SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED).
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO
FEE REQUIRED).
For the transition period from ____________ to
Commission file number 000-17468
-----------------------
GREENSTONE ROBERTS ADVERTISING, INC.
(Exact name of Company as specified in its charter)
NEW YORK 11-2250305
State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
ONE HUNTINGTON QUADRANGLE
SUITE 1C14
MELVILLE, NEW YORK 11747
(Address of principal executive offices) (Zip Code)
(516) 249-2121
Company's telephone number, including area code
-------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12 (B) OF THE ACT: NONE.
SECURITIES REGISTERED PURSUANT TO SECTION 12 (G) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 PER SHARE
- -------------------------------------------------------------------------------
(Title of Class)
Indicate by check mark whether the Company (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 (or for such shorter period that the Company was
required to file such reports), and (2) has been subject to such 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 Company'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. [X]
State the aggregate market value of the voting stock held by non-investee
companies of the Company. The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid and asked
prices of such stock, as of a specified date within 60 days prior to the date of
filing.
$950,977 AS OF JANUARY 5, 1998
Indicate the number of shares outstanding of each of the Company's classes of
common stock, as of the latest practicable date.
COMMON STOCK, $0.01 PAR VALUE -- 743,277 SHARES
(AS OF JANUARY 5, 1998)
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the Company's 1998 Annual Meeting
of Shareholders will be incorporated into Part III of this Form 10-K.
PART I
ITEM 1. BUSINESS.
GENERAL
The Company was incorporated under the laws of the State of New York on February
25, 1972 under the name Greenstone Ad Agency, Inc. and subsequently changed its
name to Greenstone & Rabasca Advertising, Inc. On December 16, 1988. The Company
amended its Certificate of Incorporation to increase the number of shares of
common stock authorized to 30,000,000, par value $.01 per share, and to change
its name to Greenstone Rabasca Roberts, Inc. Its stock was first sold to the
public on February 13, 1989. At their annual meeting on April 5, 1991, the
Company's shareholders approved the Company's name change to Greenstone Roberts
Advertising, Inc. On July 29, 1997 the Company filed an amendment to its
Certificate of Incorporation with the New York Secretary of State as a result of
a reverse one-for-ten stock split.
The Company is a full service advertising agency which analyzes and provides
advertising for its clients, and plans and creates advertising for dissemination
through various media such as television, radio, newspapers, magazines and
billboards. The Company has developed expertise in such related areas of
marketing, consultation, direct mail advertising, market and product research,
design and production of merchandising and sales promotion programs and
materials, corporate identification, and public relations. The Company creates
an advertising program within the limits imposed by the client's advertising
budget or its annual retainer. The Company's commission for advertising services
is generally 15% of the gross charge (commonly referred to as "billings") for
purchasing advertising space or time. This is consistent with the industry
average.
The Company operates offices in Long Island, New York and Orlando, Florida. The
Company believes, based on management's knowledge of and experience in the
market, that it is the largest advertising agency on Long Island, New York in
terms of commissions and fee revenues, and has a strong base in the Florida
market. The Company's success in these areas is based on its established
reputation and expertise in representing clients in businesses such as vitamins,
minerals and nutritional supplements, personal care and food products, computer
hardware and software, financial services, telecommunication services, cleaning
and safety products, wine and spirits, healthcare and education. In the past
fifteen years, the Company has received many of the advertising industry's most
recognized awards including ANDY's, CLIO's and ONE SHOW's. Also in the past
fifteen years, the Company has received in excess of one hundred "Best on Long
Island" awards for its creativity in advertisements and collateral materials.
The strategy of the Company's general advertising division is to concentrate on
servicing medium and large accounts that are seeking the personalized service,
attention and continuity of relationships with top management and creative
personnel that the Company offers and that larger advertising firms based in
major metropolitan areas are not always able to provide. The Company plans to
continue to expand its business by focusing on such accounts and through
possible acquisitions of other advertising agencies on Long Island, in Florida
and in other east coast markets.
On August 8, 1996, the Company acquired a minority interest in The Gothard
Group, Inc., a Miami-based public relations agency. The Company merged its
existing public relations business and its Hispanic Division into The Gothard
Group, Inc., and renamed the new company Gothard/Greenstone Roberts, Inc. This
newly combined agency will provide general and crisis management public
relations services including corporate, product and financial to a broad range
of clients and industries. It also has particular public relations and marketing
expertise in the diversity markets including the African-American and Hispanic
communities. Gothard/Greenstone Roberts, Inc. provides its services both to the
Company's existing clients and to its own clients.
SOLICITATION OF NEW BUSINESS
The Company has been in business for 25 years and believes it is well known in
the Long Island marketplace, as well as South Florida and Orlando. The Company
generally obtains new clients through referrals or by identifying prospects
through market research in product and service industries in which the Company
does not have a competing client. The Company solicits prospective clients
through personal contacts and presentations by agency principals, backed by a
team of creative and media personnel. The initial step in the selection process
normally involves preparing a capability study demonstrating the Company's
ability to service the prospective client. Following the submission of a
capability study, advertisers generally seek presentations from a limited number
of agencies. In soliciting new clients, the Company often incurs expenses prior
to obtaining such clients, and there is no assurance that the Company will be
able to obtain such clients or, if the clients are obtained, that such expenses
will be reimbursed by the client. The Company considers the potential revenue
from a new client when determining the appropriate level of expenses for such
presentations. The period of time required by the Company to obtain a new client
and generate revenues therefrom may range from weeks to several months.
REVENUES
The primary sources of the Company's revenues are commissions earned from
advertising placed with the various media and service fees for creative time.
Clients pay the Company the full media charge for these advertisements. The
Company retains an agency commission, which is generally 15% of the gross media
charges, and remits the remaining fee to the media. The billing and collection
procedures established by the Company require that billings be collected from
its clients in sufficient time for the Company to make the corresponding payment
to the related media, usually within 30 to 60 days of invoice. Service fees for
inside creative and typesetting time are established on a case-by-case basis.
The Company also receives a service fee on its outside purchases of production
materials (such as photography and printing) for clients, generally 20% over the
cost of such purchases. In some cases, fees are generated in lieu of commissions
on media and markup on outside purchases of production materials.
Gothard/Greenstone Roberts, Inc. generates substantially all of its revenues
from hourly fees and retainers which generally range from $2,000 to $8,000 per
month per client. Gothard/Greenstone Roberts, Inc. has had between 15 and 20
clients on retainer over the last 24 months. Gothard/Greenstone Roberts, Inc.
also derives a small portion of its revenues from production work done on behalf
of clients, which may include production of press kits, mailings, financial
reports and other items.
CLIENTS
The Company considers its relationships with its clients to be good. Due to the
nature of the business, however, any client could at some time in the future
reduce its advertising budget, or transfer to another agency all or part of its
advertising presently placed through the Company. Representation of a client
does not necessarily mean that all advertising for such client is handled by the
Company exclusively. In some cases, the Company handles the advertising of only
a portion of a client's products or services.
For the twelve months ended October 31, 1997, two of the Company's clients (IBM
and Domino Sugar) represented 13% and 12%, respectively, of the Company's
revenues. In addition, its five largest clients represented 49% of revenues for
that period and it depends upon a core of approximately 30 clients from which it
obtains the bulk of its revenues.
Advertising industry clients can terminate their relationship with the Company
on relatively short notice, typically 60 to 90 days. While the loss of the
entire business of its largest client might have a material effect upon
revenues, because the business represents revenues from different divisions of a
client, the Company believes that it is unlikely that the entire business of a
client would be lost at the same time. The Company can terminate at any time
personnel working directly on the accounts to reduce its overhead.
