shall mean the Corporation's net income as
determined for financial reporting purposes, determined in accordance with
generally accepted accounting principles consistently applied, after deduction
of all expenses incurred by the Corporation, but before deduction of any amounts
to be credited under this Plan and any deduction for the provision for taxes on
income. In determining Earnings for a particular Plan Year, the Compensation
Committee shall have the authority to make adjustments in recognition of unusual
or non-recurring events affecting the Corporation or its financial statements,
or in response to changes in applicable laws, regulations or accounting
principles.

(f) This is an unfunded plan and the crediting of Stock to the accounts of
Stock Participants or of amounts to the accounts of Cash Participants shall not
require the Corporation to set aside or pay funds, or to set aside or transfer
Stock, unless and until required by Paragraph 8 hereof.

6. VESTING

A Participant's account (whether Stock or cash) may either be vested or
contingent. An account shall be contingent ("Contingent Account") until a
Participant's Vesting Date (as hereinafter defined) occurs. A Participant's
account shall be vested ("Vested Account") from and after the Participant's
Vesting Date as to all amounts or Stock in such account on the Vesting Date and
as to all amounts or Stock credited thereafter. The Vesting Date of a
Participant shall be the date on which the first of the following events occurs:

(a) The Participant becomes a Vested Participant as defined in
paragraph 4(a) hereof; or

(b) The Participant has completed five full calendar years of
continuous employment with the Corporation after becoming a Participant in
the Plan, provided that any person who became a Participant in the Plan
prior to or during 1993 shall be deemed to have completed such five full
calendar years if he/she shall have remained continuously employed with the
Corporation through December 31, 1997; or

7. FORFEITURES

A Participant with a Contingent Account whose employment terminates for any
reason whatsoever (except for death or permanent disability) shall forfeit
his/her account. Any forfeited Contingent Account, in the discretion of the
Committee, may be reallocated and applied to Participants other than
Participants who are "Covered Employees" (within the meaning of Section 162(m)
of the Internal Revenue Code of 1986, as amended ("Code")) or may be returned to
the Corporation.

8. PAYMENTS TO PARTICIPANTS

(a) No payment of funds or distributions of Stock from Contingent Accounts
shall be made to Participants. Payments and distributions shall be made to
Participants of sums credited or Stock allocated, as the case may be, to their
respective Vested Accounts in the discretion of the Committee, as follows:

(i) in the case of cash payments to a Cash Participant, in a lump sum,
on or before June 30th following the Vesting Date;

(ii) in the case of Stock distributions to a Stock Participant, by the
issuance of such a number of shares of Stock as shall then be in such Stock
Participant's Stock Accumulated Account (except for fractional shares which
shall be paid in cash) on or before June 30th following the Vesting Date;
and

A-3
<PAGE> 28

(iii) notwithstanding the foregoing, cash payments and/or Stock
distributions may be made in no less than two nor more than five equal
annual installments, the first installment to be paid on or before June
30th following the Vesting Date, and succeeding installments to be paid on
or before each succeeding June 30th, until the amount of cash or Stock in
the Participant's Vested Account shall have been paid or distributed, as
the case may be, in full.

(b) Anything to the contrary contained above notwithstanding, in no event
shall any payment be required to be made to a Participant sooner than 90 days
after a Participant's Vesting Date. In the event the Committee shall have
determined to make payment in accordance with sub-paragraph 8(a)(iii), the
Committee shall have the right, subsequently, to amend its determination in
order to accelerate the payment to any Participant.

(c) Notwithstanding the preceding provisions of this Section 8, the
Committee may, in its discretion, defer the payment of funds or distribution of
Stock to Participants until such time and to the extent necessary to ensure that
such payment or distribution shall not be rendered nondeductible to the
Corporation by reason of Section 162(m) of the Code. The Committee shall have
the authority to prescribe such other terms and conditions relating to such
deferral as it may deem appropriate.

9. ADMINISTRATION

The Plan shall be administered by the Compensation Committee, which shall
have full and final authority, subject to the express provisions of the Plan, to
make all determinations deemed necessary or advisable for the administration of
the Plan. The Compensation Committee shall have full and final authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it and to make all determinations necessary or advisable for its
administration. However, to the extent permitted by Rule 16b-3 ("Rule 16b-3")
promulgated under the Exchange Act and by Section 162(m) of the Code, the
Compensation Committee may delegate some or all of its functions under the Plan
to the Chief Executive Officer of Grey (the Compensation Committee or the Chief
Executive Officer, as the case may be, being referred to herein as the
"Committee"). In addition to such other rights of indemnification as they may
have as directors, members of the Committee shall be indemnified by the
Corporation to the full extent permissible under applicable law while serving as
a member of the Committee.

10. NON-TRANSFERABILITY OF INTERESTS IN THE PLAN

Interests of Participants in the Plan (including amounts or Stock allocated
to their accounts) shall not be transferable otherwise than by will or by the
laws of descent and distribution. More particularly, but without limiting the
generality of the foregoing, no such interests may be assigned, transferred
(except as provided in the preceding sentence), pledged or hypothecated in any
manner, nor shall any such interests be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge, hypothecation or
other disposition contrary to this provision, and any levy or any attachment or
similar process upon such an interest shall be null and void and without effect,
and the Committee may, in its discretion, upon the happening of any such event,
terminate and declare such an interest forfeited forthwith.

11. TERMINATION AND AMENDMENT OF THE PLAN

The Board of Directors of Grey may terminate this Plan at any time or make
such amendments hereto as it shall deem advisable; provided, however, that any
such termination or amendment shall not adversely affect any amounts previously
credited to Participants under this Plan, whether in Vested or Contingent
Accounts,

A-4
<PAGE> 29

without the consent of the affected Participants; and provided, further, that no
such amendment may be made without the requisite approval of stockholders of
Grey if such approval is required in order to maintain compliance with Rule
16b-3. No such termination shall accelerate any vesting under the Plan.
Notwithstanding that the amounts may be credited or paid thereafter, no credits
or payments shall be made under this Plan with respect to any year after the
final Plan Year.

12. MISCELLANEOUS

(a) Allocations may be made under this Plan from earlier plans of like
nature, and such allocations shall be valued and shall vest as determined by the
Committee.

(b) Computations under this Plan shall be carried to the nearest one-one
thousandth of a share or dollar, as the case may be.

(d) Captions are used herein for convenience only and shall not have any
legal effect.

A-5
<PAGE> 30

EXHIBIT B

GREY ADVERTISING INC.
1994 STOCK INCENTIVE PLAN

1. PURPOSES

The purposes of the Grey Advertising Inc. ("Company") 1994 Stock Incentive
Plan ("Plan") are to encourage ownership of the common stock, par value $1 per
share ("Common Stock"), of the Company by eligible key employees of the Company
and its subsidiaries, and thereby to provide increased incentive for such
employees to put forth maximum effort for the success of the business of the
Company, and to enable the Company better to attract, retain and reward such
employees. Awards under the Plan ("Awards") may be granted in the form of Stock
Options ("Options") or restricted stock ("Restricted Stock"), subject to the
applicable terms and conditions set forth herein.

2. ADMINISTRATION

This Plan shall be administered by a committee ("Committee") of the Board
of Directors of the Company consisting of no less than two persons, each of whom
is a "disinterested person" within the meaning of Rule 16b-3 ("Rule 16b-3")
promulgated under the Securities Exchange Act of 1934, as amended. The Committee
is authorized to establish such rules and regulations as it deems necessary for
the proper administration of the Plan, and to make such determinations and
interpretations and to take such action in connection with the Plan and any
options granted under the Plan as it deems necessary or advisable. All
determinations of the Committee shall be by a majority of its members and such
determinations shall be final.

3. ELIGIBILITY

Key employees of the Company and its subsidiaries shall be eligible to
receive Awards. Directors of the Company who are not full-time employees of the
Company or of any of its subsidiaries shall not be eligible to receive Awards.

4. SHARES AVAILABLE

An aggregate of 250,000 shares of Common Stock shall be available for grant
of Options and Restricted Stock under the Plan (subject in each case to
adjustment as provided in paragraph 9). Such shares may be authorized and
unissued shares or may be treasury shares. Upon the expiration, termination or
cancellation in whole or in part of any unexercised Options or upon the
forfeiture or repurchase by the Company of any shares of Restricted Stock,
shares of Common Stock covered by such unexercised Options or forfeited or
repurchased shares of Restricted Stock shall be available again for new Awards
of Options and Restricted Stock, respectively, under the Plan. No employee may
be granted Options for more than 75,000 shares or more than 75,000 shares of
Restricted Stock (subject in each case to adjustment as provided in paragraph 9)
over the term of the Plan.

5. GRANT OF AWARDS

Subject to the provisions of paragraphs 4 and 6, Awards may be granted to
such eligible employees in such numbers and at such times during the term of the
Plan as the Committee shall determine. Each Award shall be evidenced by a duly
executed written agreement by and between the Company and the grantee,
<PAGE> 31

containing such other agreements as shall be required by the Committee and as
shall not be inconsistent with the Plan. Agreements may contain dissimilar
provisions provided that all such provisions are consistent with the Plan.
Agreements relating to shares of Restricted Stock shall prescribe the form of
legend to be inscribed to the stock certificate evidencing such shares.

