<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-K/A

[X]   AMENDMENT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the Fiscal Year Ended December 31, 1997

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                         Commission File Number 0-7898

                             GREY ADVERTISING INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

        Delaware                                          13-0802840
-------------------------------          ---------------------------------------
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

777 Third Avenue, New York, New York                         10017
------------------------------------                      ------------
(Address of principal executive offices)                   (Zip Code)

Registrant's telephone number,                             212-546-2000
     including area code                                   ------------
  
Securities registered pursuant to Section 12(b) of the Act:

Title of each Class                    Name of each exchange on which registered
-------------------                    -----------------------------------------
       None                                              None

Securities registered pursuant to Section 12(g) of the Act:

                      Common Stock, par value $1 per share
                      ------------------------------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to the filing requirements for
the past 90 days.

Yes /X/    No/ /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference In Part III of this Form 10-K or any
amendment to this form 10-K.

Yes /X/    No / /
<PAGE>   2
The aggregate market value of the voting stock held by non-affiliates of
registrant was $265,719,042 as at March 1, 1998.

The registrant had 900,830 shares of its common stock, par value $1 per share,
and 279,973 shares of its Limited Duration Class B Common Stock, par value $1
per share, outstanding as at March 1, 1998.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the annual proxy statement to be furnished in connection with the
registrant's 1998 annual meeting of stockholders are incorporated by reference
into Part III.

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

      The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report for the year ended
December 31, 1997 on Form 10-K as set forth in the pages attached hereto:

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.
Item 11.  Executive Compensation.
Item 12.  Security Ownership of Certain Beneficial Owners and Management.
Item 13.  Certain Relationships and Related Transactions.

      Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                              Grey Advertising Inc.
                                              ---------------------------------
                                                (Registrant)



Dated: April 29, 1998                         By /s/ Steven G. Felsher 
                                                 ------------------------------
                                              Executive Vice President
                                              Secretary and Treasurer


                                      -2-
<PAGE>   3
Item 10. Directors and Executive Officers of the Registrant ("Company").

Set forth below is certain information concerning the Company's directors:

<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,
                              law firm (d)

Edward H. Meyer....     71    Chairman of the        1961        2000       576,103(g)          70.90%
                              Board, President
                              and Chief
                              Executive Officer

Richard R. Shinn...     80    Retired Chairman,      1990        -(h)         1,000(i)           -(f)
                              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 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.


                                       -3-
<PAGE>   4
(c)   Represents beneficial interests in shares of the Company's Common Stock,
Class B Stock, and Series I, II and III Preferred Stock. Information is as of
March 1, 1998.

(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 1997 and 1998.

(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 109,684 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 (as hereinafter defined), 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 12.2%,
39.3%, 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 (9.1%) 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 shares of Common Stock (7.0%) issuable upon
exercise of currently exercisable stock options owned by Mr. Meyer after giving
effect to the assumed exercise thereof. Does not include 7,500 shares of each of
the Common Stock and the Class B Stock held in trust for Mr. Meyer's children,
as to which Mr. Meyer, as the Voting Trustee under the Voting Trust Agreement,
exercises voting power.

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

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


      Information concerning the Company's executive officers is included in
Part I of this report.


Item 11. Executive 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:


                                       -4-
<PAGE>   5
<TABLE>
<CAPTION>
                          Annual Compensation                      Long-Term Compensation
                          -------------------                      ----------------------
                                                                                            All
Name and                                                         Rest.(1)   Stock(3)        Other
Position                 Year        Salary(2)        Bonus(2)   Stock($)   Options(#)      Comp.(1)
<S>                      <C>        <C>              <C>           <C>       <C>           <C>
Edward H. Meyer          1997       $2,575,000       $475,000       -0-         -0-        $1,584,347
Chairman,                1996        2,300,000        325,000       -0-       20,000        1,519,957
President                1995        2,058,333        591,667       -0-       40,000        1,278,954
and Chief
Executive Officer


Robert L. Berenson       1997       $  540,000       $310,000       -0-         -0-        $  380,854
President                1996          540,000        240,000       -0-         -0-           339,466
Grey-N.Y                 1995          485,000        200,000       -0-        5,000          310,838

Barbara S. Feigin        1997       $  400,000       $215,000       -0-         -0-        $   64,952
Executive                1996          376,000        160,000       -0-         -0-           188,843
Vice President           1995          376,000        150,000       -0-        2,000          181,085


Stephen A. Novick        1997       $  825,000       $150,000       -0-         -0-        $  495,207
Executive                1996          775,000        125,000       -0-         -0-           419,345
Vice President           1995          737,500        125,000       -0-        3,500          385,439

John Shannon             1997       $  568,898       $262,400       -0-         -0-        $   65,982
President                1996          555,022        240,000       -0-         -0-            51,498
Grey-International       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.


