GREY ADVERTISING INC /DE/, DEF 14A, 1998-07-27

GREY ADVERTISING INC /DE/
DEF 14A, 1998-07-27
ADVERTISING AGENCIES

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<PAGE> 1

SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
GREY ADVERTISING INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.

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

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

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

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

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

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

(4) Proposed maximum aggregate value of transaction:

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

(5) Total fee paid:

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

[ ] Fee paid previously with preliminary materials.

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

(1) Amount Previously Paid:

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

(2) Form, Schedule or Registration Statement No.:

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

(3) Filing Party:

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

(4) Date Filed:

------------------------------------------------------------------------
<PAGE> 2

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

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

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

AUGUST 17, 1998

To the Stockholders of
GREY ADVERTISING INC.

The Annual Meeting of Stockholders of Grey Advertising Inc. ("Company")
will be held at the offices of the Atlanta division of the Company's public
relations subsidiary, The GCI Group Inc., 1355 Peachtree Street, N.E., Atlanta,
Georgia on August 17, 1998 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 approve the Company's
1998 Senior Management Incentive Plan.

(3) To consider and take action on a proposal to ratify the selection
of Ernst & Young LLP as independent auditors for the Company for 1998.

(4) 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 July 7, 1998, 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
July 27, 1998

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

AUGUST 17, 1998

This Proxy Statement is being mailed to stockholders on or about July 27,
1998 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 the Atlanta division of the Company's public relations
subsidiary, The GCI Group Inc., 1355 Peachtree Street, N.E., Atlanta, Georgia on
August 17, 1998 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
"non-votes" will not be treated as votes cast or shares present for such issues.
The affirmative vote of the holders of a plurality of the votes cast is required
in the election of directors. The vote required to approve the other matters to
be voted on at the meeting, as well as the effect of abstentions and broker
non-votes, is set forth in the sections describing such matters.

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, 1997 ("10-K").
STOCKHOLDERS DESIRING TO OBTAIN A COPY OF THE 10-K SHOULD ADDRESS WRITTEN
REQUESTS TO MS. SUZANNE P. DIEGMANN, 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 July 7, 1998, and
holders of the Company's Preferred Stock, will be entitled to vote at the
meeting. On July 7, 1998, the Company had outstanding 966,240 shares of Common
Stock and 271,833 shares of Class B Stock. The Company also has outstanding 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
<PAGE> 4

share of Class B Stock will be entitled to ten votes; and each share of
Preferred Stock will be entitled to eleven votes.

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

<TABLE>
<CAPTION>
AMOUNT OF
SHARES AND
NATURE OF
NAME AND ADDRESS BENEFICIAL
OF RECORD OR OR RECORD PERCENTAGE
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
-------------- ---------------- ---------- ----------
<S> <C> <C> <C>
Common Stock...................... Edward H. Meyer, as Voting 167,696(a) 17.4
Trustee under a Voting Trust
Agreement, dated as of February
24, 1986, and as subsequently
amended ("Voting Trust
Agreement"), among the Voting
Trustee, the Company and the
Beneficiaries of the Voting Trust
Agreement
777 Third Avenue
New York, New York 10017
Edward H. Meyer 182,137(b) 18.9
777 Third Avenue
New York, New York 10017
The committee administering the 46,032(c) 4.8
Company's Employee Stock
Ownership Plan
777 Third Avenue
New York, New York 10017
Tweedy Browne Company L.P. 59,474(d) 6.2
52 Vanderbilt Avenue
New York, New York 10017
T. Rowe Price Associates, Inc. 62,985(e) 6.5
100 E. Pratt Street
Baltimore, Maryland 21202
All executive officers and 298,081(f) 30.9
directors as a group
</TABLE>

2
<PAGE> 5

<TABLE>
<CAPTION>
AMOUNT OF
SHARES AND
NATURE OF
NAME AND ADDRESS BENEFICIAL
OF RECORD OR OR RECORD PERCENTAGE
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF CLASS
-------------- ---------------- ---------- ----------
<S> <C> <C> <C>
Class B Stock..................... Edward H. Meyer, as Voting 158,056(a) 58.1
Trustee under the Voting Trust
Agreement
777 Third Avenue
New York, New York 10017
Edward H. Meyer 135,573(b) 49.9
777 Third Avenue
New York, New York 10017
The committee administering the 56,944(c) 21.0
Company's Employee Stock
Ownership Plan
777 Third Avenue
New York, New York 10017
All executive officers and 241,620(f) 88.9
directors as a group
Series I, Series II and Series III
Preferred Stock................. Edward H. Meyer 30,000(g) 100
777 Third Avenue
New York, New York 10017
</TABLE>

- ---------------
(a) Represents voting power only. Does not include shares issuable upon exercise
or conversion of options or other securities which are contractually bound
to be deposited pursuant to the Voting Trust Agreement. In general,
investment power over the shares deposited in the voting trust established
pursuant to the Voting Trust Agreement is retained by the several
beneficiaries of the Voting Trust Agreement. (See "Certain Relationships and
Related Transactions" below.)