SUPPLIERS
The Company internally produces substantially all of the materials required for
its clients. Services and materials such as photography, printing and film are
generally purchased from outside vendors. The Company does not maintain any
written contracts with its suppliers. Substantially all of such suppliers are
located on Long Island and in Florida.
SEASONALITY
Historically, first quarter operating results have been losses because of the
timing of certain major clients' budgetary cycles.
GOVERNMENT REGULATION
Federal, state and local governments and governmental agencies in recent years
have adopted statutes and regulations affecting the advertising activities of
advertising agencies and their clients. For example, statutes and regulations
have prohibited television advertising for certain products and regulated the
form and content of certain types of advertising for many consumer products. The
Federal Trade Commission ("FTC") has also required proof of accuracy of
advertising claims with respect to various products and, in its enforcement
policies, is seeking to establish more stringent standards with respect to
advertising practices. The FTC has the authority to investigate and to institute
proceedings against advertisers and their advertising agencies for deceptive
advertising. The effect on the advertising business of future application of
existing statutes or regulations, or the effect of new legislation or regulatory
activity cannot be predicted.
No claims or enforcement actions have been instituted against the Company to
date and the Company believes that it is in compliance in all material respects
with all applicable regulations. The Company maintains errors and omissions
insurance and believes that such coverage would adequately protect it in the
event claims are made by governmental agencies or others. In addition, the
Company has a hold harmless clause in most agreements with clients.
EMPLOYEES
As of October 31, 1997, the Company employed 67 people, 66 on a full-time basis,
including 20 in account management, 6 in media, 12 in production, 11 in creative
services and 18 in general administration and finance.
The Company believes its future success will depend, in part, on its ability to
recruit and retain highly skilled management and creative personnel upon whom it
has depended in the past. Professional personnel in the advertising industry
normally do not enter into employment contracts and are free to move from one
agency to another. There is substantial competition for qualified employees,
although there is a large pool of such people in the New York Metropolitan area.
The Company, because of the competitive nature of the advertising business, has
required almost all personnel to execute employee restrictive covenant
agreements, which provide generally that when such employee leaves the employ of
the Company voluntarily, for a period of one year such employee is prohibited
from soliciting and accepting business from the Company's clients and from
trying to persuade any of the Company's other employees to sever their
employment with the Company.
None of the Company's employees is represented by a labor union. The Company has
experienced no work stoppages and believes that its employee relationships are
good. In order to recruit and retain key personnel, the Company has a wide range
of employee benefit plans.
COMPETITION
The advertising industry and other marketing communications businesses are
highly competitive. Agencies of all sizes strive to attract new clients or
additional assignments or accounts from existing clients. In addition, many
companies have in-house departments which handle all or a portion of their
advertising and/or public relations requirements.
Competition in the advertising industry depends to a large extent on the
client's perception of the quality of an agency's "creative product". As the
Company has expanded its operations it has had to compete more frequently
against larger advertising agencies. These larger agencies generally have
substantially greater financial resources, personnel and facilities than the
Company and many of them are large conglomerates and/or have an international
clientele. The Company believes it is able to compete on the basis of the
quality of its product, service, personal relationships with clients and
reputation. There can be no assurance that the Company will be able to maintain
its current position in the industry.
ITEM 2. PROPERTIES.
The Company does not own any real property. All offices are located on leased
premises, which are considered ample for its present needs. The following table
provides data on the Company offices.
Annual Approximate Lease
Offices Location Base Rent Square Feet Expiration Date
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New York One Huntington Quadrangle $372,477 14,077 6/30/98
Melville, New York
Florida Sun Trust Center $191,578 9,309 11/30/99
Orlando, Florida
The Company intends to sign a new lease commitment for the Melville office.
ITEM 3. LEGAL PROCEEDINGS.
On June 11, 1997, Proven Edge, Inc., a former client of Greenstone Roberts
Advertising Florida, Inc., a wholly-owned subsidiary of the Company,
("Florida"), and Florida's 49% owned investee, The Gothard Group Inc.,
("Gothard"), filed a civil action in the Circuit Court of Pinellas County,
Florida against the Company and Gothard seeking, among other remedies, to be
relieved of its obligation to pay outstanding bills due and owing Florida and
Gothard, and to collect damages. Their complaint alleges fraud in the
inducement, negligent misrepresentation in the inducement and breach of
contract. Proven Edge, Inc. has served interrogatory answers alleging that it
has sustained material damages as a result of its association with Florida and
Gothard. Florida and Gothard have filed a counterclaim against Proven Edge, Inc.
seeking payment of amounts due for advertising services, public relations
services and expenses. The counterclaim seeks damages intended to make Florida
and Gothard whole. Florida and Gothard have filed motions for summary judgment
on both the complaint and the counterclaim. The motions are set for hearing on
February 4, 1998. The case is scheduled for trial on July 20, 1998. Management
believes that it would be successful in obtaining a judgment and that the
allegations made by Proven Edge Inc. are untrue and its claims are wholly
without merit. The Company is contesting these claims vigorously. There can be
no assurance that even if Florida and Gothard obtain a judgment against Proven
Edge Inc., such judgment will be collectible. In management's opinion, any
unfavorable outcome associated with this matter would not have a material
adverse effect on the Company's consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS.
There were no matters submitted to a vote of the shareholders of the Company
during the fourth quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's common stock is traded in the over-the-counter market and is
quoted on NASDAQ under the symbol GRRI.
The following table sets forth the high and low closing bid quotations for the
Company's common stock (restated for the reverse one-for-ten stock split
effective July 29, 1997), as reported by NASDAQ for the periods indicated. These
quotations represent bid prices between dealers, do not include retail markups,
markdowns or commissions, and do not necessarily represent actual transactions.
Common Stock Closing Bid Prices For
Fiscal Year Ended October 31,
1997 1996
HIGH LOW HIGH LOW
First Quarter 4.69 2.81 4.69 3.75
Second Quarter 3.75 1.88 4.69 3.44
Third Quarter 2.81 2.19 5.00 3.44
Fourth Quarter 3.50 2.00 5.31 4.06
The Company's common stock was held by approximately 289 shareholders of record
as of January 5, 1998.
The Company has never paid a cash dividend on its common stock and does not
contemplate paying cash dividends on its common stock in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA.
FIVE-YEAR SELECTED FINANCIAL DATA
The selected historical financial data presented below has been derived from
consolidated financial statements audited by Arthur Andersen LLP for the years
ended October 31, 1993, 1994, 1995 and 1996 and Ernst & Young LLP for the year
ended October 31, 1997. The selected historical financial data should be read in
conjunction with the consolidated financial statements, related notes and other
financial information included elsewhere in this document.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
STATEMENT OF
OPERATIONS DATA: 1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commissions and Fees $ 7,113,144 $ 8,960,983 $ 9,685,169 $ 10,507,754 $11,191,293
Net (loss)income $(1,117,895) $ 53,828 $ (211,062) $ 4,122 $ (466,735)
(Loss)earnings
per common share $ (1.50) $ .07 $ (.22) $ .00 $ (.49)
Average shares
outstanding 745,791 791,947 953,632 953,632 953,632
BALANCE SHEET
DATA:
Total assets $ 9,165,790 $14,334,357 $13,596,373 $ 13,075,318 $12,861,865
Long-term debt $ 250,000 $ 250,000 $ 250,000 $ 250,000 $ 250,000
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997 AS COMPARED TO
THE FISCAL YEAR ENDED OCTOBER 31, 1996.
Commission and fee revenue decreased $1,847,839 or 21% from $8,960,983 for the
year ended October 31, 1996 to $7,113,144 for the year ended October 31, 1997.