                                      -5-
<PAGE>   6
      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 accrued 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.")

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

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       December 31, 1997
                         Shares                            -----------------       -----------------
                         Acquired       Value                 Exercisable/            Exercisable/
Name                     On Exercise    Realized(2)           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)   "Value Realized" represents the market price of the Common Stock on the
      date of exercise less the exercise price paid.


                                       -6-
<PAGE>   7
SENIOR EXECUTIVE OFFICER POST-EMPLOYMENT COMPENSATION PLAN

      The Senior Executive Officer Post-Employment Compensation Plan provides
that certain qualified officers of the Company and its subsidiaries will be
entitled upon retirement at or after the age of 60 to a lifetime supplemental
pension of a maximum of $50,000 per year. Persons who are executive vice
presidents of the Company, or more senior, or are designated senior executive
officers of certain of the Company's subsidiaries, and who have met certain age
and length of service requirements, and have been designated by the Board of
Directors of the Company, are participants under the plan. In addition, a
surviving spouse of a recipient of a pension under the plan is entitled to an
annual pension equal to a maximum of $25,000 for the shorter of such spouse's
life and 20 years. Each of the named executives (other than Mr. Shannon) were
participants under the plan. In addition, the Company has certain understandings
whereby certain additional pension amounts may be paid to Messrs. Berenson and
Novick, and Ms. Feigin. The Company in 1997 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, 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.


Item 12. Security Ownership of Certain Beneficial Owners and Management.

      As of March 1, 1998, the Company had outstanding 900,830 shares of Common
Stock and 279,973 shares of Class B Stock.

<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          160,724(a)            17.8
                               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
</TABLE>


                                       -7-
<PAGE>   8
<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                      198,537(b)            22.0
                               777 Third Avenue
                               New York, New York 10017

                               The committee administering           46,032(c)             5.1
                               the Company's Employee Stock
                               Ownership Plan
                               777 Third Avenue
                               New York, New York 10017

                               Southeastern Asset Management, Inc.   56,791(d)             6.3
                               6075 Poplar Avenue, Suite 900
                               Memphis, Tennessee 38119

                               Tweedy Browne Company L.P.            55,634(e)             6.2
                               52 Vanderbilt Avenue
                               New York, New York 10017

                               T. Rowe Price Associates, Inc.        60,785(f)             6.7
                               100 E. Pratt Street
                               Baltimore, Maryland 21202

                               All executive officers and           301,932(g)            30.5
                                 directors as a group

Class B Stock......            Edward H. Meyer, as Voting           163,307(a)            58.3
                               Trustee under the Voting Trust
                               Agreement
                               777 Third Avenue
                               New York, New York 10017

                               Edward H. Meyer                      135,573(b)            48.4
                               777 Third Avenue
                               New York, New York 10017

                               The committee administering           56,944(c)            20.3
                               the Company's Employee Stock
                               Ownership Plan
                               777 Third Avenue
                               New York, New York 10017

                               All executive officers and           248,371(g)            81.3
                                 directors as a group

Series I, Series II
  and Series III               Edward H. Meyer                       30,000(h)           100.0
  Preferred Stock..            777 Third Avenue
                               New York, New York 10017
</TABLE>


                                       -8-
<PAGE>   9
      (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, however,
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, and shares of Common Stock issuable upon exercise
of stock options which are currently exercisable (after giving effect to the
assumed conversion and exercise thereof) and Mr. Meyer's beneficial interest in
shares of Common Stock and Class B Stock deposited by him pursuant to the Voting
Trust Agreement as to which he retains investment power. Does not include shares
of Common Stock (5.1% of such class) and of Class B Stock (20.3%) 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
Trust under the Voting Trust Agreement, or shares of Common Stock or of Class B
Stock as to which Mr. Meyer exercises voting power by virtue of being the Voting
Trustee under the Voting Trust Agreement (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. Southeastern Asset Management, Inc., a registered investment advisor,
which, together with a related entity, on behalf of its clients, has been a
long-term investor in the Company, has sole or shared dispositive and voting
power with respect to the shares listed, except with respect to 4,400 such
shares as to which it exercises no voting authority.

      (e) Information based on the Company's understanding of publicly-filed
material. Tweedy Browne Company L.P., a registered investment advisor, which
together with related entities, on behalf of its clients, has been a long-term
investor in the Company, has sole or shared dispositive and voting power with
respect to the shares listed.

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


                                       -9-
<PAGE>   10
      (g) includes shares of Common Stock (5.1% of such class) and of Class B
Stock (20.3%), 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 in the Voting Trust shares 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.

      (h) Represents 20,000 shares 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.

Item 13.  Certain Relationships and Related Transactions.