(b) Includes shares of Common Stock and of Class B Stock, as the case may be,
issuable upon conversion of the Company's 8 1/2% Convertible Subordinated
Debentures owned by Mr. Meyer, shares of Common Stock issuable upon exercise
of stock options which are currently exercisable (after giving effect to the
assumed conversion and exercise thereof), and Mr. Meyer's beneficial
interest in shares of Common Stock and Class B Stock deposited by him
pursuant to the Voting Trust Agreement as to which he retains investment
power. Does not include shares of Common Stock 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. Does not include shares of Common Stock and Class B
Stock held in trust for Mr. Meyer's children which have been deposited in
the voting trust under the Voting Trust Agreement, exercisable options to
purchase shares of Common Stock which Mr. Meyer has transfered to the trust
for the benefit of his children, 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 (other than shares deposited
in the Voting Trust by Mr. Meyer).

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

(d) Information based on the Company's understanding of publicly-filed material.
Tweedy Browne Company L.P., a registered investment advisor, which, together
with related entities, on behalf of its clients, has

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<PAGE> 6

been a long-term investor in the Company, has sole or shared dispositive and
voting power with respect to the shares listed.

(e) Information based on the Company's understanding of publicly-filed material.
T. Rowe Price Associates, Inc., a registered investment advisor, which,
together with a related entity, on behalf of its clients, has been a
long-term investor in the Company, has sole dispositive and voting power
with respect to the shares listed.

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

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

4
<PAGE> 7

ELECTION OF DIRECTOR

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

John Shannon has been nominated to be elected at the meeting to serve as a
director until the Annual Meeting of Stockholders to be held in 2001. Mr.
Shannon 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. Shannon 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........ 68 Partner, Skadden, 1973 1999 2,200(e) --(f)
Arps, Slate,
Meagher & Flom
LLP, law firm(d)

Edward H. Meyer....... 71 Chairman of the 1961 2000 564,501(g) 69.66%
Board, President
and Chief
Executive Officer

Richard R. Shinn...... 80 Retired Chairman 1990 --(h) 1,000(i) --(f)
of Metropolitan
Life Insurance
Company

John Shannon.......... 61 President, 1991 1998 1,000 --(f)
Grey-International
</TABLE>

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

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

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

Mr. Meyer is also a director of Bowne & Co., Inc., Ethan Allen Interiors,
Inc., Harman International Industries, Inc. and The May Department Stores
Company. Mr. Meyer also serves as director or trustee

5
<PAGE> 8

of thirty-six mutual funds advised by Merrill Lynch Asset Management, Inc.
or its wholly-owned subsidiary, Fund Asset Management, Inc.

Mr. Shinn is also a director of Union Texas Petroleum, Inc.

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

(d) Skadden, Arps, Slate, Meagher & Flom LLP, a law firm in which Mr. Kaplan is
a partner, has provided certain legal services to the Company in 1997 and
1998.

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

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

(g) Mr. Meyer owns beneficially 103,284 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 10.7%, 40.5%,
100%, 100% and 100% of each class, respectively. Also includes shares held
pursuant to the Voting Trust Agreement, as to which Mr. Meyer, as the Voting
Trustee, exercises voting power, and shares of Common Stock and Class B
Stock held in the Company's Employee Stock Ownership Plan as to which Mr.
Meyer exercises shared voting power by virtue of his membership on the
committee charged with its administration. Also includes shares of Common
Stock (2.6%) and Class B Stock (9.4%) issuable on conversion of the
Company's 8 1/2% Convertible Subordinated Debentures owned by Mr. Meyer
after giving effect to the assumed conversion thereof and shares of Common
Stock (5.5%) issuable upon exercise of currently exercisable stock options
owned by Mr. Meyer after giving effect to the assumed exercise thereof. Does
not include shares of the Common Stock and 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, or exercisable options to
purchase shares of Common Stock which Mr. Meyer transferred to the trust for
the benefit of his children.

(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.

The Board of Directors has no reason to believe Mr. Shannon will, for any
reason, be unable to serve as a director. If, however, Mr. Shannon 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
an agreement with the Company, Mr. Kaplan has elected to have payment of his
director's fees deferred until he retires from the Board.