This decrease is principally attributable to the full year effect of closing the
Recruitment, Spanish International and Coconut Creek divisions in fiscal 1996.
Salaries and employee related expenses decreased 17% from $6,014,572 for the
year ended October 31, 1996 to $5,004,743 for the year ended October 31, 1997.
The decrease is the result of a reduction in staff attributable to the
divisional closings as discussed above.
Office and general expenses decreased $584,336, from $2,934,848 for the year
ended October 31, 1996 to $2,350,512 for the year ended October 31, 1997. This
decrease is principally attributable to the full year effect of closing the
Recruitment, Spanish International and Coconut Creek divisions in fiscal 1996.
The provision for loss on claim in litigation arose in the fourth quarter of
fiscal 1997. While management is vigorously pursuing this claim and believes
that it will be successful, the financial viability of the entity being
litigated is questionable. Accordingly, management has reserved against this
claim.
Interest income decreased $23,528 from $88,579 for the year ended October 31,
1996 to $65,051 for the year ended October 31, 1997 due primarily to the
reduction in available funds for investing activities.
Net loss for the year ended October 31, 1997 of $1,117,895 compared to net
income of $53,828 for the year ended October 31, 1996 is attributable primarily
to the factors discussed above.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996 AS COMPARED TO
THE FISCAL YEAR ENDED OCTOBER 31, 1995.
Commission and fee revenue decreased $724,186 or 7% from $9,685,169 for the year
ended October 31, 1995 to $8,960,983 for the year ended October 31, 1996.
$570,315 of the revenue decrease is attributable primarily to the closing of the
recruitment division. The remaining decrease in revenues is due to the loss of
clients partially offset by increased activity from new and existing clients.
Salaries and related costs decreased 13% from $6,921,093 for the fiscal year
ended October 31, 1995 to $6,014,572 for the fiscal year ended October 31, 1996.
The decrease is the result of a reduction in staffing and in part due to the
closing of the recruitment division. Salaries and related costs as a percent of
revenues decreased from 71% for the year ended October 31, 1995 to 67% for the
year ended October 31, 1996, also due in part to the closure of the recruitment
division.
Other operating costs decreased $207,652 or 7% as management continues its
efforts to control costs in various operating areas.
Interest income, decreased $71,455 due primarily to the use of funds to
repurchase 206,190 shares of the Company's common stock.
Income/(loss) before provision/(benefit) for income taxes increased $318,532
from a loss of $218,390 for the year ended October 31, 1995 to income of
$100,142 for the year ended October 31, 1996. The increase is the result of
management efforts to reduce and control costs as discussed above.
The effective tax rate for the tax provision of $46,314 is 46.2%. This is
primarily the result of certain expenses that are permanently non-deductible for
income tax purposes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $2,258,000 at October 31, 1997, including cash
and cash equivalents of $2,989,000, accounts receivable of $4,281,000 and
billable production orders of $496,000 offset by accounts payable and accrued
liabilities of $5,818,000.
Net cash provided by operating activities for the year ended October 31, 1997
was approximately $203,000. The principal factors contributing to the cash flow
were decreases in accounts receivable of $3,618,000, adjusted for an increase in
the provision for bad debts of $858,000, offset by the net loss for the period
of approximately $1,118,000, and decreases in accounts payable of $3,800,000.
Because the Company recognizes commissions as a percentage of expenditures
incurred, the accounts receivable balance relates not only to the commissions
and fees shown on the income statement, but also to receivables for production
costs and media purchased for clients. Similarly, the accounts payable balance
includes payables for production costs and media incurred on behalf of clients.
The Company has available an unsecured $5,000,000 line of credit from a bank.
Management believes that its current working capital levels will be sufficient
to meet the Company's liquidity and working capital requirements for the
foreseeable future. The Company does not anticipate any increases in capital
expenditures or other cash requirements which would have a material adverse
effect on its liquidity.
PART III
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is incorporated herein by reference to the
Consolidated Financial Statements listed in Item 14(a) of Part IV of this
report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
During 1997, the Company dismissed Arthur Andersen LLP as its independent
auditors and retained Ernst & Young LLP. On February 25, 1997, the Company filed
a Form 8-K related to the change in the Company's certifying public accountants,
which is incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Required information will be incorporated in the Company's Proxy Statement to be
filed within 120 days of October 31, 1997 and is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
Required information will be incorporated in the Company's Proxy Statement to be
filed within 120 days of October 31, 1997 and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Required information will be incorporated in the Company's Proxy Statement to be
filed within 120 days of October 31, 1997 and is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements:
(2) Financial Statement Schedules:
NUMBER DESCRIPTION
3.1 Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registrant's Registration Statement on
Form S-18 (Registration No. 33-26372 NY)).
3.2 By-laws of the Registrant (incorporated by reference to Exhibit 3.2 of
the Registrant's Registration Statement on Form S-18 (Registration No.
33-26372 NY)).
10.1* 1988 Stock Option Plan (incorporated by reference to Exhibit 10.6 of
the Registrant's Registration Statement on Form S-18 (Registration No.
33-26372 NY)).
10.2* Amendment No. 1 to the 1988 Stock Option Plan dated February 7, 1990
(incorporated by reference to Exhibit 10.6 of the Registrant's Form
10-K for the fiscal year ending October 31, 1990)).
10.3 Lease agreements between the Registrant and We're Associates dated
September 28, 1987 (incorporated by reference to Exhibit 10.4 and 10.5
of the Registrant's Registration Statement on Form S-18 (Registration
No. 33-26372 NY)).
10.4 Second and third modifications of lease agreements between the
Registrant and We're Associates dated February 14, 1989 and July 7,
1989, respectively (incorporated by reference to Exhibit 10.8 of the
Registrant's Form 10-K for the fiscal year ending October 31, 1990).
10.5 Lease agreements between the Registrant and Wyncreek Partners, Ltd.
dated April 17, 1989 and the first and second amendments dated June
29, 1989 and April 10, 1990, respectively (incorporated by reference
to Exhibit 10.10 of the Registrant's Form 10-K for the fiscal year
ending October 31, 1990).
10.6* Employment agreement between the Registrant and Ronald M. Greenstone
dated December 31, 1994. (Incorporated by reference to Exhibit 10.6 of
the Registrant's Form 10-K for the fiscal year ending October 31,
1994).
10.7* Employment agreement between the Registrant and Gary C. Roberts
dated December 31, 1995.
10.8 Fifth and sixth amendments of lease agreements between the Registrant
and We're Associates dated June 13, 1990 and June 18, 1991,
respectively (incorporated by reference to Exhibit 10.11 of the
Registrant's Form 10-K for the fiscal year ending October 31, 1991).
10.9 Third amendment of lease agreement between the Registrant and Wyncreek
Partners, Ltd. dated January 19, 1991 (incorporated by reference to
Exhibit 10.12 of the Registrant's Form 10-K for the fiscal year ending
October 31, 1991).
10.10 Fourth and fifth amendments of lease agreement between the Registrant
and Wyncreek Partners, Ltd. dated January 22, 1992 and May 12, 1992,
respectively (incorporated by reference to Exhibit 10.10 of the
Registrant's Form 10-K for the fiscal year ending October 31, 1992).
10.11 Lease agreement between the Registrant and Lincoln-Sun Center Ltd.
dated September 4, 1992 (incorporated by reference to Exhibit 10.11 of
the Registrant's Form 10-K for the fiscal year ending October 31,
1992).
10.12 Sixth amendment of lease agreement between the Registrant and Wyncreek
Partners, Ltd. dated August 26, 1993 (incorporated by reference to
Exhibit 10.12 of the Registrant's Form 10-K for the fiscal year ending
October 31, 1993).