6. TERMS AND CONDITIONS OF OPTIONS

All Options under the Plan shall be granted subject to the following terms
and conditions:

(a) Designation. Each Option shall be designated as either an
"incentive stock option" (within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code")) or as a "nonqualified stock
option".

(b) Option Price. The option price shall be not less than 100% of the
fair market value of a share of Common Stock, as determined by the
Committee, on the date the option is granted; provided, however, that the
option price of an "incentive stock option" granted to any individual (a
"ten percent shareholder") who owns (within the meaning of Section
422(b)(6) of the Code) stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or any
subsidiary corporation shall not be less than 110% of such fair market
value.

(c) Duration of Options. Unless sooner terminated by the terms of the
Plan or by the terms of any specific grant, each Option shall expire not
later than ten years from the date of grant; provided, however, that the
maximum term of an "incentive stock option" granted to a ten percent
shareholder shall be five years from the date of grant or such longer
period as may be permitted by the Code.

(d) Exercise of an Option. Options shall be exercisable over their
term at such times and in such installments as the Committee may prescribe.
Options may be exercised from time to time by written notice to the Company
stating the number of shares with respect to which the Option is being
exercised.

(e) Payment. No shares shall be issued or delivered upon exercise of
an Option until full payment for the Option shares has been made in cash,
in shares having a fair market value equal to the option price, or in a
combination of the foregoing.

(f) Nontransferability of Options. An Option shall not be
transferable by an optionee except by will or the laws of descent and
distribution and shall be exercisable, during the optionee's lifetime, only
by the optionee.

(g) Termination of Employment. Upon termination of an optionee's
employment, each Option previously granted to the optionee shall expire if
not exercised before the earlier of (i) the expiration date provided in the
option agreement applicable to each such Option and (ii) such earlier date
as may be set forth in such option agreement.

(h) Non-Competitive Provision. Anything herein to the contrary
notwithstanding, if an optionee, without the written consent of the
Company, engages either directly or indirectly, in any manner or capacity,
as principal, agent, partner, officer, director, employee, or otherwise, in
any business or activity competitive with the business conducted by the
Company or any subsidiary of the Company, each Option previously granted to
the optionee shall expire forthwith.

B-2
<PAGE> 32

7. TERMS AND CONDITIONS APPLICABLE TO RESTRICTED STOCK

All Awards of Restricted Stock shall be granted subject to the following
terms and conditions:

(a) Purchase Price. Shares of Restricted Stock may be sold to
eligible employees at such purchase price per share as shall be determined
by the Committee, or such shares may be awarded and issued without the
payment of a purchase price.

(b) Conditions to Certain Issuances and Sales. Shares of Restricted
Stock may be issued or sold hereunder without the payment of a purchase
price (or for a per share purchase price which is less than the then fair
market value per share, as determined by the Committee) only if the
Corporation's "Earnings" (as hereinafter defined) for its fiscal year prior
to the year of such issuance or sale exceed $15,000,000. For purposes
hereof, "Earnings" for a particular year shall mean the Company's net
income as determined for financial reporting purposes, determined in
accordance with generally accepted accounting principles consistently
applied, after deduction of all expenses incurred by the Company, but
before deduction of any amounts credited for such year under the Company's
1993 Senior Management Incentive Plan (or any successor plan thereto) and
any deduction for the provision for taxes on income. In determining
Earnings for a particular year, the Committee shall have the authority to
make adjustments in recognition of unusual or nonrecurring events affecting
the Company or its financial statements, or in response to changes in
applicable laws, regulations or accounting principles.

(c) Exercise of Rights to Purchase. An employee who is granted the
right to purchase shares of Restricted Stock may exercise such right during
such period after the time of grant as may be determined by the Committee,
provided that he or she is still an employee of the Company or any of its
subsidiaries on the date of such exercise.

In order to exercise his or her right to purchase shares of Restricted
Stock, the employee shall give written notice to the Company of his or her
election to purchase and the number of shares he or she is purchasing. The
full purchase price of the shares being purchased shall be tendered at the
time of such notice in cash or in previously owned shares of Stock. The
purchaser shall possess no rights as a stockholder with respect to any
purchased shares until he or she has made such full payment and has had
issued to him or her a certificate or certificates evidencing the shares so
purchased.

(d) Restrictions. Shares of Restricted Stock issued to or purchased
by an employee under the Plan shall be subject to such restrictions as may
be imposed by the Committee at the time of issuance or at the time of the
grant of the right to purchase shares. Such restrictions may vary from
employee to employee and may also vary among several grants to the same
employee.

8. REGULATORY APPROVALS

The Company shall not be required to issue any certificate or certificates
for shares of Common Stock upon the exercise of an Option or upon the lapsing of
restrictions with respect to Restricted Stock prior to (a) the obtaining of any
approval from any governmental agency which the Company shall, in its sole
discretion, determine to be necessary or advisable and (b) the completion of any
registration or other qualification of such shares under any state or Federal
law or rulings or regulations of any governmental body which the Company shall,
in its sole discretion, determine to be necessary or advisable.

B-3
<PAGE> 33

9. ADJUSTMENT OF SHARES AVAILABLE

If there is any change in the Common Stock through the declaration of stock
dividends, or through recapitalization resulting in stock splits, or
combinations or exchanges of shares, or otherwise, the number of shares
available for Awards, the maximum number of Options and shares of Restricted
Stock which may be granted to any individual, the shares subject to any Award
and the option prices applicable to outstanding Options shall be appropriately
adjusted by the Committee.

10. AMENDMENT

The Board of Directors of the Company may from time to time amend the Plan
in any manner which it deems in the best interest of the Company, but may not,
without the approval of the Company's Stockholders, adopt any amendment which
would cause the Plan to fail to comply with Rule 16b-3.

11. EFFECTIVE DATE OF THE PLAN

This Plan shall be effective as from June 27, 1994, provided that the Plan
shall have been approved within twelve months of such date by the Stockholders
of the Company. In the absence of such Stockholder approval, the Plan (and any
Awards theretofore granted) shall be null and void. No Awards may be granted
after the tenth anniversary of such effective date.

B-4
<PAGE> 34

COMMON STOCK

GREY ADVERTISING INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS

FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 27, 1994

The undersigned stockholder(s) of Grey Advertising Inc. ("Company")
hereby appoint(s) Edward H. Meyer and Steven G. Felsher, and each of them, the
true and lawful proxies, agents and attorneys of the undersigned each with full
power to act without the other and with full power of substitution and
revocation, to represent and act for the undersigned, in the name, place and
stead of the undersigned, and to vote all shares of the Company which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders to be held at the offices of APCO Associates Inc., the
Company's public affairs subsidiary, 1155 21st Street N.W., Washington, D.C.,
on June27, 1994 at 8:00 A.M., local time, and at any and all adjournments
thereof, on the following matters:

THE SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS HEREIN, BUT WHERE SPECIFICATIONS ARE NOT INDICATED, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE NOMINEE FOR DIRECTOR AND IN FAVOR OF THE
PROPOSALS REFERRED TO IN ITEMS 2, 3 AND 4. If other matters not now known come
before the meeting the persons named herein or their substitutes will vote such
shares in accordance with their best judgment.

The undersigned hereby ratifies and confirms all that said proxies,
agents and attorneys, or either of them, or their substitutes, lawfully may do
at the meeting and hereby revokes all proxies heretofore given by the
undersigned to vote at said meeting or any and all adjournments thereof.

If only one of said proxies, or his substitute, be present and vote at
said meeting, or at any or all adjournments thereof, such person shall have and
may exercise all powers hereby granted.

(Continued on reverse side)

FOLD AND DETACH HERE

<PAGE> 35

PROPOSAL NO. 1. The election of Edward H. Meyer, as a
director, to hold office until the Annual Meeting to
be held in 1997 or until the election of his successor.

FOR WITHHELD
FROM
/ / / /

PROPOSAL NO. 2. A proposal to amend and restate
the Company's 1993 Senior Management Incentive Plan.

FOR AGAINST ABSTAIN

/ / / / / /

PROPOSAL NO. 3. A proposal to approve the Company's
1994 Stock Incentive Plan.

FOR AGAINST ABSTAIN

/ / / / / /

PROPOSAL NO. 4. A proposal to ratify the selection
of Ernst & Young as independent auditors for the
Company for 1994.

FOR AGAINST ABSTAIN
/ / / / / /

5. The transaction of such other business as may
properly come before the meeting, and at any and
all adjournments thereof.

The undersigned hereby acknowledges receipt of the
Notice of the Meeting and Proxy Statement, dated
June 7, 1994. Dated: June , 1994.

(L.S.)
------------------------------------------------
Stockholder should sign exactly as name appears at left.

(L.S.)
--------------------------------------------------
Stockholder should sign exactly as name appears at left.