During 1997, the Board met four times. Each director attended all of the
meetings of the Board. The Audit Committee, which is comprised of Messrs. Kaplan
and Shinn, reviews the services of the Company's independent auditors, the
preparation of the Company's financial statements and the maintenance of
internal controls by the Company. Messrs. Kaplan and Shinn also comprise the
Company's Compensation Committee, which is charged with overseeing matters
relating to senior executive compensation. The Company does not have a standing
nominating committee. Members of the Audit Committee and the Compensation
Committee receive $1,000 for each meeting of each such committee which does not
fall on the same day as a meeting of the Board.
6
<PAGE> 9

REMUNERATION OF MANAGEMENT

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

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

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
---------------------------- ----------------------------------------
ALL
REST. STOCK OTHER
NAME AND POSITION YEAR SALARY(2) BONUS(2) STOCK($)(1) OPTIONS(#)(3) COMP.(1)
- ----------------- ---- --------- -------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Edward H. Meyer............ 1997 $2,575,000 $475,000 -0- -0- $1,584,347
Chairman, President and 1996 2,300,000 325,000 -0- 20,000 1,519,957
Chief Executive Officer 1995 2,058,333 591,667 -0- 40,000 1,278,954
Robert L. Berenson......... 1997 $ 540,000 $310,000 -0- -0- $ 380,854
President, Grey-N.Y 1996 540,000 240,000 -0- -0- 339,466
1995 485,000 200,000 -0- 5,000 310,838
Barbara S. Feigin.......... 1997 $ 400,000 $215,000 -0- -0- $ 64,952
Executive Vice President 1996 376,000 160,000 -0- -0- 188,843
1995 376,000 150,000 -0- 2,000 181,085
Stephen A. Novick.......... 1997 $ 825,000 $150,000 -0- -0- $ 495,207
Executive Vice President 1996 775,000 125,000 -0- -0- 419,345
1995 737,500 125,000 -0- 3,500 385,439
John Shannon............... 1997 $ 568,898 $262,400 -0- -0- $ 65,982
President,
Grey-International 1996 555,022 240,000 -0- -0- 51,498
1995 476,500 201,500 -0- 2,000 49,889
</TABLE>

- ---------------
(1) All Other Compensation includes: (i) contributions of $15,650 in 1997 to the
Company's qualified defined contribution plans on behalf of the named
executives other than Mr. Shannon, who, as a United Kingdom resident,
participated in local pension programs to which he contributed funds out of
his salary compensation; (ii) amount shown for Mr. Shannon represents
deferred compensation pursuant to a subsidiary-sponsored program for United
Kingdom executives; (iii) respective insurance premium expense coverage or
reimbursement of $71,622, $18,595, $22,948, and $26,277 in 1997, for Messrs.
Meyer, Berenson and Novick, and Ms. Feigin; (iv) accruals in the amounts of
$241,500 for Mr. Meyer and $24,000 for Ms. Feigin in 1997 generally in
respect of amounts which would have been allocated to Mr. Meyer's and Ms.
Feigin's accounts under the Company's qualified defined contribution
programs for such year but for certain limitations determined under the
federal tax laws; (v) respective allocations under the Company's Senior
Management Incentive Plan ("SMIP") in 1997, for Messrs. Berenson, Meyer and
Novick, of $247,584, $1,256,550, and $257,584, such amounts include $100,000
for Mr. Berenson and $125,000 for Mr. Novick allocated in 1997 as advances
to the five year SMIP begun in 1998; and (vi) $100,000 and $200,000,
respectively, of loan forgiveness in 1997 in respect of Messrs. Berenson's
and Novick's indebtedness to the Company.

(2) Includes amounts paid into a deferred compensation trust on Mr. Meyer's
behalf in 1997. (See "Certain Relationships and Related Transactions"
below.)

(3) No options were granted to any of the named executives during 1997.

7
<PAGE> 10

AGGREGATE OPTIONS EXERCISED IN 1997 AND STOCK OPTION VALUES AS AT DECEMBER 31,
1997(1)

<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1997(2) DECEMBER 31, 1997
SHARES -------------------- ------------------
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED(3) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- -------------------- ------------------
<S> <C> <C> <C> <C>
Edward H. Meyer.............. -- -- 53,333/6,667 $8,419,969/620,031
Robert L. Berenson........... -- -- 0/5,000 0/897,500
Barbara S. Feigin............ -- -- 0/2,000 0/359,000
Stephen A. Novick............ -- -- 0/3,500 0/628,250
John Shannon................. -- -- 0/2,000 0/359,000
</TABLE>

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

(2) Includes options which were granted to Mr. Meyer and which, subsequent to
such grant, and in accordance with the terms of the Company's stock option
programs, Mr. Meyer transferred to a trust established for the benefit of
his children.

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

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 establishment of the goals of the Company's
compensation practices and the implementation of compensation programs that
further these goals. The Compensation Committee reviews regularly the
development of the Company's operations, its revenue and profit performance, its
prospects for growth, the general trends in the advertising agency industry and
the particular needs of the Company.

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

These goals are particularly important, and not readily subject to a
short-term formula approach, in the advertising industry where compensation is
heavily negotiated and where there is great demand for talented people, thus
resulting in a high potential for executive turnover. The Compensation Committee
believes that the programs adopted by Grey have been helpful in retaining the
Company's executive officers who average more than 20 years of service with the
Company. This stability, which is not prevalent in the advertising agency
business more generally, has, in the judgment of the Compensation Committee,
been important in enabling the Company to achieve its performance over the last
20 years. Over such 20-year period, and as through the record date, the
Company's stock price has had an annual compounded return, exclusive of
dividends, of approximately 18%.