10.13 Employment agreement between the Company and Ronald M. Greenstone
dated January 1, 1998.
10.14 Employment agreement between the Company and Gary C. Roberts dated
January 1, 1998.
21 Subsidiaries of the Company.
(c) Reports on Form 8-K:
On February 25, 1997, a Form 8-K was filed for the change in the
Company's independent auditors.
On July 29, 1997, a Form 8-K was filed to record the approval of the
one-for-ten reverse stock split by the Company's shareholders on July
29, 1997.
On September 12, 1997, a Form 8-K was filed to disclose that the
Company has filed a counter lawsuit against a former client for
reimbursement of professional services and outside vendor
reimbursements. The lawsuit was initiated after the former client
filed a claim for a unspecified amount against the Company for breach
of contract.
___________________
*Indicates a Management Contract or a Compensatory Plan or Arrangement.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of
1934, the Company has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Melville, State of New
York on January 29, 1998.
Greenstone Roberts Advertising, Inc.
By: /s/ Ronald M. Greenstone
Ronald M. Greenstone
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed by the following persons in the capacities and on the dates
indicated.
/s/ Ronald M. Greenstone Chairman of the Board, January 29, 1998
Ronald M. Greenstone Chief Executive Officer,
(principal executive officer)
and Director
/s/ Gary C. Roberts President and Director January 29, 1998
Gary C. Roberts
/s/ Nelson C. Hunter Senior Vice President, Principal January 29, 1998
Nelson C. Hunter Accounting Officer
/s/ Anthony V. Curto Director January 29, 1998
Anthony V. Curto
/s/ Richard Projain Director January 29, 1998
Richard Projain
/s/ Martin Sussman Director January 29, 1998
Martin Sussman
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Number
Report of Independent Auditors - Ernst & Young LLP F-2
Report of Independent Public Accountants - Arthur Andersen LLP F-3
Consolidated Balance Sheets as of October 31, 1997 and 1996 F-4
Consolidated Statements of Operations for the years ended
October 31, 1997, 1996 and 1995 F-5
Consolidated Statements of Shareholders' Equity for the years
ended October 31, 1997, 1996 and 1995 F-6
Consolidated Statements of Cash Flows for the years ended
October 31, 1997, 1996 and 1995 F-7
Notes to Consolidated Financial Statements F-8 to F-14
Index to Supplemental Schedule S-1
Report of Independent Public Accountants on Schedule S-2
Schedule II - Valuation and Qualifying Accounts S-3
Information required by other schedules required under Regulation S-X is either
not applicable or is included in the consolidated financial statements or notes
thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Greenstone Roberts Advertising, Inc.
We have audited the accompanying consolidated balance sheet of Greenstone
Roberts Advertising, Inc. and subsidiary as of October 31, 1997 and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the year then ended. Our audit also included the financial statement schedule
listed in the Index at Item 14(a) for the year ended October 31, 1997. These
consolidated financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Greenstone Roberts
Advertising, Inc. and subsidiary at October 31, 1997 and the consolidated
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth herein.
/s/ Ernst & Young LLP
Melville, New York
December 22, 1997
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Greenstone Roberts
Advertising, Inc.:
We have audited the accompanying consolidated balance sheet of Greenstone
Roberts Advertising, Inc. (a New York corporation) and subsidiary as of October
31, 1996 and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the two years in the period ended October 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Greenstone Roberts Advertising,
Inc. and subsidiary as of October 31, 1996 and the results of their operations
and their cash flows for each of the two years in the period ended October 31,
1996, in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
New York, New York
January 9, 1997
<PAGE>
<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
OCTOBER 31,
1997 1996
---- ----
ASSETS
Current Assets
<S> <C> <C>
Cash and cash equivalents $2,989,370 $2,553,730
Short-term investments - 302,422
Accounts receivable, net of allowance for bad debts
of $886,645 in 1997 and $380,994 in 1996 4,280,534 8,756,598
Billable production orders in process, at cost 495,712 828,020
Deferred income taxes 128,918 180,918
Recoverable income taxes 52,000 -
Receivable from investee company 60,000 50,000
Other current assets 69,610 123,406
--------------- --------------
TOTAL CURRENT ASSETS 8,076,144 12,795,094
Furniture, equipment and leasehold improvements,
at cost, less accumulated depreciation and
amortization of $2,612,569 in 1997 and $2,285,948 in 1996 649,455 929,103
Investment in investee company,
net of accumulated amortization of $27,612 in 1997
and $5,112 in 1996 66,258 210,926
Deferred income taxes 65,202 65,202
Cost in excess of net assets acquired and other assets, net of
accumulated amortization of $337,661 in 1997 and $303,679 in 1996 308,731 334,032
--------------- ----------------
TOTAL ASSETS $9,165,790 $14,334,357
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $5,570,804 $9,370,546
Accrued liabilities 247,010 484,958
--------------- -----------------
TOTAL CURRENT LIABILITIES 5,817,814 9,855,504
Long-term debt 250,000 250,000
Commitments and contingencies
SHAREHOLDER'S EQUITY
Preferred stock, $1.00 par value, 1,000,000 shares - -
authorized, no shares issued or outstanding
Common stock, $.10 par value, 3,000,000 shares
authorized, 1,060,000 shares issued 106,000 106,000
Additional paid-in capital 3,600,692 3,600,692
Retained earnings 758,892 1,876,787
Less: treasury stock at cost, 316,723 shares in 1997 and
312,558 shares in 1996 (1,367,608) (1,354,626)
--------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 3,097,976 4,228,853
--------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $9,165,790 $14,334,357
=============== ==================
See accompanying notes.