FOLD AND DETACH HERE

<PAGE> 36

LIMITED DURATION CLASS B COMMON STOCK

GREY ADVERTISING INC.

PROXY SOLICITED BY THE BOARD OF DIRECTORS

FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 27, 1994

The undersigned stockholder(s) of Grey Advertising Inc. ("Company") hereby
appoint(s) Edward H. Meyer and Steven G. Felsher, and each of them, the true
and lawful proxies, agents and attorneys of the undersigned each with full
power to act without the other and with full power of substitution and
revocation, to represent and act for the undersigned, in the name, place and
stead of the undersigned, and to vote all shares of the Company which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Stockholders to be held at the offices of APCO Associates Inc., the
Company's public affairs subsidiary, 1155 21st Street N.W., Washington, D.C.,
on June27, 1994 at 8:00 A.M., local time, and at any and all adjournments
thereof, on the following matters:

The undersigned hereby ratifies and confirms all that said proxies, agents
and attorneys, or either of them, or their substitutes, lawfully may do at the
meeting and hereby revokes all proxies heretofore given by the undersigned to
vote at said meeting or any and all adjournments thereof.

If only one of said proxies, or his substitute, be present and vote at said
meeting, or at any or all adjournments thereof, such person shall have and may
exercise all powers hereby granted.

(Continued on reverse side)

FOLD AND DETACH HERE

<PAGE> 37

PROPOSAL NO. 1. The election of Edward H. Meyer, as a
director, to hold office until the Annual Meeting to
be held in 1997 or until the election of his successor.

FOR WITHHELD
FROM
/ / / /

PROPOSAL NO. 2. A proposal to amend and restate
the Company's 1993 Senior Management Incentive Plan.

FOR AGAINST ABSTAIN

/ / / / / /

PROPOSAL NO. 3. A proposal to approve the Company's
1994 Stock Incentive Plan.

FOR AGAINST ABSTAIN

/ / / / / /

PROPOSAL NO. 4. A proposal to ratify the selection
of Ernst & Young as independent auditors for the
Company for 1994.

FOR AGAINST ABSTAIN
/ / / / / /

5. The transaction of such other business as may
properly come before the meeting, and at any and
all adjournments thereof.

The undersigned hereby acknowledges receipt of the
Notice of the Meeting and Proxy Statement, dated
June 7, 1994. Dated: June , 1994.

(L.S.)
-------------------------------------------------
Stockholder should sign exactly as name appears at left.

FOLD AND DETACH HERE

<PAGE> 38

(LOGO)

GREY ADVERTISING INC.

1993 FINANCIAL REPORT

Grey Advertising Inc.
777 Third Avenue
New York, New York 10017
212-546-2000
<PAGE> 39

WHO WE ARE AND WHAT WE DO

Grey Advertising Inc. ("Company") was founded in 1917 as Grey Studios and
was incorporated in New York in 1925; it was reincorporated in Delaware 49 years
later. Its stock was first sold to the public in 1965. Since its inception, the
Company has engaged in the creation and placement of advertising. The Company
engages in the planning, creation, production and placement of advertising in
various media including television, radio, newspaper and magazines. The Company
has developed an expertise in and offers its clients such additional services as
marketing consultation, direct response advertising, research, product
publicity, public relations and sales promotion.

The Company does business in only one industry segment, and no separate
class of similar services contributed 10% or more of the Company's gross income
or net income during 1993, 1992 or 1991. While the Company operates on a
worldwide basis, for the purposes of presenting certain financial information in
accordance with Securities and Exchange Commission rules, the Company's
operations are deemed to be conducted in three geographic areas. Information
relating to this appears in Note N to the Consolidated Financial Statements.

STOCK PRICES* AND
DIVIDEND HISTORY 1992-1993

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
1992 QUARTER QUARTER QUARTER QUARTER 1993 QUARTER QUARTER QUARTER QUARTER
- - --------------- ------- ------- ------- ------- --------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Bid Prices* Bid prices*
High......... 128 138 137 140 High........... 157 165 189 187
Low.......... 110 125 126 129 Low............ 132 143 166 174
</TABLE>

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
1992 QUARTER QUARTER QUARTER QUARTER 1993 QUARTER QUARTER QUARTER QUARTER
- - --------------- ------- ------- ------- ------- --------------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asked Prices* Asked prices*
High......... 135 145 137 140 High........... 158 169 191 188
Low.......... 118 130 131 135 Low............ 136 150 170 181
Dividends...... .75 .75 .75 .775 Dividends...... .775 .775 .775 .8125
</TABLE>

- - ------------------
*Such over-the-counter market quotations reflect interdealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent
actual transactions.

Note: Stockholders of Record -- Common Stock 530 (6/1/94);
Limited Duration Class B Common Stock 329 (6/1/94).

1
<PAGE> 40

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

RESULTS OF OPERATIONS

Income from commissions and fees ("gross income") increased 0.5% in 1993
and 6.8% in 1992 when compared to the respective prior years. Absent exchange
rate fluctuations, gross income increased 5.9% in 1993 and 5.8% in 1992 as
compared to the respective prior years. The increase in revenue in both years,
primarily resulted from expanded activities from existing clients, and the
continued growth of the Company's general agency and specialized operations.

Salaries and employee related expenses increased less than 1% in 1993 and
9.3% in 1992 when compared to the respective prior years. Office and general
expenses have increased 1.4% in 1993 and 1.5% in 1992 versus prior years. These
increases are generally in line with the increase in gross income shown for such
years.

Inflation did not have a material effect on either revenue or expenses
during 1991, 1992 or 1993.

During the fourth quarter of 1991, the Company absorbed the operations of
its Levine Huntley Vick & Beaver, Inc. ("LHV&B") subsidiary. In connection
therewith, the Company recognized pre-tax charges of approximately $23,850,000
($11,000,000 after tax) related predominately to the disposal of LHV&B's real
estate obligations and leasehold assets, the write off of certain fixed assets
and goodwill, and other costs, primarily severance, in connection with the
restructuring. The Company also reflected modest similar charges with respect to
a small number of related operations. A substantial portion of the lease
obligation settlement payments and severance were paid in the fourth quarter of
1991, and the fixed asset and goodwill write offs were charged against the
restructuring reserve in 1991. These charges represented a majority of the costs
incurred with respect to the restructuring. During 1992 and 1993, most of the
remaining costs included in the restructuring charge were settled, and at
December 31, 1993 less than 10% of the original restructuring reserve remains on
the Company's balance sheet to cover any unsettled obligations.

The effective tax rate was 52.7% in 1993, and was 46.9% in 1992, as
restated (see next page) and 38.1% in 1991. The increase in the effective tax
rate in each year is primarily related to increases in the state and local tax
provisions reflecting utilization of the tax benefit associated with the
restructuring charge and due to an increased proportion of the income before
taxes being derived from higher tax jurisdictions. In addition, the 1993
effective tax rate increased because the U.S. income tax statutory rate rose to
35% from 34%.

Minority interest decreased $3,104,000 in 1993 and increased $3,064,000 in
1992 as compared to the respective prior years. The decrease in 1993 and
increase in 1992 were primarily due to changes in the level of profits of
majority-owned companies.

Equity in earnings of nonconsolidated companies increased $1,068,000 in
1993 and $268,000 in 1992 as compared to the respective prior years. These
increases are due primarily to an increase in equity holdings and an increase in
the profit attributable to levels of the nonconsolidated companies.

Net income for 1993 increased 11.2% when compared to net income in 1992;
net income for 1992, as restated (see below), increased 7.4% over net income in
1991 excluding restructuring costs. After giving effect to the restructuring
charges, net income, as restated (see below), for 1992 increased 317.8% when
compared to 1991.

Primary net income per share increased 6.2% in 1993 and, excluding the
restructuring charge, 8.1% in 1992 as compared to the respective prior periods.

In the first quarter of 1993, the Company adopted FAS 109, Accounting for
Income Taxes, as of January 1, 1993 and, as permitted, elected to restate prior
years financial statements. The effect of the restatement was to increase the
tax provision in 1992 by $600,000, reduce 1992 net income by the same

2
<PAGE> 41

amount and reduce 1991 net income by $500,000 by recognizing a cumulative effect
of the accounting change adjustment.

For purposes of computing primary net income per common share, the
Company's net income was (i) reduced by dividends paid on the Company's
Preferred Stock and (ii) reduced or increased by the increase or decrease,
respectively, in redemption value of the Preferred Stock.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents on December 31, 1993 was $181,267,000 up from
$92,755,000 at the end of the prior year; the Company's working capital at
year-end increased during 1993 by $12,413,000 to $25,001,000. These increases
are largely attributable to enhanced collection and disbursement management, and
the effect of the long-term borrowing described below. In addition, the Company
invested in long-term, marketable, highly liquid securities during the second
half of 1993. At December 31, 1993, the Company's investment in such marketable
securities, principally United States Treasury obligations with maturities
between two and seven years, was valued at $22,425,000.