The Company's executive officers, as disclosed in this proxy statement, own
a substantial interest in the Company's stock, a significant portion of which
was acquired over many years through a number of the Company's stock programs.
This indicates the importance which the Company places on management having the
same interests as stockholders generally.

In recent years, a significant portion of the executives' total
compensation has been provided through payment of discretionary annual bonuses
and through allocations under the Company's Senior Management Incentive Plan
("SMIP"). The total amounts paid or allocated, as the case may be, are related
to overall corporate operating performance and have trended upwards in better
years. In granting annual bonuses, the Compensation Committee considers the
executives' relative contribution to the Company's overall success, the need for
executives to believe they are compensated competitively, the need for bonuses
to be scaled to reflect seniority and contribution, and other relevant factors.
The Compensation Committee increased Mr. Meyer's salary effective the beginning
of 1998 with a raise in line with the rate of increase of the Company's gross
income and in recognition of the Company's strong operating profit performance.
Mr. Meyer's bonus for 1997 was $475,000 which was considered appropriate given
the Company's record performance. The Committee also considered the compensation
of other chief executive officers generally, as such data is publicly available
and set forth in various compilations. In addition, the Committee considered the
available information about the compensation of chief executive officers of
other advertising agencies. The Committee also recognizes the increasingly
costly marketplace for senior executive talent in the advertising agency
industry generally and the necessity for the Company to remain competitive. In
1997, the Company provided for payments to fund a pension obligation to Mr.
Meyer following the expiration of his current

9
<PAGE> 12

employment agreement on the basis discussed elsewhere in the proxy statement.
The Committee believed this was appropriate in recognition of Mr. Meyer's
continued employment beyond normal retirement age. In reviewing Mr. Meyer's
compensation elements, the Compensation Committee further considered that Mr.
Meyer has been employed by the Company since 1956 and has served as the Chief
Executive Officer since 1971, that despite difficult business conditions in
several major markets Mr. Meyer led the Company to record profits and
significantly increased share performance during the course of 1997, and that
the Company's continued strong and steady growth is importantly attributed to
Mr. Meyer's leadership. The Committee also considered Mr. Meyer's long-term
contributions in creating value for the Company and its stockholders by
establishing and maintaining many significant client relationships, and by
overseeing the Company's expansion into new disciplines and parts of the world.
Overall, it is the generalized view of the Compensation Committee that under Mr.
Meyer's direction the Company has been and is well organized, and managed for
long-term, stable growth.

Under SMIP, as approved by the Company's stockholders, participants are
credited with compensation in an aggregate amount equal to 12% of the Company's
pre-tax operating earnings for each year from 1993 through 1997. Because of Mr.
Meyer's senior position and his substantial interest in the equity of the
Company, the Compensation Committee, as agreed in prior years, awarded Mr. Meyer
with respect to 1997 an amount corresponding to 15% of the aggregate amount
credited for 1997 under SMIP.

The income tax laws deny tax deductions to publicly-held corporations for
annual compensation paid to certain executive officers in excess of $1,000,000,
subject to certain exceptions. The Committee believes the Company should take
appropriate steps to be in a position to preserve the tax deductibility of
compensation payments, to the extent such steps are consistent with providing
competitive compensation to its executives and the Company otherwise satisfies
the requirements of the tax law. Thus, to satisfy the requirements of the tax
law, the Compensation Committee submitted to, and secured the approval of, the
stockholders at the 1994 annual meeting, the Company's stock compensation and
incentive plans designed to comply with such tax laws. In addition, and for the
same purpose, as discussed below, the Company has entered into arrangements with
each of Messrs. Meyer and Novick intended to ensure continued compliance in the
future.

Mark N. Kaplan
Richard R. Shinn

SENIOR EXECUTIVE OFFICER POST-EMPLOYMENT COMPENSATION PLAN; PENSION ARRANGEMENTS

The Senior Executive Officer Post-Employment Compensation Plan provides
that certain qualified officers of the Company and its subsidiaries will be
entitled upon retirement at or after the age of 60 to a lifetime supplemental
pension of $50,000 per year. Persons who are executive vice presidents of the
Company, or more senior, or are designated senior executive officers of certain
of the Company's subsidiaries, and who have met certain age and length of
service requirements, and have been designated by the Board of Directors of the
Company, are participants under the plan. In addition, a surviving spouse of a
recipient of a pension under the plan is entitled to an annual pension equal to
$25,000 for the shorter of such spouse's life and 20 years. Each of the named
executives (other than Mr. Shannon) is a participant 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. The
Company, in 1997, also agreed to make certain payments ("pension deposits") to a
rabbi trust established with the United States Trust Company of New York which
would be used to fund a pension obligation to be payable to Mr. Meyer over the
eleven year period following the normal expiration of his current employment
agreement ("pension period"). The initial pension deposit,