</TABLE>
<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended October 31,
1997 1996 1995
---- ---- -----
<S> <C> <C> <C>
Commissions and fees $7,113,144 $8,960,983 $9,685,169
Expenses:
Salaries and employee related expenses 5,004,743 6,014,572 6,921,093
Office and general expenses 2,350,512 2,934,848 3,142,500
Provision for loss on claim in litigation 796,167 - -
------------------ ------------------ -----------------
8,151,422 8,949,420 10,063,593
------------------ ------------------ -----------------
(1,038,278) 11,563 (378,424)
Interest income 65,051 88,579 160,034
Equity in operations of investee company (144,668) - -
------------------ ------------------ ------------------
(Loss)income before income taxes (1,117,895) 100,142 (218,390)
(Provision)benefit for income taxes - (46,314) 7,328
------------------ -------------------- -----------------
Net (loss)income $(1,117,895) $53,828 $(211,062)
================== ==================== =================
(Loss) earnings per common share $(1.50) $0.07 $(0.22)
================== ==================== =================
Shares used in computing (loss)earnings
per common share 745,791 791,947 953,632
================== ==================== =================
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
Common Stock Additional Treasury Stock
Paid-in Retained
Shares Amount Capital Earnings Shares Amount Total
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - OCTOBER 31, 1994 1,060,000 $106,000 $3,600,692 $2,034,021 106,368 $ (446,747) $5,293,966
Net (loss) - - - (211,062) - - (211,062)
-------------- -------------- -------------- ------------- ---------- ----------- ------------
BALANCE - OCTOBER 31, 1995 1,060,000 106,000 3,600,692 1,822,959 106,368 (446,747) 5,082,904
Treasury stock purchased - - - - 206,190 (907,879) (907,879)
Net income - - - 53,828 - - 53,828
--------------- -------------- --------------- ------------ ---------- ----------- ------------
BALANCE - OCTOBER 31, 1996 1,060,000 106,000 3,600,692 1,876,787 312,558 (1,354,626) 4,228,853
Treasury stock purchased - - - - 4,165 (12,982) (12,982)
Net (loss) - - - (1,117,895) - - (1,117,895)
--------------- ------------- --------------- ------------ ----------- ------------ ------------
BALANCE - OCTOBER 31, 1997 1,060,000 $106,000 $3,600,692 $758,892 316,723 $(1,367,608) $3,097,976
=============== ============= ================ =========== =========== ============= ============
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31,
1997 1996 1995
---- ---- ----
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net (loss)income $(1,117,895) $53,828 $(211,062)
Adjustments to reconcile net (loss)income to net cash
provided by operating activities:
Depreciation and amortization 360,603 471,432 451,723
Equity in operations of investee company 144,668 8,961 -
Provision for bad debts 857,868 1,419 51,907
Deferred income tax expense (benefit) 52,000 86,208 (104,675)
Deferred income tax liability - (53,109) (19,019)
Changes in operating assets and liabilities:
Accounts receivable 3,618,196 (1,741,311) 72,445
Billable production orders in process, at cost 332,308 (295,420) 150,276
Recoverable income taxes and other current assets 1,796 (12,300) 916
Other assets (8,681) 8,174 4,816
Accounts payable (3,799,742) 1,712,508 478,342
Accrued liabilities (237,948) (67,365) 272,794
------------------ ------------------- -----------------
Net cash provided by operating activities 203,173 173,025 1,148,463
------------------ ------------------- -----------------
INVESTING ACTIVITIES:
Purchases of furniture, equipment and leasehold
improvements, net (46,973) (439,629) (279,169)
Maturities of short-term investments, net 302,422 818,593 1,159,032
Purchase of investment in investee company - (225,000) -
Advances to investee company, net (10,000) (50,000) 150,000
------------------ ------------------- -----------------
Net cash provided by investing activities 245,449 103,964 1,029,863
------------------ ------------------- -----------------
FINANCING ACTIVITIES:
Purchase of treasury stock (12,982) (907,879) -
------------------ ------------------- -----------------
Net cash used in financing activities (12,982) (907,879) -
------------------ ------------------- -----------------
Net increase(decrease) in cash and cash
equivalents 435,640 (630,890) 2,178,326
Cash and cash equivalents at beginning of year 2,553,730 3,184,620 1,006,294
------------------ ------------------- -----------------
Cash and cash equivalents at end of year $2,989,370 $2,553,730 $3,184,620
================== =================== =================
See accompanying notes.
</TABLE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Greenstone Roberts Advertising, Inc. and its wholly-owned subsidiary, Greenstone
Roberts Advertising Florida, Inc. ("Florida"), (collectively the "Company"). All
significant intercompany balances and transactions have been eliminated in
consolidation.
REVERSE STOCK SPLIT
On July 29, 1997, the Company's Board of Directors approved a reverse
one-for-ten stock split to shareholders of record on June 12, 1997. All common
stock data has been restated to present this reverse stock split as if it
occurred on November 1, 1994.
RECOGNITION OF COMMISSION AND FEE REVENUE
Substantially all revenues are derived from commissions for placement of
advertisements in various media and fees for production of advertisements and
marketing materials. Such revenues are recognized as billed. Billings are
generally rendered upon insertion date for print media, job completion date for
production costs, and air date for broadcast media.
CONCENTRATION OF CREDIT RISK
The Company provides advertising and marketing services to a wide range of
clients who operate in many industry sectors and are principally located in the
Northeast and Florida. The Company grants credit to all qualified clients and
generally does not require collateral. The Company does not believe it is
exposed to any undue concentration of credit risk to any significant degree.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the 1997
presentation.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with original
maturities of three months or less to be cash equivalents, including commercial
paper, certificates of deposit and money market mutual funds. Cash equivalents
as of October 31, 1997 and 1996 were approximately $1,020,000 and $1,076,000,
respectively.
SHORT-TERM INVESTMENTS
The Company follows the provisions of Statement of Financial Accounting
Standards No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES ("SFAS No. 115"). SFAS No. 115 establishes the accounting and
reporting for investments in equity securities that have readily determinable
fair values and for all investments in debt securities. In connection with SFAS
No. 115, the Company's debt securities have been classified as held to maturity
and are stated at amortized cost which, due to the nature of the securities,
approximates market value.
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements are stated at cost, net of
accumulated depreciation and amortization. Depreciation and amortization are
computed using the straight-line method, over the estimated useful lives of the
related assets as follows:
Furniture 5 - 7 years
Equipment 5 - 7 years
Leasehold improvements Lease term or useful life, whichever is shorter
EXCESS OF COST OVER NET ASSETS ACQUIRED
Excess of cost over net assets acquired is amortized on a straight-line basis
over 10 years. During the year ended October 31, 1997, the Company adopted
Statement of Financial Accounting Standards No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. This adoption had no effect on the consolidated financial
statements.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES ("SFAS No. 109"). SFAS
No. 109 requires recognition of deferred income taxes under the liability
method.
EARNINGS (LOSS) PER SHARE
Earnings (loss) per share is based on the weighted average number of shares of
common stock outstanding during the respective periods and the dilutive effect
of stock options using the treasury stock method.
In February 1997, the Financial Accounting Standards Board issued Statement 128,
EARNINGS PER SHARE ("SFAS 128"), which is effective for both interim and annual
financial statements for periods ending after December 15, 1997. At that time,
the Company will be required to change the method currently used to compute
earnings (loss) per share and restate all periods. Under the new requirements
for calculating basic earnings per share, the dilutive effect of stock options
will be excluded. The adoption of SFAS 128 will not have a material effect on
the accompanying financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
2. INVESTMENT IN INVESTEE COMPANY:
On August 8, 1996, the Company acquired a 49% interest in The Gothard Group,
Inc., a Miami-based public relations agency. The Company merged its existing
public relations business and its Hispanic Division into The Gothard Group, Inc.
and renamed the new company Gothard/Greenstone Roberts, Inc. ("Gothard"). The
Company is accounting for its interest in Gothard using the equity method of
accounting. The excess of the purchase price over the net assets of the acquired
interest is being amortized over ten years.
At October 31, 1997, Gothard had net assets of approximately $217,000 and a net
loss of approximately $249,000 for the year then ended.
On August 27, 1996, the Company advanced Gothard $50,000. During the year ended
October 31, 1997, the Company made additional advances aggregating $173,000 and
Gothard repaid $163,000. Accordingly, the balance owed the Company by Gothard at
October 31, 1997 is $60,000. It is anticipated that the total loan will be
repaid during the year ending October 31, 1998. In addition, included in
accounts receivable is approximately $90,000 due from Gothard at October 31,
1997.
3. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS:
Furniture, equipment and leasehold improvements are summarized as follows:
October 31, October 31,
1997 1996
---- ----
Office equipment $2,512,982 $2,472,919
Furniture and fixtures 535,219 533,444
Leasehold improvements 178,984 173,849
Automobiles 34,839 34,839
------------------- ---------------------
3,262,024 3,215,051
Less accumulated depreciation and
amortization (2,612,569) (2,285,948)
------------------- ---------------------
$649,455 $929,103
=================== =====================
4. LINE OF CREDIT AGREEMENT:
The Company has available an unsecured $5,000,000 line of credit with a bank,
which expires on April 30, 1998. Borrowings against this line bear interest at
the prime rate, as defined. The Company did not have any amounts outstanding to
the bank at October 31, 1997 or 1996.