Domestically, the Company maintains committed bank lines of credit
totalling $40,000,000. These lines of credit were partially utilized during both
1993 and 1992 to secure obligations of selected foreign subsidiaries in the
respective year-end amounts of $11,100,000 and $13,311,000.

The Company also maintains domestic uncommitted lines of credit. These
facilities, which are available at the discretion of the offering banks, were
not utilized during the period. There were no amounts outstanding under these
arrangements at December 31, 1993 or 1992.

Other lines of credit are available to the Company in foreign countries in
connection with short-term borrowings and bank overdrafts used in the normal
course of business. There were $34,751,000 and $27,464,000 outstanding under
such facilities at December 31, 1993 and 1992, respectively.

Historically, funds from operations and short-term bank borrowings have
been sufficient to meet the Company's dividend, capital expenditure and working
capital needs. While the Company has not had to utilize long-term borrowing to
fund its operating needs, in January 1993, taking advantage of favorable terms
offered, it borrowed $30,000,000, at a fixed interest rate of 7.68%, repayable
in equal installments in January 1998, 1999 and 2000. The Company does not
anticipate any material increased requirement for capital or other expenditures
which will adversely affect its liquidity.

The Company's business generally has been seasonal with greater commissions
and fees earned in the second and fourth quarters, particularly the fourth
quarter. As a result, cash, accounts receivable, accounts payable and accrued
expenses are typically higher on the Company's year-end balance sheet than at
the end of any of the preceding three quarters.

3
<PAGE> 42

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------
1993 1992
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................................... $181,267,000 $ 92,755,000
Accounts receivable........................................................... 363,105,000 370,223,000
Expenditures billable to clients.............................................. 22,581,000 26,205,000
Other current assets.......................................................... 69,116,000 92,125,000
------------ ------------
TOTAL CURRENT ASSETS.................................................. 636,069,000 581,308,000
INVESTMENTS IN AND ADVANCES TO NONCONSOLIDATED AFFILIATED COMPANIES -- Notes B
and C......................................................................... 16,104,000 11,160,000
FIXED ASSETS -- net -- Note D................................................... 57,724,000 62,974,000
MARKETABLE SECURITIES -- Notes A and E.......................................... 22,425,000
INTANGIBLES AND OTHER ASSETS -- including loans to officers of $4,947,000 in
1993 and $5,194,000 in 1992 -- Notes A, F, G, I and L(1)...................... 88,311,000 96,922,000
------------ ------------
TOTAL ASSETS.......................................................... $820,633,000 $752,364,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.............................................................. $469,227,000 $429,071,000
Notes payable to banks -- Note F.............................................. 45,851,000 40,795,000
Accrued expenses and other.................................................... 88,099,000 92,455,000
Income taxes payable.......................................................... 7,891,000 6,399,000
------------ ------------
TOTAL CURRENT LIABILITIES............................................. 611,068,000 568,720,000
OTHER LIABILITIES, including deferred compensation of $15,342,000 and
$15,891,000 -- Note L(1)...................................................... 31,820,000 45,180,000
LONG-TERM DEBT -- Note F........................................................ 33,025,000 3,025,000
MINORITY INTEREST............................................................... 9,053,000 10,230,000
REDEEMABLE PREFERRED STOCK -- at redemption value; par value $1 per share;
authorized 500,000 shares; issued and outstanding 32,000 shares in 1993 and
34,000 shares in 1992 -- Note G............................................... 6,590,000 6,468,000
COMMON STOCKHOLDERS' EQUITY:
Common Stock -- par value $1 per share; authorized 10,000,000 shares; issued
1,062,046 in 1993 and 1,030,892 in 1992.................................... 1,062,000 1,031,000
Limited Duration Class B Common Stock -- par value $1 per share; authorized
2,000,000 shares; issued 369,738 shares in 1993 and 400,892 shares in
1992....................................................................... 370,000 401,000
Paid-in additional capital.................................................... 27,329,000 23,635,000
Retained earnings............................................................. 131,835,000 118,737,000
Cumulative translation adjustment............................................. (3,573,000) 2,779,000
Unrealized loss on marketable securities -- Notes A and E..................... (147,000)
Loans to officer used to purchase Common Stock and Limited Duration Class B
Common Stock -- Note I..................................................... (4,726,000) (4,726,000)
------------ ------------
152,150,000 141,857,000
Less -- cost of 164,372 and 163,830 shares of Common Stock and 26,851 and
30,551 shares of Limited Duration Class B Common Stock held in treasury at
December 31, 1993 and 1992, respectively................................... 23,073,000 23,116,000
------------ ------------
TOTAL COMMON STOCKHOLDERS' EQUITY..................................... 129,077,000 118,741,000
RETIREMENT PLANS, LEASES AND CONTINGENCIES -- Note L............................
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................ $820,633,000 $752,364,000
=========== ===========
</TABLE>

See notes to consolidated financial statements.

4
<PAGE> 43

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Commissions and fees........................... $567,243,000 $564,468,000 $528,299,000
Expenses:
Salaries and employee related expenses --
Note L(1)................................. 348,462,000 346,933,000 317,531,000
Office and general expenses -- Note L(2)..... 177,993,000 175,577,000 173,039,000
Restructuring costs -- Note M................ 23,850,000
------------ ------------ ------------
526,455,000 522,510,000 514,420,000
------------ ------------ ------------
40,788,000 41,958,000 13,879,000
Other income (expense) -- net -- Note C........ 1,917,000 630,000 (602,000)
------------ ------------ ------------
INCOME BEFORE TAXES ON INCOME OF
CONSOLIDATED COMPANIES............. 42,705,000 42,588,000 13,277,000
Provision for taxes on income -- Note K........ 22,487,000 19,975,000 5,057,000
------------ ------------ ------------
Net income of consolidated companies before
cumulative effect of accounting change.... 20,218,000 22,613,000 8,220,000
Minority interest applicable to consolidated
companies................................. (4,508,000) (7,612,000) (4,548,000)
Equity in nonconsolidated affiliated
companies................................. 1,971,000 903,000 635,000
------------ ------------ ------------
Net income before cumulative effect of
accounting change......................... 17,681,000 15,904,000 4,307,000
Cumulative effect of accounting change....... (500,000)
------------ ------------ ------------
NET INCOME........................... $ 17,681,000 $ 15,904,000 $ 3,807,000
=========== =========== ===========
Earnings per Common Share -- Note J:
Primary
Before cumulative effect of
accounting change....................... $13.46 $12.68 $3.51
Cumulative effect of accounting change.... .42
------ ------ -----
NET INCOME........................... $13.46 $12.68 $3.09
------ ------ -----
------ ------ -----
Fully diluted
Before cumulative effect of
accounting change....................... $13.00 $12.25 $3.48
Cumulative effect of accounting change.... .40
------ ------ -----
NET INCOME........................... $13.00 $12.25 $3.08
------ ------ -----
------ ------ -----
</TABLE>

See notes to consolidated financial statements.

5
<PAGE> 44

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<TABLE>
<CAPTION>
COMMON STOCK
PAID-IN HELD IN TREASURY OTHER
COMMON ADDITIONAL RETAINED ------------------------ EQUITY
STOCK CAPITAL EARNINGS SHARES AMOUNT ACCOUNTS TOTAL
---------- ----------- ------------ ------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December
31, 1990............ $1,432,000 $18,092,000 $106,608,000 301,390 $(28,156,000) $ 6,024,000 $104,000,000
Net income........... 3,807,000 3,807,000
Cash
dividends -- Common
Shares -- $2.93 per
share............... (3,335,000) (3,335,000)
Cash
dividends -- Redeemable
Preferred Stock
-- $5.85 per
share............... (199,000) (199,000)
Common Shares
acquired -- at
cost................ 3,211 (361,000) (361,000)
Decrease in
redemption value of
Redeemable
Preferred -- Note
G................... 92,000 92,000
Restricted Stock Plan
activity -- Note
H................... 433,000 (5,000) 288,000 721,000
Tax benefit from
restricted
stock -- Note H..... 937,000 937,000
Common Shares issued
upon exercise of
stock options....... 568,000 (23,786) 759,000 1,327,000
Translation
adjustment.......... (1,836,000) (1,836,000)
---------- ----------- ------------ ------- ------------ ----------- ------------
Balance at December
31, 1991............ 1,432,000 20,030,000 106,973,000 275,815 (27,470,000) 4,188,000 105,153,000
Net income........... 15,904,000 15,904,000
Cash
dividends -- Common
Shares -- $3.025.... (3,519,000) (3,519,000)
Cash
dividends -- Redeemable
Preferred Stock
-- $6.05............ (206,000) (206,000)
Common Shares
acquired -- at
cost................ 7,375 (891,000) (891,000)
Increase in
redemption value of
Redeemable Preferred
Stock -- Note G..... (415,000) (415,000)
Restricted Stock Plan
activity -- Note
H................... 252,000 252,000
Tax benefit from
restricted
stock -- Note H..... 119,000 119,000
Common Shares issued
upon exercise of
stock options....... 498,000 (70,999) 4,112,000 4,610,000
Tax benefit from
exercise of stock
options............. 1,556,000 1,556,000
Deferred compensation
used to purchase
Common Shares....... 20,000 (17,810) 1,133,000 1,153,000
Senior Management
Incentive Plan
activity -- Note
L................... 1,160,000 1,160,000
Notes receivable from
senior executive
related to exercise
of stock
options -- Note I... (4,726,000) (4,726,000)
Translation
adjustment.......... (1,409,000) (1,409,000)
---------- ----------- ------------ ------- ------------ ----------- ------------
Balance at December
31, 1992............ 1,432,000 23,635,000 118,737,000 194,381 (23,116,000) (1,947,000) 118,741,000
Net income........... 17,681,000 17,681,000
Cash
dividends -- Common
Shares -- $3.1375
per share........... (3,911,000) (3,911,000)
Cash
dividends -- Redeemable
Preferred
Stock -- $6.275
per................. (204,000) (204,000)
Common Shares
acquired -- at
cost................ 5,426 (787,000) (787,000)
Increase in
redemption value of
Redeemable Preferred
Stock -- Note G..... (468,000) (468,000)
Restricted Stock Plan
activity -- Note
H................... 256,000 256,000
Tax benefit from
restricted
stock -- Note H..... 66,000 66,000
Common Shares issued
upon exercise of
stock options....... (44,000) (8,584) 830,000 786,000
Tax benefit from
exercise of stock
options............. 46,000 46,000
Senior Management
Incentive Plan
activity -- Note
L................... 3,370,000 3,370,000
Translation
adjustment.......... (6,352,000) (6,352,000)
Unrealized loss on
marketable
securities --
Notes A and E....... (147,000) (147,000)
---------- ----------- ------------ ------- ------------ ----------- ------------
Balance at December
31, 1993............ $1,432,000 $27,329,000 $131,835,000 191,223 $(23,073,000) $(8,446,000) $129,077,000
=========== ============= ============== ======== ============== ============= ==============
</TABLE>