10
<PAGE> 13

made with respect to 1997, was $1,040,000 and annual pension deposits of
$360,000 are scheduled to be made in 1998 through 2002, inclusive. The amount of
the pension to be paid to Mr. Meyer will depend on, and be limited to, the funds
in the rabbi trust during the pension period. In addition, upon termination of
Mr. Meyer's employment prior to the commencement of the pension period or upon
his death, any undistributed funds in the rabbi trust would be paid to Mr. Meyer
or his estate, as the case may be, in satisfaction of any future obligations
with respect to this pension.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Messrs. Meyer and Novick have employment agreements with the Company. In
addition, the Company has an understanding with Mr. Berenson providing for his
continued employment with the Company through December 31, 1999 at a base annual
salary of $625,000 per year. In addition, an 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 (with the Company having agreed to forgive 20% of the original
amount thereof each December 31 on which Mr. Berenson was employed after the
closing of the loan). During 1993, in lieu of making the loan to Mr. Berenson
and forgiving it as contemplated, the Company assisted Mr. Berenson in securing
a loan from a commercial bank by agreeing to amortize up to $100,000 per year
for up to five years (through 1997) of the principal on the mortgage loan Mr.
Berenson took from such bank. The Company's obligation to reimburse the bank is
essentially parallel to the obligation it would have had to Mr. Berenson to
forgive the loan his agreement contemplated being made to him and, therefore, it
is considered the equivalent of a loan forgiveness. In addition, in early 1994,
the Company loaned Mr. Berenson $50,000 which is forgivable by the Company
assuming his continued employment through 1998. In 1995, the Company loaned Mr.
Berenson $125,000 which is forgivable by the Company assuming Mr. Berenson's
continued employment through 1999. During 1996, the Company loaned Mr. Berenson
$700,000, $200,000 of which is forgivable by the Company assuming his continued
employment through 2003, and $500,000 of which is forgivable by the Company
assuming his continued employment through 2004.

In 1984, the Company entered into an employment agreement with Mr. Meyer,
as amended, which provides for Mr. Meyer's employment with the Company through
December 31, 2002. The agreement also provides for a minimum annual salary of
$2,900,000 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 $46,647 in premiums in respect of these policies in 1997.
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 equivalent 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
11
<PAGE> 14

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 for a ten year period following
termination of his employment up to $100,000 per year during the first five
years of such period and $50,000 per year during the remainder of such period,
with such amounts being adjusted for increases in the consumer's price index
until the date of termination of his employment. During such ten year period,
Mr. Meyer has also been charged with the responsibility of overseeing a certain
portion of the Company's charitable contributions and, thus, will see to the
contribution to charities of $100,000 per year of the Company's funds during the
first five years of the period and of $50,000 per year during the remainder of
the period.

In the context of the agreement extending the term of Mr. Meyer's
employment agreement through the date hereinabove mentioned, the Company and Mr.
Meyer also reached agreement providing for the deferral of certain compensation
otherwise payable to him and the payment of such deferred compensation into a
trust, commonly referred to as a rabbi trust, established with United States
Trust Company of New York. The purpose of the trust arrangement is to enhance
the Company's ability to deduct compensation paid to Mr. Meyer without the
application of Section 162(m) of the Internal Revenue Code ("Section") at such
time as the monies are paid to Mr. Meyer from the trust. The Section, under
certain circumstances, denies a tax deduction to an employer for certain
compensation expenses in excess of $1,000,000 per year paid by a publicly-held
corporation to certain of its executives. For 1997, all of cash compensation
payable to Mr. Meyer in excess of $930,000 was deferred and paid into the trust.
In 1998 and subsequent years, such compensation as shall be timely elected by
Mr. Meyer shall be deferred and paid into the trust provided that no such
election shall cause any compensation paid to Mr. Meyer to be non-deductible by
reason of the Section. Amounts deferred and paid into the trust shall be paid to
Mr. Meyer or to his estate, as the case may be, following the expiration of Mr.
Meyer's employment agreement, or the termination of his employment by reason of
death or disability. For the purpose of the presentation of Mr. Meyer's
compensation in the Summary Compensation Table hereinabove provided, the amounts
deferred and paid into the trust are deemed having been paid to Mr. Meyer.

In 1983, the Company sold and issued $3,025,000 principal amount of its
8 1/2% Convertible Subordinated Debentures, due December 31, 2003, 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 due December 31, 2004. The
Debentures are convertible at any time into one share of Common Stock and one
share of Class B Stock, at a current conversion price of $118.54, 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
$2,339,988, representing the amount of tax required to be withheld in connection
with such option exercise. The promissory notes are each full recourse, mature
on December 22, 2001 and bear interest at the rate of 6.06% per year. Mr. Meyer
is also indebted to the Company in the aggregate amount of $762,950 pursuant to
long-term 9%, full recourse promissory notes delivered to the Company in 1981,
1982 and 1983 as part payment for Mr. Meyer's purchase of shares of Series I, II
and III Preferred Stock. The redemption date of the three series of Preferred
Stock is fixed at April 7, 2004. The terms of the Preferred Stock also give Mr.
Meyer or his estate, as the case may be, the option to require the Company to
redeem his Preferred Stock for a period of 12 months following his

12
<PAGE> 15

(i) death, (ii) permanent disability or permanent mental disability, (iii)
termination of full-time employment for good reason or (iv) termination of
full-time employment by the Company without cause.