5. LONG-TERM DEBT:
Long-term debt consists of a note payable relating to the acquisition of certain
assets of an advertising agency in February 1992. The note, by its terms, was
payable in two equal installments of $125,000 in February 1993 and 1994,
respectively. The Company believes that due to certain misrepresentations by the
seller in connection with the business of this agency, a significant adjustment
in the purchase price is required. Accordingly, the Company has forgone payment
of the note payable until a fair settlement is agreed. The entire note payable
balance is included in long-term debt. Cost in excess of net assets acquired
relating to this acquisition has been amortized to an amount equal to the
balance of the note payable. Any adjustment to the purchase price would result
in a reduction to long-term debt and cost in excess of net assets acquired.
6. INCOME TAXES:
<TABLE>
<CAPTION>
The provision (benefit) for income taxes included in the accompanying
consolidated statements of operations consists of the following:
October 31, October 31, October 31,
1997 1996 1995
CURRENT:
<S> <C> <C> <C>
Federal $(52,000) $19,121 $50,863
State - (5,906) 65,503
------------------ ---------------- ---------------
(52,000) 13,215 116,366
------------------ ---------------- ---------------
DEFERRED:
Accelerated depreciation - (13,255) (10,538)
Allowance for bad debts - (1,301) (15,579)
Goodwill amortization - (10,177) (11,230)
Vacation accrual - 30,651 (34,263)
Various accrued liabilities and other - 27,181 (20,973)
Federal NOL carryback 52,000 - -
State NOL carryforward - - (31,111)
-------------------- -------------------- ---------------------
52,000 33,099 (123,694)
-------------------- -------------------- ---------------------
TOTAL: $ - $46,314 $(7,328)
==================== ==================== =====================
</TABLE>
Since the Company recorded a loss for both financial reporting and income tax
purposes during the year ended October 31, 1997, no provision for income taxes
was recorded.
As a result of losses from operations, the Company has available a Federal net
operating loss carryforward of approximately $159,000 which expires in 2012, a
New York State net operating loss carryforward of approximately $195,000 which
expires in 2012, and a Florida state net operating loss carryforward of
approximately $1,163,000 which expires in years 2009 through 2012.
<TABLE>
<CAPTION>
The components of the Company's net deferred tax assets are as follows:
October October
31, 31,
1997 1996
---- ----
Deferred tax liability:
<S> <C> <C>
Depreciation and amortization $(40,000) $(41,000)
Other (43,000) (45,000)
------------------- -------------------
Total deferred tax liability (83,000) (86,000)
------------------- -------------------
Deferred tax assets:
Federal operating loss carryforwards 54,000 -
State operating loss carryforwards 78,000 51,000
Accounts receivable reserves 356,000 166,000
Amortization of excess of purchase price
over net assets acquired 93,000 54,000
Other 46,000 61,000
------------------- -------------------
Total deferred tax assets 627,000 332,000
------------------- -------------------
Valuation allowance for deferred tax assets (350,000) -
------------------- -------------------
Net deferred tax assets $194,000 $246,000
=================== ===================
The Company did not have a valuation allowance for deferred tax assets at October 31, 1995.
</TABLE>
<TABLE>
<CAPTION>
The following table reconciles the Federal statutory rate to the Company's
effective rate:
October October October
31, 1997 31, 1996 31, 1995
<S> <C> <C> <C>
(Benefit)provision for Federal income
taxes at the statutory rate (34.0)% 22.0% (31.3)%
State income taxes, net of Federal
income tax benefit (3.8) 2.0 2.3
Non-deductible expenses .9 16.3 12.8
Other - 5.9 12.8
Valuation allowance on deferred tax assets 36.9 - -
-------------------- -------------------- -----------------
- 46.2% (3.4)%
==================== ==================== =================
Income taxes paid during the years ended October 31, 1997, 1996 and 1995 were
approximately $43,000, $77,000 and $143,000, respectively.
</TABLE>
7. SAVINGS PLAN:
The Company maintains a 401(k) Savings Plan ("Savings Plan") that covers all
employees with one or more years of service. The Company matches employee
contributions utilizing a percentage determined at the discretion of management.
Such percentage was 15% of employee contributions for the years ended October
31, 1997, 1996 and 1995. The Company's matching contribution to the Savings Plan
was approximately $22,000, $23,000 and $32,000, for the years ended October 31,
1997, 1996 and 1995, respectively.
8. SIGNIFICANT CUSTOMERS:
For the year ended October 31, 1997, business from two customers represented 13%
and 12% of the Company's revenues. In addition, the Company's five largest
clients represented 49% of revenues for that period. For the years ended October
31, 1996 and 1995, business from a company which is no longer a customer
represented 15% of revenues.
9. STOCK OPTION PLAN:
The Company has elected to follow Accounting Principles Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES and related interpretations in
accounting for its stock options, because, as discussed below, the alternative
fair value accounting provided under Statement of Financial Accounting Standards
No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION" ("Statement 123"), requires
the use of option valuation models that were not developed for use in valuing
employee and director stock options.
In December 1988, the Board of Directors approved the adoption of the 1988 Stock
Option Plan (the "Plan"). The Plan was amended in 1990 to increase the number of
common shares reserved for issuance to key employees, including officers and
directors who are also employees, from 60,000 to 90,000 shares. All options are
granted at no less than 100% of the fair market value on the date of grant.
As a result of the reverse one-for-ten stock split on July 29, 1997, all
unexercised stock options issued prior to August 5, 1997 were canceled. On
August 5, 1997, new options were issued at an exercise price of $2.25, the fair
market value of the underlying common stock on that date.
Options granted expire ranging from two to six years from the date of grant, and
are exercisable in full one year from date of grant. Options that are
unexercised are canceled immediately if the holder ceases to be an employee of
the Company.
<TABLE>
<CAPTION>
The following table summarizes stock option activity:
Shares Weighted-Average
Under Option Exercise Price
<S> <C> <C>
BALANCE, October 31, 1994 at exercise prices from $4.69 to $5.00 81,500 $ 4.89
Options granted at exercise price of $4.40 to $5.30 2,250 4.95
Options canceled at exercise price of $5.00 (19,350) 5.00
---------- ------
BALANCE, October 31, 1995 at exercise prices from $4.40 to $5.30 64,400 4.86
Options granted at exercise price of $4.70 4,900 4.70
Options canceled at exercise prices of $4.70 to $5.30 (16,400) 5.01
---------- ------
BALANCE, October 31, 1996 at exercise prices of $4.40 to $5.30 52,900 4.80
Options canceled at exercise prices of $2.25 to $5.30 (55,950) 4.65
Options granted at exercise price of $2.25 79,900 2.25
----------- ------
BALANCE, October 31, 1997 at exercise price of $2.25 76,850 $2.25
=========== ========
</TABLE>
The weighted-average fair value of options granted during the years ended
October 31, 1997 and 1996 was $1.21 and $.83, respectively. As of October 31,
1997, none of the options were exercisable and outstanding options had a
remaining weighted-average contractual life of 5.36 years. In addition, the
Company has 13,150 options available for future grant and has reserved 90,000
shares of common stock for issuance of all outstanding options.
STATEMENT 123
Pro forma information regarding net (loss)income and (loss)earnings per share is
required by Statement 123, which also requires that the information be
determined as if the Company has accounted for its stock options granted
subsequent to November 1, 1995 under the fair value method of that Statement.
The fair value for these options was estimated using a Black-Scholes option
pricing model with the following weighted-average assumptions for the years
ended October 31, 1997 and 1996, respectively: risk-free interest rate of 6.10%
and 5.94%, volatility factor of the expected market price of the Company's
common stock of .58 (both years), a weighted-average expected life of the option
of 4.7 years and 3.2 years, and no dividend yields.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information is as follows:
Year Ended
October 31, 1997 October 31, 1996
Pro forma net (loss) income.......... $ (1,132,000) $ 48,000
Pro forma (loss) earnings per share.. $ (1.52) $ .06
Because Statement 123 is applicable to options granted subsequent to November 1,
1995, its pro forma effect will not be fully reflected until the year ending
October 31, 1998.