See notes to consolidated financial statements.

6
<PAGE> 45

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income......................................................... $ 17,681,000 $ 15,904,000 $ 3,807,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization of fixed assets................. 13,591,000 13,171,000 13,612,000
Amortization of intangibles................................... 5,486,000 7,682,000 5,104,000
Deferred compensation......................................... 6,379,000 8,572,000 9,718,000
Equity in earnings of nonconsolidated affiliated companies,
net of dividends received of $1,336,000, $595,000 and
$440,000..................................................... (635,000) (308,000) (195,000)
Minority interest applicable to consolidated companies........ 4,508,000 7,612,000 4,548,000
Writedown of investments in affiliates........................ 1,344,000
Amortization of restricted stock expense...................... 256,000 280,000 527,000
Cumulative effect of accounting change........................ 500,000
Deferred income taxes......................................... (3,271,000) 5,351,000 (10,981,000)
Asset writeoffs related to restructuring -- Note M............ 6,997,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable................. (29,082,000) 27,633,000 (49,044,000)
Decrease (increase) in expenditures billable to clients.... 555,000 (4,014,000) (3,056,000)
Decrease (increase) in other current assets................ 28,454,000 (11,434,000) (25,660,000)
(Increase) decrease in other assets........................ (2,202,000) (4,592,000) 5,714,000
Increase in accounts payable............................... 76,731,000 769,000 97,569,000
(Decrease) increase in accrued expenses and other.......... (5,580,000) 8,976,000 12,594,000
Increase (decrease) in income taxes payable................ 2,385,000 478,000 (2,822,000)
(Decrease) in other liabilities............................ (7,298,000) (26,160,000) (4,502,000)
------------ ------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................. 107,958,000 49,920,000 65,774,000
INVESTING ACTIVITIES
Purchases of fixed assets.......................................... (13,421,000) (11,904,000) (14,664,000)
Increase in investments in and advances to nonconsolidated
affiliated companies............................................ (4,849,000) (1,731,000) (402,000)
Purchases of marketable securities................................. (22,572,000)
Increase in intangibles, primarily goodwill........................ (6,770,000) (1,780,000) (18,212,000)
------------ ------------ ------------
NET CASH USED IN INVESTING ACTIVITIES...................... (47,612,000) (15,415,000) (33,278,000)
FINANCING ACTIVITIES
Common Shares issued under Restricted Stock Plan................... 240,000
Net proceeds from (repayments of) short-term borrowings............ 9,762,000 (11,331,000) 12,307,000
Common Shares acquired for treasury................................ (787,000) (492,000) (361,000)
Cash dividends paid on Common Shares............................... (3,884,000) (3,519,000) (3,335,000)
Cash dividends paid on Redeemable Preferred Stock.................. (204,000) (206,000) (199,000)
Proceeds from exercise of stock options............................ 786,000 1,041,000 1,327,000
Proceeds from the redemption of Redeemable Preferred Stock......... (300,000)
Proceeds from long-term debt....................................... 30,000,000
------------ ------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES........ 35,373,000 (14,507,000) 9,979,000
Effect of exchange rate changes on cash.............................. (7,207,000) 1,231,000 (2,112,000)
------------ ------------ ------------
INCREASE IN CASH AND CASH EQUIVALENTS...................... 88,512,000 21,229,000 40,363,000
Cash and cash equivalents at beginning of year....................... 92,755,000 71,526,000 31,163,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR................... $181,267,000 $ 92,755,000 $ 71,526,000
=========== =========== ===========
</TABLE>

SUPPLEMENTAL INFORMATION REGARDING NON-CASH FINANCING ACTIVITIES.

In 1992, the Company granted a loan of $3,170,000 in partial payment for the
purchase of common stock (see Note I).

See notes to consolidated financial statements.

7
<PAGE> 46

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1993

NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its majority owned subsidiaries. Material
intercompany balances and transactions have been eliminated in consolidation.

Certain amounts for years prior to 1993 have been reclassified to conform
with the current year classification.

Commissions and Fees: Income derived from advertising placed with media is
generally recognized based upon the publication or broadcast dates. Income
resulting from expenditures billable to clients is generally recognized when
billed. Payroll costs are expensed as incurred.

Cash Equivalents: The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be cash equivalents. The
carrying amount of cash equivalents approximates fair value because of the short
maturities of those instruments.

Investments in and Advances to Nonconsolidated Affiliated Companies: The
Company carries its investments in nonconsolidated affiliated companies on the
equity method. The Company is amortizing the excess ($6,995,000 in 1993 and
$3,669,000 in 1992) of the cost of its investments in certain of these companies
over the related net equity at the date of acquisition over periods of up to 20
years. Certain investments which are not material in the aggregate are carried
on the cost method.

Fixed Assets: Depreciation of furniture, fixtures and equipment is
provided for over their estimated useful lives ranging from three to ten years
and has been computed principally by the straight-line method. Amortization of
leaseholds and leasehold improvements is provided for principally over the terms
of the related leases, which are not in excess of the lives of the assets.

Foreign Currency Translation: Primarily all balance sheet accounts of the
Company's foreign operations are translated at the exchange rate in effect at
each year end and income statement accounts are translated at the average
exchange rates prevailing during the year. Resulting translation adjustments are
made directly to a separate component of stockholders' equity. Foreign currency
transaction gains and losses are reported in income. During 1993, 1992 and 1991,
foreign currency transaction gains and losses were not material.

Intangibles: The excess ($63,965,000 in 1993 and $63,895,000 in 1992) of
purchase price over underlying net equity of certain consolidated subsidiaries
at the date of acquisition is being amortized by the straight-line method over
periods of up to 20 years.

Income Taxes: Effective January 1, 1993, the Company changed its method of
accounting for income taxes from the deferred method to the liability method
required by FAS 109, Accounting for Income Taxes. As permitted under the new
rules, the Company has restated its 1992 and 1991 financial statements (see Note
K). The Company provides appropriate foreign withholding taxes on unremitted
earnings of consolidated and nonconsolidated foreign companies.

Marketable Securities: Effective December 31, 1993, the Company has
adopted FAS 115, Accounting for Certain Investments in Debt and Equity
Securities. The Company has classified its investments in marketable securities
as available-for-sale at the time of purchase and re-evaluates such designation
as of each balance sheet date. Available-for-sale securities are carried at fair
value, based on publicly quoted market prices, with unrealized gains and losses
reported as a separate component of stockholders' equity.

8
<PAGE> 47

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

Postretirement Benefits: During 1992, the Company adopted FAS 106,
Accounting for Postretirement Benefits Other Than Pensions. The costs incurred
resulting from the adoption of this pronouncement were not material.

NOTE B -- FOREIGN OPERATIONS

The following financial data is applicable to consolidated foreign
subsidiaries:

<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Current assets..................................... $357,391,000 $369,342,000 $369,022,000
Current liabilities................................ 363,948,000 372,391,000 363,792,000
Other assets -- net of other liabilities........... 45,889,000 61,205,000 56,842,000
Net income......................................... 2,584,000 4,473,000 6,827,000
</TABLE>

Consolidated retained earnings at December 31, 1993 includes equity in
unremitted earnings of nonconsolidated foreign companies of approximately
$2,937,000.