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 $825,000 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 then employed by the Company. During 1997
the Company forgave $200,000 of this loan.

If Mr. Meyer had been terminated effective December 31, 1997 under
circumstances which would have resulted in payment of the special severance
detailed in the foregoing description of his agreement, the amount then payable
to him would have been $42,813,532. Other than pursuant to the loans described
above in connection with Mr. Meyer's securities, and Messrs. Berenson's and
Novick's arrangements, no executive named above is indebted to the Company for
more than $60,000. Certain key employees of the Company, including the named
executives (other than Mr. Shannon) and certain members of their immediate
families ("Beneficiaries"), have entered into the Voting Trust Agreement, as
amended in 1987 and 1994, pursuant to which the Beneficiaries have deposited the
shares of Common Stock and Class B Stock owned by them into a voting trust. The
Beneficiaries have also agreed to deposit into the voting trust shares of Common
Stock or Class B Stock hereafter acquired by them. The voting trust was extended
in 1994 and will continue until 2004. Mr. Meyer has been designated the sole
Voting Trustee. Beneficiaries retain the sole authority to receive dividends
and, in general, to dispose of their shares held in the voting trust. The
Company has entered into indemnification agreements with each of the members of
the Board of Directors providing, generally, for the fullest indemnification
permitted by law.

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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 S&P 500 TOTAL
(FISCAL YEAR COVERED) GREY PEER GROUP RETURN
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 139.14 107.21 110.08
1994 114.56 115.19 111.53
1995 154.81 152.90 153.45
1996 199.91 188.40 188.68
1997 270.01 294.67 251.63
</TABLE>

The Company's peer group is comprised of Cordiant plc, The Interpublic
Group of Companies, Inc., Omnicom Group, Inc., True North Communications, Inc.
and WPP Group, plc. The graph assumes the initial investment of $100 on December
31, 1992 and the reinvestment of dividends thereafter.

14
<PAGE> 17

PROPOSAL TO APPROVE THE GREY ADVERTISING INC.
1998 SENIOR MANAGEMENT INCENTIVE PLAN

The Grey Advertising Inc. 1998 Senior Management Incentive Plan ("1998
SMIP") was adopted by the Board on November 21, 1997, subject to stockholder
approval. The following description of the 1998 SMIP is not intended to be
complete and is qualified in its entirety by the complete text of the 1998 SMIP,
a copy of which is attached hereto as Exhibit A. Capitalized terms used herein,
unless otherwise defined, will have the meaning assigned to them in the text of
the 1998 SMIP.

The 1998 SMIP is intended to provide performance-based compensation and do
so in a manner so as to be eligible for compliance with Section 162(m) of the
Code ("Section"), if the conditions of the Section are satisfied. The Section
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 ("Covered Employees") who are employed at the end of the employer's
taxable year: 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 relating to performance-based
compensation and the other conditions of the Section are satisfied, compensation
paid to Covered Employees (as defined in the Section) will not be subject to the
deduction limit of the Section. In this regard, the regulations under the
Section contain a definition of (and other rules regarding) "outside directors"
which do not currently permit Mr. Kaplan to qualify as an "outside director".
However, the 1998 SMIP contains deferral features (described below) which are
designed to enable the Company to preserve (if appropriate) the deductibility of
all payments made under the 1998 SMIP irrespective of whether the 1998 SMIP
otherwise satisfies the conditions of the Section.

DESCRIPTION OF PRINCIPAL FEATURES OF THE 1998 SMIP

The 1998 SMIP is intended to provide additional compensation to certain key
executives of the Company and its subsidiaries based on the consolidated
earnings of the Company and, thereby, to advance the continued success of the
Company 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 1998 SMIP is administered by the Board or the Compensation Committee of
the Board (the Board or such Compensation Committee, as the case may be, being
hereinafter referred to as the "Compensation Committee"), which has the
authority to make all determinations deemed necessary or advisable for the
administration of the 1998 SMIP. The Compensation Committee has full and final
authority to interpret the 1998 SMIP, 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 (as
promulgated under the Securities Exchange Act of 1934, as amended) ("Rule
16b-3") and the Section, however, the Compensation Committee may delegate some
or all of its functions under the 1998 SMIP 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".

15
<PAGE> 18

The aggregate number of treasury or authorized but unissued shares of
Common Stock which may be allocated under the 1998 SMIP will not exceed 200,000
shares, subject to adjustment as described in the following sentence. In the
event that the number of outstanding shares of Common Stock is 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 of Common Stock which may be allocated under the
1998 SMIP and the number of shares of Common Stock represented by outstanding
allocations (as well as the consideration to be issued or paid under the 1998
SMIP) will be appropriately adjusted (including through the substitution of
other consideration) as determined by the Committee so as to reflect any such
change.