10. COMMITMENTS AND CONTINGENCIES:
LEASES
At October 31, 1997, the Company was committed under operating leases,
principally for office space, through fiscal 2000.
Rent expense was approximately $666,000, $843,000 and $842,000, for the years
ended October 31, 1997, 1996 and 1995, respectively. Future minimum rents under
the remaining terms of existing operating leases are as follows:
FISCAL
1998 $499,000
1999 $212,000
2000 $ 18,000
EMPLOYMENT AGREEMENTS
Effective January 1, 1998, the Company renewed employment agreements with its
two executive officers. One of the agreements provides for annual compensation
of $275,000 and incentive compensation of an amount equivalent to 10% of income
before provision for income taxes and expires on December 31, 2000. The other
agreement provides for annual compensation of $225,000 and incentive
compensation of an amount equal to 2% of income before provision for income
taxes and expires on December 31, 1999.
LITIGATION
A former client of the Company has filed a civil claim against the Company and
Gothard. The former client is seeking, among other remedies, to be relieved of
its obligation to pay outstanding bills due and owing the Company and to collect
damages. The Company and Gothard have filed a counterclaim against the former
client seeking payment of amounts due for advertising and public relations
services and expenses. Management believes that it will be successful in
obtaining a judgment against the former client, and that the former clients'
claims are untrue and without merit. However, there can be no assurance that
even if the Company and Gothard obtain a judgment against the former client that
such judgment would be collectible. Accordingly, management has recorded a
provision to reserve against this claim in it entirety. In management's opinion,
any unfavorable outcome associated with this matter would not have a material
adverse effect on the Company's consolidated financial statements.
<PAGE>
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
INDEX TO SUPPLEMENTAL SCHEDULE
Page
Number
Report of Independent Public Accountants on Schedule S-2
Schedule II - Valuation and Qualifying Accounts S-3
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Shareholders of Greenstone Roberts
Advertising, Inc.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheet at October 31, 1996 of Greenstone Roberts
Advertising, Inc. and subsidiary and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the two years in the
period ended October 31, 1996 included in this filing and have issued our report
thereon dated January 9, 1997. Our audits were made for the purpose of forming
an opinion on the basic consolidated financial statements taken as a whole. The
schedule listed in the accompanying index is presented for purposes of complying
with the Securities and Exchange Commission's rules and is not part of the basic
consolidated financial statements. This schedule, as it relates to the years
ended October 31, 1996 and 1995 has been subjected to the auditing procedures
applied in the audits of the basic consolidated financial statements and, in our
opinion, fairly states, in all material respects, the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
/s/ Arthur Andersen LLP
New York, New York
January 9, 1997
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
Balance at Charged to
Description beginning costs and Recovery/ Balance at
Fiscal year ended of year expenses Deductions end of year
Allowance for bad debts:
- ------------------------
<S> <C> <C> <C> <C>
October 31, 1997 $380,994 $857,868 $352,217 $886,645
October 31, 1996 $377,723 $ 1,419 $ (1,852) $380,994
October 31, 1995 $327,865 $ 51,907 $ 2,049 $377,723
Valuation allowance for deferred tax assets:
- --------------------------------------------
October 31, 1997 - $350,000 - $350,000
October 31, 1996 - - - -
October 31, 1995 - - - -
This schedule should be read in conjunction with the accompanying consolidated
financial statements and notes thereto.
</TABLE>
Exhibit 10.13
AGREEMENT, made as of January 1, 1998, by and between Greenstone
Roberts Advertising, Inc., a New York corporation (the "Corporation"), and
Ronald M. Greenstone, an individual residing at 2470 N.W. 46th Street, Boca
Raton, Florida 33431 (the "Executive").
W I T N E S S E T H :
WHEREAS, the Corporation desires to employ the Executive, and the
Executive is agreeable to accepting such employment, under the terms of this
Agreement;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the parties agree to as follows:
1. The Corporation employs the Executive, and the Executive agrees to
serve the corporation, for a period of three (3) years commencing on January 1,
1998 and ending at 12:00 midnight on the third anniversary thereof (the "First
Termination Date"), and from year to year thereafter unless the period of
employment hereunder shall be terminated by either party giving at least six (6)
months' prior written notice of termination to the other party specifying the
date of termination. Each of the initial term of this Agreement and the renewal
periods thereof is referred to herein as a "Period of Employment." Such
termination date shall be either the First Termination Date or an anniversary
date of the First Termination Date and termination shall be effective on the
date specified in such notice.
2. During the period of employment hereunder, the Executive shall be
employed by the corporation as the Chairman of the Board and Chief Executive
Officer of the Corporation, and, except as hereinafter provided, shall devote
his full business time and efforts to the business and affairs of the
Corporation, use his best efforts to promote the business of the Corporation,
hold the offices in the Corporation to which from time to time he may be elected
or appointed, and perform such executive duties as shall be assigned to him by
the Board of Directors of the Corporation, provided they are at least of the
same degree of responsibility as the duties being performed by the Executive
contemporaneously with the execution of this Agreement. In connection with the
performance of his duties hereunder, the Executive from time to time may be
required to travel both within and outside of the United States of America. The
Executive shall be reimbursed for all travel and other expenses incidental to
the performance of services hereunder in accordance with the usual practices of
the Corporation. The Executive shall be entitled to vacations in accordance with
the Corporation's existing vacation policy and the Corporation shall provide the
Executive with reasonable perquisites suitable to the office in the Corporation
which he holds. The Corporation agrees that, consistent with the foregoing, the
Executive may devote such time and attention as is reasonably necessary to his
personal and financial affairs.
3. (a) The Corporation shall compensate the Executive for the services
to be rendered by him hereunder, including all services to be rendered as an
officer or director of the Corporation, by paying the Executive a salary at the
rate of not less than Two Hundred Seventy-five Thousand ($275,000.00) Dollars.
Such salary shall be payable in accordance with the usual salary payment
practices of the Corporation or as otherwise determined by the Board of
Directors.
For each fiscal year ending October 31st in which the Executive is
employed, he shall receive as an additional incentive compensation in the sum of
ten (10%) percent of all pre-tax earnings, the dollar amount of which shall be
determined by the Corporation's auditors which shall be binding upon the
Corporation and the Executive. If the Executive's employment shall terminate on
a date other than October 31st, then the Executive's share of the bonus pool
shall be pro-rated for that portion of the year the Executive has rendered
service.
The Board of Directors of the Corporation annually shall review the
services rendered by the Executive and, in its sole discretion, may award the
Executive bonus compensation for the services rendered during the year under
review. The Board of Directors of the corporation also shall review the salary
of the Executive at least annually. Nothing herein contained shall prevent the
Board of Directors of the Corporation from prospectively increasing the salary
or other compensation of the Executive during the period of employment
hereunder.