NOTE C -- OTHER INCOME (EXPENSE) -- NET

<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Interest income.................................... $ 7,307,000 $ 6,565,000 $ 5,964,000
Interest expense................................... (7,558,000) (7,170,000) (6,125,000)
Dividends from affiliates.......................... 674,000 198,000 351,000
Writedown of investments........................... (1,344,000)
Other -- net....................................... 1,494,000 1,037,000 552,000
------------ ------------ ------------
$ 1,917,000 $ 630,000 $ (602,000)
=========== =========== ===========
</TABLE>

NOTE D -- FIXED ASSETS

Components of fixed assets -- at cost are:

<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
Furniture, fixtures and equipment................................... $ 90,304,000 $ 91,950,000
Leaseholds and leasehold improvements............................... 42,091,000 41,711,000
------------ ------------
132,395,000 133,661,000
Less accumulated depreciation and amortization...................... 74,671,000 70,687,000
------------ ------------
$ 57,724,000 $ 62,974,000
=========== ===========
</TABLE>

NOTE E -- MARKETABLE SECURITIES

At December 31, 1993, the Company's investments in marketable securities
consist of U.S. Treasury obligations with maturities of 2 to 7 years and a
market value of $22,425,000. At December 31, 1993, the Company has recorded
unrealized losses of $147,000 related to these investments.

NOTE F -- CREDIT ARRANGEMENTS AND LONG-TERM DEBT

The Company maintains committed lines of credit of $40,000,000 with various
banks and may draw against the lines on unsecured demand notes at rates below
the applicable bank's prime interest rate. These lines of credit were partially
utilized during both 1993 and 1992 to secure obligations of selected foreign
subsidiaries in the respective year-end amounts of $11,100,000 and $13,331,000.
The Company had $34,751,000 and $27,464,000 outstanding under other uncommitted
lines of credit at December 31,

9
<PAGE> 48

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

1993 and 1992, respectively. The carrying amount of the debt outstanding under
both the committed and uncommitted lines of credit approximates fair value
because of the short maturities of the underlying notes.

In January 1993, the Company borrowed $30,000,000 from the Prudential
Insurance Company at a fixed interest rate of 7.68% repayable in equal
installments of $10,000,000 in January 1998, 1999 and 2000. The terms of the
loan agreement require, inter alia, that the Company maintain specified levels
of net worth, meet certain cash flow requirements and limit its incurrence of
additional indebtedness to certain specified amounts. At December 31, 1993, the
Company was in compliance with all of these covenants. The fair value of the
Prudential debt is estimated to be $31,400,000 at December 31, 1993. This
estimate was determined using a discounted cash flow analysis using current
interest rates for debt having the similar terms and remaining maturities.

The remaining balance of long-term debt consists of 8 1/2% Convertible
Subordinated Debentures due December 10, 1996 which are currently convertible
into 8.43 shares of Common Stock and an equal amount of Limited Duration Class B
Common Stock, subject to certain adjustments, for each $1,000 principal amount
of such Debentures. The debt was issued in exchange for cash and a $3,000,000,
9% promissory note, payable December 10, 1997, from an officer of the Company
and is included in other assets at December 31, 1993 and 1992. During 1991, the
Company extended the maturity dates of the debt and related promissory note to
the dates indicated above. During each of the years 1993, 1992 and 1991, the
Company paid to the officer interest of $257,000 pursuant to the terms of the
8 1/2% Convertible Subordinated Debenture. During each of the years 1993, 1992
and 1991, the officer paid to the Company interest of $270,000 pursuant to the
terms of the 9% promissory note.

For the years 1993, 1992 and 1991, the Company made interest payments of
$6,529,000, $7,242,000 and $6,118,000, respectively.

NOTE G -- REDEEMABLE PREFERRED STOCK

The Company has outstanding at December 31, 1993 and 1992, 22,000 and
24,000 shares, respectively, of its Series 1 Preferred Stock and 5,000 shares
each of its Series 2 and Series 3 Preferred Stock, which are held by current and
former senior employees of the Company including one executive officer. The
shares were issued at a price equal to the book value of the Common Stock at the
time of issuance less a fixed amount. One dollar per share was paid in cash and
the balance was represented by full recourse promissory notes, payable in May
1996, bearing interest at 9% per annum. In April 1993, the Company, at the
option of one holder, after attainment of age 65, redeemed 2,000 shares of
Series 1 Preferred Stock at a price of $347,000. The Company discharged its
obligation by payment of cash of $300,000 and forgiveness of the holder's
promissory note of $47,000. The amount of the full recourse promissory notes
included in other assets at December 31, 1993 and 1992 was $763,000 and
$810,000, respectively. The interest paid to the senior employees in 1993, 1992
and 1991, pursuant to the terms of these notes was $70,000, $77,000, and
$77,000, respectively.

The redemption price per share for the Preferred Stock is the combined book
value per share of the Common Stock and Limited Duration Class B Common Stock as
adjusted in accordance with the terms of the respective Certificates of
Designation and Terms of each series of Preferred Stock upon redemption less a
fixed discount. Holders of the Preferred Stock may have their shares redeemed
upon termination of employment prior to age 65. The Company is obligated to
redeem such shares following the holder's retirement after age 65.

Following the distribution of the new class of Common Stock designated
Limited Duration Class B Common Stock, the holders of the Preferred Stock became
entitled to eleven votes per share on all

10
<PAGE> 49

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

matters submitted to the vote of stockholders. The holders of the Series 1
Preferred Stock are entitled, as well, to vote as a single class to elect or
remove one-quarter of the Board of Directors, to approve the merger or
consolidation of the Company or the sale by it of all or substantially all of
its assets, and to approve the authorization or issuance of any other class of
Preferred Stock having equivalent voting rights.

The holders of the Preferred Stock are entitled to receive cumulative
preferential dividends at the annual rate of $.25 per share, and to participate
in dividends on the Common Stock and Limited Duration Class B Common Stock to
the extent such dividends, on a per share basis, exceed the preferential
dividends.

In the event of the liquidation of the Company, holders of Preferred Stock
are entitled to a preferential liquidation distribution of $1.00 per share in
addition to all accrued and unpaid preferential dividends.

The total carrying value of the Series 1, 2 and 3 Preferred Stock
(applicable to those shares outstanding at each respective year end) increased
by $468,000 and $415,000 in 1993 and 1992, respectively, and decreased by
$92,000 in 1991, which represents the change in redemption value during those
periods. This change is referred to as "Additional Capital Applicable to
Redeemable Preferred Stock" in the Certificates of Designation and Terms of the
Series 1, 2 and 3 Preferred Stock.

NOTE H -- COMMON STOCK

The Company has authorized and outstanding two classes of common stock,
Common Stock and Limited Duration Class B Common Stock (Class B Common Stock),
both $1 par value per share.

The Class B Common Stock has the same dividend and liquidation rights as
the Common Stock and a holder of each share of Class B Common Stock is entitled
to ten votes on all matters submitted to stockholders. The shares of Class B
Common Stock are restricted as to transferability and upon transfer, except to
specified limited classes of transferees, will convert into shares of Common
Stock which have one vote per share. The Class B Common Stock will automatically
convert to Common Stock on April 30, 1996.

Shares which have been issued and are now outstanding under the provisions
of the Company's Restricted Stock Plan are subject to restrictions as to
transferability expiring generally five or six years from the date of issue. In
1990, an additional 100,000 shares of Common Stock were authorized under this
Plan. During 1993, the restriction lapsed on 1,400 shares of Common Stock and no
shares of Class B Common Stock. At December 31, 1993 and 1992, there were
125,000 and 124,800 shares of Common Stock and 49,900 and 49,900 shares of Class
B Common Stock, respectively, reserved by the Company and available for issuance
under this Plan. Compensation to employees under the Plan of $214,000
representing the unamortized excess of the market value of restricted stock over
any cash consideration received, is carried as a reduction of Paid-In Additional
Capital and is charged to income ($256,000 in 1993, $252,000 in 1992 and
$481,000 in 1991) over the related required period of service of the respective
employees.

The tax benefit, resulting from the difference between compensation expense
deducted for tax purposes and compensation expense charged to income, is
recorded as an increase to Paid-In Additional Capital.

11
<PAGE> 50

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE I -- STOCK OPTION PLANS

Executive Growth Plan: Under the terms of the Company's qualified stock
option plan (Executive Growth Plan), options may be granted to officers and key
employees at prices not less than 100% of the fair market value of the shares on
the date of grant. At December 31, 1993 and 1992, there were no options
outstanding and no options exercisable and at December 31, 1991 and 1990, there
were 25,000 options of Class B Common Stock and 25,000 options of Common Stock
outstanding and exercisable under this plan. During 1992, these options were
exercised at a total option price of $3,237,000, and were paid for with cash of
$67,000 and a note from an officer of the Company in the amount of $3,170,000
due and payable in December 2001 at a fixed interest rate of 6.06%. At December
31, 1993, 142,847 shares of Common Stock and 142,847 shares of Class B Common
Stock were reserved by the Company for issuance with respect to the Plan. In
addition, the holder of the options was entitled to receive an additional amount
representing the dividends which would have been paid if the options had been
exercised on the date of grant. The holder used this additional amount
($1,153,000) to purchase an additional 8,905 shares of both Common Stock and
Class B Common Stock. The additional amount was reflected as compensation
expense in 1992 and in years prior to the exercise.