Key executives of the Company and its subsidiaries (including executive
officers and directors who are employees) are eligible to become participants in
the 1998 SMIP. The Committee, in its sole discretion, will determine which key
executives will become participants in the 1998 SMIP. In selecting participants,
the Committee will consider such factors as it, in its sole discretion, deems
relevant in connection with accomplishing the purposes of the 1998 SMIP.

For each of the calendar years 1998 through 2002 (each, a "Plan Year"),
there will be credited by the Committee to the 1998 SMIP 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 will be made only if the
Earnings for such Plan Year exceed $15,000,000. (The amount credited to the 1998
SMIP 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 1998 SMIP 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, the Committee will allocate to each participant an
amount ("Allocation Amount") of the Plan Year Pool for such Plan Year. The
Allocation Amount of a participant may not exceed 30% of the Plan Year Pool with
respect to any Plan Year. Allocations with respect to a Plan Year will be made
by the Committee not later than June 30th of each year following the Plan Year
to which such allocations apply.

Each participant will be designed as either a Cash Participant or a Stock
Participant (as such terms are defined in the 1998 SMIP). Allocations to a Cash
Participant will be made entirely in cash. Allocations to Stock Participants
will be made one-half in cash and one-half in Common Stock. For purposes of the
preceding sentence, the fair market value of the Common Stock will be determined
based on the average of the means of the daily high bid and low asked prices of
the Common Stock on the last 15 days on which the Common Stock traded during
December of the Plan Year to which allocations are attributable.

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 Plan Year multiplied by the amount of the dividends 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.

16
<PAGE> 19

A participant's account may either be vested or contingent. A participant's
account will 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
will be date on which there occurs the earliest of (i) the participant becomes a
"Vested Participant" (defined as a participant who has reached age 65 when
becoming a participant prior to December 31, 1997); (ii) the participant
completes five full calendar years of continuous employment with the Company or
a subsidiary after becoming a participant in the 1998 SMIP, provided that any
person who became a participant in the 1998 SMIP prior to or during 1998 will 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, 2002; or (iii) the participant dies or becomes 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 30 following the Vesting Date; (ii)
Common Stock distributions to Stock Participants may be made in a single
distribution on or before June 30 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 30 following the Vesting Date until the amount of cash and/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 will not
be rendered nondeductible to the Company by reason of the Section.

A participant with a contingent account whose employment terminates for any
reason (except for death or permanent disability) will forfeit his or her
account. Any forfeited contingent account, in the discretion of the Committee,
in general, may be reallocated and applied to participants or may be returned to
the Company.

The Board may amend or terminate the 1998 SMIP at any time; provided,
however, that any such termination or amendment will not adversely affect any
amounts previously credited to the participants under the 1998 SMIP 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.

Inasmuch as benefits under the 1998 SMIP 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 1997
under the Grey Advertising Inc. 1993 Senior Management Incentive 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 votes against this proposal. Broker
non-votes will not be counted as present and, accordingly, will not affect the
vote on this proposal.

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

17
<PAGE> 20

RELATIONSHIP WITH INDEPENDENT AUDITORS

The Board of Directors of the Company has selected its present auditors,
the firm of Ernst & Young LLP, as independent auditors to examine and report on
the financial statements of the Company for the year ending December 31, 1998. A
representative of Ernst & Young LLP is expected to be present at the meeting to
make such statements as they deem appropriate and to respond to appropriate
stockholder questions. The Board has determined that, although not required, it
would be desirable to request from the stockholders an expression as to whether
they concur in the foregoing selection. The Board recommends that stockholders
vote to ratify such selection. If the holders of a majority of the votes
represented at the meeting do not ratify the selection of Ernst & Young LLP the
selection of independent auditors will be reconsidered by the Board. Abstentions
will have the same effect as a negative vote, while broker non-votes will be
disregarded and have no effect.

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

STOCKHOLDER PROPOSALS

Any stockholder who wishes to submit a proposal to be presented at the 1999
Annual Meeting of Stockholders must forward such proposal to the Secretary of
the Company, at the address of the Company which is given above, so that it is
received no later than February 3, 1999.

SOLICITATION OF PROXIES

The solicitation of proxies will be conducted primarily by mail. Employees
of the Company, however, may solicit proxies by telephone, other means of
communication or personal contact, but at no additional compensation.

OTHER MATTERS

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

STEVEN G. FELSHER
Secretary

July 27, 1998

18
<PAGE> 21

EXHIBIT A

GREY ADVERTISING INC.

1998 SENIOR MANAGEMENT INCENTIVE PLAN

1. PURPOSES OF THE PLAN

The 1998 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, with Grey,
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 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") 1998 through 2002 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 participants
under the Plan are herein called "Participants". In addition, in order to
encourage community of interest with the stockholders of Grey, certain awards
under the Plan shall be in the form of the common stock, par value $1 per share
("Stock"), of Grey.