      Messrs. Meyer and Novick have employment agreements with the Company. In
addition the Company has an agreement with Mr. Berenson providing for his
continued employment with the Company through December 31, 1999 at an annual
salary of $625,000 per year. In addition, understandings with Mr. Berenson
provided that the Company would advance him a compensatory loan in an amount not
to exceed $500,000 to facilitate the purchase of a primary residence which would
secure the loan. Such loan was to be repayable five years after it was made or
upon termination of Mr. Berenson's employment with the Company under certain
circumstances (with the Company having agreed to forgive 20% of the original
amount thereof each December 31 on which Mr. Berenson was employed after the
closing of the loan). During 1993, in lieu of making the loan to Mr. Berenson
and forgiving it as contemplated, the Company assisted Mr. Berenson in securing
a loan from a commercial bank by agreeing to amortize up to $100,000 per year
for up to five years of the principal on the mortgage loan Mr. Berenson took
from such bank. The Company's obligation to reimburse the bank is essentially
parallel to the obligation it would have had to Mr. Berenson to forgive the loan
the agreement with him contemplated being made to him and, therefore, it is
considered the equivalent of a loan forgiveness. In addition, in early 1994, the
Company loaned Mr. Berenson $50,000 which is forgivable by the Company assuming
his continued employment through 1998. In 1995, the Company loaned Mr. Berenson
$125,000 which is forgivable by the Company assuming Mr. Berenson's continued
employment through 1999. During 1996, the Company loaned Mr. Berenson $700,000,
$200,000 of which is to be repaid with accrued interest in May 1999 and $500,000
of which is to be repaid with accrued interest in December 2003.


                                      -10-
<PAGE>   11
      The Company has an employment agreement with Mr. Meyer, which provides for
Mr. Meyer's employment with the Company through December 31, 2002. The agreement
also provides for a minimum annual salary of $2,900,000 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 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 or a car and driver. The
Company has also agreed to reimburse Mr. Meyer for certain business expenses
incurred by him following termination of his employment up to $100,000 per year
during the first five years of such period and $50,000 per year during the
remainder of such period, with such amounts being adjusted for increases in the
consumer's price index until the date of termination of his employment. During
such ten year period, Mr. Meyer has also been charged with the responsibility of
overseeing a certain portion of the Company's charitable contributions and,
thus, will see to the contribution to charities of $100,000 per year of the
Company's funds during the first five years of the period and of $50,000 per
year during the remainder of the period.

      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
times as the monies are paid to Mr. Meyer from the trust. The Section, under
certain circumstances, denies a tax deduction to an employer for certain
compensation expenses in excess of $1,000,000 per year paid by a publicly held
corporation to certain of its executives. For 1997, all cash compensation
payable to Mr. Meyer in excess of $930,000 was deferred and paid into the trust.
In 1998 and subsequent years, such


                                      -11-
<PAGE>   12
compensation as shall be timely elected by Mr. Meyer shall be deferred and paid
into the trust provided that no such election shall cause any compensation paid
to Mr. Meyer to be non-deductible by reason of the Section. Amounts deferred and
paid into the trust shall be paid to Mr. Meyer or to his estate, as the case may
be, upon the expiration of Mr. Meyer's employment agreement, or the termination
of his employment by reason of death or disability. For the purpose of the
presentation of Mr. Meyer's compensation in the Summary Compensation Table
hereinabove provided, the amounts deferred and paid into the trust are deemed
having been paid to Mr. Meyer.

      In 1983, the Company sold and issued $3,025,000 principal amount of its
8-1/2% Convertible Subordinated Debentures, due December 10, 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
$2,339,998, representing the amount of tax required to be withheld in connection
with such option exercise. The promissory notes are each full recourse, mature
on December 22, 2001 and bear interest at the rate of 6.06% per year. Mr. Meyer
is also indebted to the Company in the aggregate amount of $762,950 pursuant to
long-term 9%, full recourse promissory notes delivered to the Company in 1981,
1982 and 1983 as part payment for Mr. Meyer's purchase of shares of Series 1, 2
and Series 3 Preferred Stock (collectively, "Original Preferred Stock"). In
1994, the Company and Mr. Meyer entered into an Exchange Agreement pursuant to
which Mr. Meyer exchanged the Original Preferred Stock for a like number of
shares of new Preferred Stock, designated Series I Preferred Stock, Series II
Preferred Stock and Series III Preferred Stock (collectively, the "New Preferred
Stock"). The redemption date of the three series of new preferred stock is fixed
at April 7, 2004 rather than on a date determined by reference to Mr. Meyer's
termination of full-time employment with the Company. The terms of the New
Preferred Stock also give Mr. Meyer or his estate, as the case may be, the
option to require the Company to redeem his Preferred Stock for a period of 12
months following his (i) death, (ii) permanent disability or permanent mental
disability, (iii) termination of full-time employment for good reason or (iv)
termination of full-time employment by the Company without cause.


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<PAGE>   13
      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, as of 1997, 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, l997 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 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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