In addition, and in accordance with the terms of the option agreement, the
holder of the options issued to the Company a promissory note in the principal
amount of $2,340,000 bearing interest at the rate of 6.06%, payable in December
2001, to settle his obligation to provide the Company with funds necessary to
pay the required withholding taxes due upon the exercise of the options. The
Company received a tax benefit of $1,556,000 upon the exercise of the options. A
portion of this note equal to the tax benefit and the full amount of the note
for $3,170,000 are reflected in a separate component of stockholders' equity at
December 31, 1993 and 1992.

The interest paid to the Company by the holder pursuant to the terms of the
two notes issued in connection with the option exercise was $334,000 in 1993. No
interest payments were made in 1992.

Incentive Stock Option Plan: In 1982, the Company adopted an Incentive
Stock Option Plan. Under this plan in which options were available to be granted
through May 1992, options were granted to key employees, including officers, at
a price not less than 100% of the fair market value of the shares on the date of
grant. A Committee of the Board of Directors determined the terms and conditions
under which options may be granted or exercised. However, options (i) may not be
exercised within twelve months from the date of grant, (ii) may not be granted
to Committee members, (iii) expire within ten years from the date of grant and
(iv) must be exercised in the order of grant.

Transactions involving outstanding stock options under this Plan were:

<TABLE>
<CAPTION>
NUMBER OF SHARES
-------------------
CLASS B
COMMON COMMON TOTAL OPTION
STOCK STOCK PRICE
------- ------- ------------
<S> <C> <C> <C>
Outstanding, December 31, 1990................................ 26,992 31,992 $ 3,995,000
Cancelled..................................................... (266) (266) (35,000)
Exercised..................................................... (11,893) (11,893) (1,325,000)
------- ------- ------------
Outstanding, December 31, 1991................................ 14,833 19,833 2,635,000
Cancelled..................................................... (500) (500) (65,000)
Exercised..................................................... (10,233) (10,233) (1,323,000)
-------- ------- ------------
Outstanding, December 31, 1992................................ 4,100 9,100 1,247,000
Cancelled..................................................... (300) (300) (58,000)
Exercised..................................................... (3,700) (3,700) (676,000)
-------- ------ ------------
Outstanding, December 31, 1993................................ 100 5,100 $ 513,000
======== ========= ============
</TABLE>

12
<PAGE> 51

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

As of December 31, 1993, options to acquire 2,242 shares of Common Stock
and 100 shares of Class B Common Stock were exercisable. The Company has
reserved 29,684 shares of Common Stock and 29,684 shares of Class B Common Stock
for issuance with respect to this plan.

Nonqualified Stock Option Plan: On December 2, 1987, the Company adopted a
Nonqualified Stock Option Plan, whereby 100,000 shares of Common Stock were
reserved for issuance. In 1990, the number of shares of Common Stock authorized
for issuance under this Plan was increased to 200,000. At the discretion of a
Committee of the Board of Directors, nonqualified stock options are granted to
employees eligible to receive options at prices not less than 100% of the fair
market value of the shares on the date of grant, and options must be exercised
within 10 years of grant and for only specified limited periods beyond
termination of employment.

Transactions involving outstanding stock options under this Plan were:

<TABLE>
<CAPTION>
NUMBER TOTAL OPTION
OF SHARES PRICE
--------- ------------
<S> <C> <C>
Outstanding, December 31, 1990............................................. 35,750 $3,558,000
Cancelled.................................................................. (1,100) (120,000)
Issued..................................................................... 6,200 869,000
--------- ------------
Outstanding, December 31, 1991............................................. 40,850 4,307,000
Cancelled.................................................................. (2,200) (257,000)
Issued..................................................................... 1,000 131,000
Exercised.................................................................. (533) (50,000)
--------- ------------
Outstanding, December 31, 1992............................................. 39,117 4,131,000
Cancelled.................................................................. (567) (58,000)
Exercised.................................................................. (1,184) (110,000)
--------- ------------
Outstanding, December 31, 1993............................................. 37,366 $3,963,000
======== ============
Available for future grants................................................ 160,917
========
</TABLE>

As of December 31, 1993 and 1992, 19,668 and 8,051 of the outstanding
options, respectively, were exercisable.

NOTE J -- COMPUTATION OF NET INCOME PER COMMON SHARE

The computation of net income per common share is based on the weighted
average number of common shares outstanding, including adjustments for the
effect of the assumed exercise of dilutive stock options and shares issuable
pursuant to the Company's Senior Management Incentive Plan (see Note L(1))
(1,263,900 in 1993, 1,205,241 in 1992 and 1,196,908 in 1991) and, for fully
diluted net income per common share, the assumed conversion of the 8 1/2%
Convertible Subordinated Debentures issued in December 1983. Also, for the
purpose of computing net income per common share, the Company's net income is
reduced by dividends on the Preferred Stock and is reduced or increased to the
extent of an increase or decrease, respectively, in redemption value of the
Preferred Stock. Primary net income per common share is computed as if stock
options were exercised at the beginning of the period and the funds obtained
thereby used to purchase common shares at the average market price during the
period. In computing fully diluted net income per common share, the market price
at the close of the period or the average market price, whichever is higher, is
used to determine the number of shares which are assumed to be repurchased.

13
<PAGE> 52

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The effects of the Preferred Stock dividend requirements and the change in
redemption values amounted to $.53, $.52 and $.09 per share in 1993, 1992 and
1991, respectively.

NOTE K -- INCOME TAXES

Effective January 1, 1993, the Company adopted FAS 109 (see Note A). As
permitted under the new rules, the Company restated its 1992 and 1991 financial
statements. The effect of adoption of FAS 109 was to reduce net income in 1992
by $600,000 or $0.50 per share, through an increase to the deferred provision
for income taxes. The cumulative effect of adoption as of January 1, 1991 was to
reduce net income by $500,000.

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes. At December 31, 1993, and at
December 31, 1992 and 1991, as restated, the Company had deferred tax assets of
$16,282,000, $15,334,000 and $21,928,000 and deferred tax liabilities of
$12,194,000, $14,517,000 and $15,760,000, respectively, detailed as follows:

<TABLE>
<CAPTION>
DEFERRED TAX ASSETS (LIABILITIES)
-----------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Restructuring costs and related future tax benefits......... $ 3,531,000 $ 5,767,000 $ 7,411,000
Deferred compensation....................................... 5,730,000 4,220,000 8,792,000
Accrued expenses............................................ 7,021,000 5,347,000 5,725,000
Safe harbor lease and depreciation.......................... (9,228,000) (10,772,000) (12,267,000)
Tax on unremitted foreign earnings and other................ (2,966,000) (3,745,000) (3,493,000)
----------- ----------- -----------
4,088,000 817,000 6,168,000
Valuation allowance for deferred tax assets.................
----------- ----------- -----------
Net deferred tax assets..................................... $ 4,088,000 $ 817,000 $ 6,168,000
=========== =========== ===========
</TABLE>

The components of income before taxes on income are as follows:

<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Domestic.................................................... $28,646,000 $20,440,000 $(6,648,000)
Foreign..................................................... 14,059,000 22,148,000 19,925,000
----------- ----------- -----------
$42,705,000 $42,588,000 $13,277,000
=========== =========== ===========
</TABLE>

Provisions (benefits) for Federal, foreign, state and local income taxes
consisted of the following:

<TABLE>
<CAPTION>
1993 1992 1991
------------------------ ----------------------- -------------------------
CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED
---------- ---------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Federal................. $12,106,000 $(2,448,000) $ 1,649,000 $3,752,000 $ 2,867,000 $(3,981,000)
Foreign................. 8,580,000 (1,578,000) 11,727,000 8,447,000
State and local......... 5,072,000 755,000 1,248,000 1,599,000 4,724,000 (7,000,000)
----------- ---------- ---------- --------- ---------- -----------
$25,758,000 $(3,271,000) $14,624,000 $5,351,000 $16,038,000 $(10,981,000)
=========== ========== ========== ========= ========== ===========
</TABLE>

14
<PAGE> 53

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The effective tax rate varied from the statutory Federal income tax rate as
follows:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Statutory Federal tax rate.............................................. 35.0% 34.0% 34.0%
State and local income taxes (benefits), net of Federal income tax...... 8.9 4.4 (11.3)
Difference in foreign tax rates......................................... 8.4 11.2 14.7
Withholding tax on unremitted foreign earnings.......................... 1.2 1.0 3.2
Adjustment of prior years' provisions................................... (2.2) (4.9)
Other -- net............................................................ 1.4 1.2 (2.5)
---- ---- -----
52.7% 46.9% 38.1%
==== ==== =====
</TABLE>

During the years 1993, 1992 and 1991, the Company made income tax payments
of $18,748,000, $14,435,000 and $13,905,000, respectively.