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"), subject to adjustment as provided in the following paragraph.
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 Grey's treasury.

In the event that the number of outstanding shares of Stock of Grey 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 (including through the substitution of other
consideration) as determined at the sole discretion of 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 Board of Directors of Grey ("Board") or the Compensation Committee of
the Board (the Board or such Compensation Committee, as the case may be, being
hereinafter referred to as the "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> 22

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, 1997 ("Vested Participants");

(b) Participants who are designated "Cash Participants", to whom
awards shall be paid solely in cash; 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, 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, the Committee shall allocate to each
Participant an amount ("Allocation Amount") of the Plan Year Pool for such
Plan Year. The Allocation Amount of a Participant may not exceed 30% of the
Plan Year Pool 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 Participant Allocations") to each Stock
Participant shall be made half in cash credits and half in Stock
Allocations as hereinafter defined. Allocations in the form of Stock
("Stock Allocations") to each Stock Participant shall be made corresponding
to such numbers of shares of Stock as shall equal (i) one half of the
dollar value of the total 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 on 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 of Stock 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.

2
<PAGE> 23

(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 1998 shall be deemed to have completed such five full
calendar years if he or she shall have remained continuously employed with
the Corporation through December 31, 2002; 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
or 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 or a Stock
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

3
<PAGE> 24

for fractional shares which shall be paid in cash) on or before June
30th following the Vesting Date; and

(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, as determined by the Board, the first installments
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 above provisions of this Section 8, the
Committee may, in its discretion, defer the payment of funds and/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
non-deductible 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 promulgated under
the Securities Exchange Act of 1934, as amended ("Rule 16b-3"), 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, in
such instance, 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 fullest 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 cash 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.

4
<PAGE> 25

11. TERMINATION AND AMENDMENT OF PLAN

The Board 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 allocations previously credited to
Participants under this Plan, whether in Vested or Contingent Accounts, 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.

5
<PAGE> 26
==============================================================================
GREY ADVERTISING INC.
LIMITED DURATION CLASS B COMMON STOCK
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 17, 1998

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 Atlanta Division of the Company's public relations subsidiary,
The GCI Group, Inc., 1355 Peachtree Street, N.E., Atlanta, Georgia, on August
17, 1998 at 8:00 AM, local time, and at any and all adjournments thereof, on the
following matters.

THE SHARES REPRESENTED HEREBY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS HEREIN, BUT WHERE SPECIFICATIONS ARE NOT INDICATED, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF THE NOMINEE FOR DIRECTOR AND IN FAVOR OF THE
PROPOSALS REFERRED TO IN ITEM 2 AND ITEM 3. 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)
<PAGE> 27
-- Please Detach and Mail in the Envelope Provided --

Please mark your
A [X] votes as in this
example.

WITHHELD
FOR FROM
[ ] [ ]
Proposal No. 1.
The election of
John Shannon,
as Director, to hold office until the Annual Meeting to
be held in 2001 or until the election of his successor.

FOR AGAINST ABSTAIN
Proposal No. 2. A proposal to approve the [ ] [ ] [ ]
Company's 1998 Senior Management
Incentive Plan.

Proposal No. 3. A proposal to ratify the [ ] [ ] [ ]
selection of Ernst & Young LLP as
independent auditors for the Company
for 1998.

Proposal No. 4. 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 July 27, 1998.

Signature(s) (LS) Dated 1998
------------------- ------------- -----------------
Note: Stockholder(s) should sign exactly as name appears above

<PAGE> 28
GREY ADVERTISING INC.

COMMON STOCK

PROXY SOLICITED BY THE BOARD OF DIRECTORS

FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON AUGUST 17, 1998

The undersigned stockholder(s) of Grey Advertising Inc. ("Company") hereby
appoint(s) Edward H. Meyer and Steven G. Feisher, 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 Atlanta Division of the Company's
public relations subsidiary, The GCI Group, Inc., 1355 Peachtree Street, N.E.,
Atlanta, Georgia, on August 17, 1998 at 8:00 AM, local time, and at any and all
adjournments thereof, on the following matters.

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)

<PAGE> 29
Please Detach and Mail in the Envelope Provided
- --------------------------------------------------------------------------------
Please mark your
A [X] votes as in this
example.

WITHHELD FOR AGAINST ABSTAIN
FOR FROM PROPOSAL NO. 2. [ ] [ ] [ ]
PROPOSAL NO. 1 [ ] [ ] A proposal to approve the Company's
The election of John Shannon, 1998 Senior Management Incentive Plan.
as Director, to hold office
until the Annual Meeting to PROPOSAL NO. 3. [ ] [ ] [ ]
be held in 2001 or until the A proposal to ratify the selection of
election of his successor. Ernst & Young LLP as independent
auditors for the Company for 1998.

PROPOSAL NO. 4. 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 July 27,
1998.

SIGNATURE(S) (L.S.) DATED 1998
----------------------------------------- ---------
NOTE: Stockholder(s) should sign exactly as name appears above.