NOTE L -- RETIREMENT PLANS, DEFERRED COMPENSATION, LEASES AND CONTINGENCIES

(1) The Company's Profit Sharing Plan is available to all employees of the
Company and qualifying subsidiaries meeting certain eligibility
requirements. The Plan provides for contributions by the Company at the
discretion of the Board of Directors, subject to maximum limitations. The
Company also operates a noncontributory Employee Stock Ownership Plan
covering eligible employees of the Company and qualifying subsidiaries,
under which the Company may make contributions (in stock or cash) to an
Employee Stock Ownership Trust ("ESOT") in amounts each year as determined
at the discretion of the Board of Directors. The Company made no stock
contributions to the Plan in 1993, 1992 and 1991. The Company and the ESOT
have certain rights to purchase shares from participants whose employment
has terminated. In addition to the two plans noted above, various
subsidiaries maintain separate profit sharing and retirement arrangements.
Furthermore, the Company also provides additional retirement and deferred
compensation benefits to certain officers and employees.

The Company maintains a Senior Management Incentive Plan ("SMIP") in which
deferred compensation is granted to senior executive or management employees
deemed essential to the continued success of the Company. The amount
recorded as an expense related to this Plan amounted to $4,581,000,
$4,340,000 and $4,529,000 in 1993, 1992 and 1991, respectively.
Approximately $3,343,000 and $1,160,000 of Plan expense incurred in 1993 and
1992, respectively, will be payable in Company stock in accordance with the
terms of the Plan. These awards convert into 18,461 and 8,624 equivalent
shares of Common Stock in 1993 and 1992, respectively. The future obligation
related to the stock award has been reflected as an increase to Paid-In
Additional Capital.

Expenses related to the foregoing plans and benefits aggregated $21,057,000
in 1993, $25,002,000 in 1992, and $20,300,000 in 1991.

In December 1990, the Company amended its employment agreement with its
Chairman and Chief Executive Officer, which extended the term of that
agreement through December 31, 1997. Concurrently, the Company also
discharged this individual's pension obligation which had been established
pursuant to the terms of his long-standing employment agreement. This
obligation was partially satisfied with a distribution of approximately
$19.8 million from a trust fund previously established by the Company for
this purpose. The remainder of the amount necessary to discharge this
obligation (approximately $9.5 million) was distributed from general
corporate funds. Included in other assets at December 31, 1993 and 1992 is
approximately $9.5 and $11.9 million,

15
<PAGE> 54

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

respectively, related to this arrangement which is being amortized to
expense over the remaining term of the related employment agreement.

Pursuant to an employment agreement, dated December 21, 1990, an executive
officer of the Company borrowed $1,000,000 from the Company repayable at
December 31, 1995, except that one-fifth of the principal of the loan is
forgiven by the Company each December 31, beginning with December 31, 1991,
provided that the officer continues to be employed by the Company on those
dates. In 1993, 1992 and 1991, the Company has included in each year
$200,000 of compensation expense, representing the amount of loan forgiven
each year. As of December 31, 1993 and 1992, the remaining loan balance was
$400,000 and $600,000, respectively (the long term portion of the loan,
$200,000 in 1993 and $400,000 in 1992, is included in other assets).

(2) Rental expense amounted to approximately $32,725,000 in 1993, $33,741,000 in
1992 and $29,106,000 in 1991 which is net of sub-lease rental income of
$2,016,000 in 1993, $3,343,000 in 1992, and $3,483,000 in 1991. Approximate
minimum rental commitments, excluding escalations, under noncancellable
operating leases are as follows:

<TABLE>
<CAPTION>
OFFICE SUB-LEASE
SPACE COMMITMENTS TOTAL
------------- ----------- ------------
<S> <C> <C> <C>
1994................................................... $ 27,007,000 $ (807,000) $ 26,200,000
1995................................................... 24,467,000 (392,000) 24,075,000
1996................................................... 24,085,000 (373,000) 23,712,000
1997................................................... 21,256,000 (341,000) 20,915,000
1998................................................... 19,626,000 (324,000) 19,302,000
Beyond 1998............................................ 43,925,000 (335,000) 43,590,000
------------- ----------- ------------
$ 160,366,000 $(2,572,000) $157,794,000
=========== ============= ===========
</TABLE>

(3) The Company is not involved in any pending legal proceedings not covered by
insurance or by adequate indemnification or which, if decided adversely,
would have a material effect on either the results of operations, liquidity
or financial position of the Company.

NOTE M -- RESTRUCTURING COSTS

In November 1991, the Company recorded a charge for restructuring costs of
$23,850,000 primarily in connection with the absorption of a former subsidiary.
These charges related predominantly to the disposal of the subsidiary's real
estate obligations and leasehold assets, the write-off of certain of its fixed
assets, goodwill and other costs, primarily severance, in connection with the
integration. The restructuring costs also included similar modest charges with
respect to a small number of related operations. The components of the
restructuring charge as recorded in the fourth quarter of 1991 were as follows:

<TABLE>
<S> <C>
Lease termination -- payments and other lease related costs........................... $ 12,200,000
Write-off of fixed assets and leasehold improvements.................................. 4,400,000
Write-off of goodwill of former subsidiaries.......................................... 2,500,000
Severance payments.................................................................... 2,300,000
Other costs........................................................................... 2,450,000
------------
$ 23,850,000
==========
</TABLE>

16
<PAGE> 55

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

The amount provided in 1991 was for liabilities which existed as of the
fourth quarter of 1991 and was not for any events anticipated to happen after
December 31, 1991. Most personnel reduction related to the absorption of the
former subsidiaries occurred during the fourth quarter of 1991 and the severance
accrual was adequate to cover those liabilities. Of the deferred tax benefits
totaling $7,411,000, related to the restructuring charge that was recorded in
1991, $1,644,000 was realized in 1992 and $2,236,000 realized in 1993 (see Note
K). The remaining deferred tax balance is expected to be realized over the next
couple of years.

17
<PAGE> 56

GREY ADVERTISING INC. AND CONSOLIDATED SUBSIDIARY COMPANIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED

NOTE N -- INDUSTRY SEGMENT AND RELATED INFORMATION

Commissions and fees and operating profit by geographic area for the years
ended December 31, 1993, 1992 and 1991, and related identifiable assets at
December 31, 1993, 1992 and 1991 are summarized below (000s omitted):
<TABLE>
<CAPTION>
UNITED STATES WESTERN EUROPE OTHER
---------------------------- ---------------------------- -------------------------
1993 1992 1991 1993 1992 1991 1993 1992 1991
-------- -------- -------- -------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commissions and fees.................... $267,964 $241,279 $248,322 $260,005 $281,632 $242,644 $39,274 $41,557 $37,333
======== ======== ======== ======== ======== ======== ======= ======= =======
Operating profit (loss)................. $ 28,809 $ 20,023 $ (8,239) $ 11,415 $ 16,594 $ 17,866 $ 564 $ 5,341 $ 4,252
======== ======== ======== ======== ======== ======== ======= ======= =======
Other income (expense) -- net...........
Income before taxes on income of
consolidated companies................
Identifiable assets..................... $353,532 $260,849 $246,990 $389,723 $427,728 $421,656 $61,274 $52,627 $56,714
======== ======== ======== ======== ======== ======== ======= ======= =======
Investments in and advances to
nonconsolidated affiliated
companies.............................
Total assets............................

<CAPTION>
CONSOLIDATED
----------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Commissions and fees.................... $567,243 $564,468 $528,299
======== ======== ========
Operating profit (loss)................. $ 40,788 $ 41,958 $ 13,879

Other income (expense) -- net........... 1,917 630 (602)
-------- -------- --------
Income before taxes on income of
consolidated companies................ $ 42,705 $ 42,588 $ 13,277
======== ======== ========
Identifiable assets..................... $804,529 $741,204 $725,360

Investments in and advances to
nonconsolidated affiliated
companies............................. 16,104 11,160 10,471
-------- -------- --------
Total assets............................ $820,633 $752,364 $735,831
======== ======== ========
</TABLE>

Commissions and fees from one client amounted to 13.0%, 13.4% and 10.6% of
the consolidated total in 1993, 1992 and 1991, respectively.

18
<PAGE> 57

REPORT OF INDEPENDENT AUDITORS

BOARD OF DIRECTORS
GREY ADVERTISING INC.

We have audited the consolidated balance sheets of Grey Advertising Inc.
and consolidated subsidiary companies as of December 31, 1993 and 1992, and the
related consolidated statements of income, common stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1993. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Grey
Advertising Inc. and consolidated subsidiary companies at December 31, 1993 and
1992, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1993 in conformity with
generally accepted accounting principles.

As discussed in Note A to the financial statements, in 1993 the Company
changed its method of accounting for income taxes.

New York, New York
February 11, 1994 ERNST & YOUNG