(b) In the event the Executive is terminated by the Corporation (a
"Cessation of Employment") otherwise than for "cause" (as hereinafter in
Paragraph 6 defined), or in the event a contract of employment is not renewed
upon terms mutually acceptable to the Corporation and the Executive:
(i) The Corporation shall within five (5) days of
the Cessation of Employment pay to the Executive in one lump sum as a special
severance and termination payment an amount equal to the annual salary then
being paid to the Executive pursuant to the provisions of Paragraph 3 (a); and
(ii) For the entire remaining portion of the then
current Period of Employment, the Corporation shall continue to pay to the
Executive the salary then being paid by the Corporation to the Executive
pursuant to the provisions of Paragraph 3 (a) prior to the date of the Cessation
of Employment;
(iii) For the entire remaining portion of the
then current Period of Employment, the Executive shall continue to be eligible
to, and shall participate in, all employee benefit programs of the Corporation
in which the Executive participated prior to the date of the Cessation of
Employment including, without limitation, all savings, life, accident, medical
and dental insurance plans and programs; and the Executive shall be entitled to
make whatever elections may be available to him with respect to his interests in
savings and comparable plans.
4. In the event of the Executive's death during the term hereof, this
Agreement shall terminate on the date of death of the Executive.
5. While employed hereunder, the Executive shall not engage in or
carry on, directly or indirectly, either for himself or as a member of a
partnership or as a stockholder, investor, lender, officer or director of a
corporation (other than the Corporation), or as an employee or agent of, or
consultant to, any person, partnership or corporation (other than the
Corporation), or in any capacity on behalf of any trust or other organization or
entity, any business in competition with (as defined in Paragraph 6) any
business then carried on by the Corporation as long as any like business is
carried on by the Corporation or by any person, corporation, partnership, trust
or other organization or entity deriving title to the good will of such
business, directly or indirectly, from the Corporation; provided, however, that
nothing herein contained shall prevent the Executive from purchasing securities
of any publicly-owned company, the securities of which are listed on a national
securities exchange or registered pursuant to Section 12 (g) of the Securities
Exchange Act of 1934, as amended, but the total holding f any such security so
listed or registered shall be limited to one (1%) percent of the amount of any
such security outstanding. The Executive may make investments, without
restriction on amount, in non-competitive private businesses.
6. To induce the Corporation to execute and deliver this Agreement,
and to protect the trade secrets of the business of the Corporation, the
Executive hereby covenants and agrees that if the Executive shall terminate his
employment hereunder in breach of this Agreement, or if his employment is
terminated by the Corporation for cause (as hereinafter defined), then for a
period of twelve (12) months from the effective date of termination of the
period of employment hereunder, the Executive will not engage in or carry on,
directly or indirectly, either for himself or as a member of a partnership or as
a stockholder, investor, lender, officer or director of a corporation, or as an
employee or agent of, or consultant to, any person, partnership or corporation,
or in any capacity on behalf of any trusts or other organization or entity, any
business with or for any person or entity which at any time during the
twenty-four (24) months preceding the date of termination of this Agreement was
a client of Corporation in competition with any business then carried on by the
Corporation; provided, however, that nothing herein contained shall prevent the
Executive from purchasing securities of any publicly-owned company, the
securities of which are listed on a national securities exchange or are
registered pursuant to Section 12 (g) of the Securities Exchange Act of 1934, as
amended, but the total holding of any such securities so listed or registered
shall be limited to one (1%) percent of the amount of any such security
outstanding. Nothing contained herein shall prevent the Executive from
purchasing or otherwise beneficially owning, without restriction on amount, any
securities issued by the Corporation. The term "in competition with" as used in
this Agreement shall mean a business which is conducted anywhere within the
United State or in other ares in the world where the Corporation then carries on
business and which is substantially similar in whole or in part of the business
then conducted by the Corporation.
For the purposes of this Paragraph 6, the term "for cause" shall mean,
and be limited exclusively to, the following actions by the Executive: actual
(as distinguished from statutory) fraud; misappropriation of funds or property
of the Corporation for his own use; embezzlement of the Corporation's property;
or a material and intentional breach by Executive of the provisions to be
performed by him of paragraph 2, 7 or 9 of this Agreement. A mere allegation by
the Corporation shall not be sufficient; the burden of proving that a
termination is "for cause" shall be on the Corporation. It is specifically
agreed that "cause" shall not include any act of a commission or omission by the
Executive in the exercise of Executive's business judgement as a senior
executive of the Corporation or a member of the Board of Directors of the
Corporation.
7. The Executive agrees that any and all systems, work- in-progress,
inventions, discoveries, improvements, processes, compounds, formulae, patents,
copyrights and trademarks, made, discovered or developed by him, solely or
jointly with others, or otherwise, during the period of his employment by the
Corporation, and which may be useful in or relate to any business of the
Corporation, shall be fully disclosed by the Executive to the Board of Directors
of the Corporation, and shall be the sole and absolute property of the
Corporation, and the Corporation will be the sole and absolute owner thereof.
The Executive agrees that at all times, both during his employment and after the
termination of his employment, he will keep all of the same secret from everyone
except the Corporation and will disclose the same to no one except as required
for the business of the Corporation or unless otherwise authorized in writing by
the Board of Directors or the Chairman of the Board of Directors of the
Corporation, unless such information shall have become public knowledge or shall
have become known generally to competitors through sources other than the
Executive.
8. The Executive agrees, at the request of the Corporation, to make
application in due form for United States Letters Patent and foreign Letters
Patent on any of said systems, inventions, discoveries, improvements, processes,
compounds and formulae, and to assign to the Corporation all of his right, title
and interest in and to said systems, inventions, discoveries, improvements,
processes, compounds, formulae and patent applications therefor or any patents
thereon, and to execute at any and all times any and all instruments, and to do
any and all acts necessary, or which the Corporation may deem desirable, in
connection with such application of letters Patent, to establish and perfect int
he Corporation the entire right, title and interest in and to said systems,
inventions, discoveries, improvements, processes, compounds, formulae and patent
applications therefor or patents thereon or in the conduct of any proceedings or
litigation in regard thereto. It is understood and agreed that all costs and
expenses, including, but not limited to, reasonable attorneys' fees, incurred at
the request of the Corporation in connection with any action taken by the
Executive pursuant to this paragraph 8, shall be borne by the Corporation.
9. The Executive agrees that, during or after the termination of this
Agreement, he shall not divulge, furnish or make accessible to any person,
corporation, partnership, trust or other organization or entity, any
information, trade secrets, technical data or know-how relating to the business,
business practices, methods, products, processes, equipment or any confidential
or secret aspect of the business of the Corporation without the prior written
consent of the Corporation, unless such information shall have become public
knowledge or shall have become known generally to competitors of the Corporation
through sources other than the Executive.
10. The Executive shall be entitled to participate in the life
insurance, dental, 401(k) and major medical group plans of the Corporation, and
in each other employee benefit plan that the corporation has or may establish
and maintain for the benefit of the employees of the Corporation.
11. The Executive agrees that the Corporation may procure life
insurance on the life of the Executive, in such amount as the Corporation may
deem appropriate, with the Corporation named as the sole beneficiary under such
policy or policies. The Executive agrees that upon request from the Corporation,
he will submit to a physical examination and will execute such applications and
other documents as may be required for the procurement of such insurance.
12. The Executive acknowledges that he has been employed for his
unique talents and that his leaving the employ of the Corporation would
seriously hamper the business of the Corporation.
13. This Agreement sets forth the entire Agreement and understanding
between the parties and merges and supersedes all prior discussions, agreements
and understandings of every kind and nature between them concerning the subject
matter hereof. No variation hereof shall be deemed valid unless in writing and
signed by the party to be bound thereby and no discharge of the terms hereof
shall be deemed valid unless by full performance by the parties or by a writing
signed by both parties. No waiver by a party of any breach by the other party of
any provision or condition of this Agreement by him or its to be performed shall
be deemed a waiver of the breach of a similar or dissimilar provision or
condition at the same time or any prior or subsequent time or of the provision
or condition itself.
14. All notices relating to this Agreement shall be in writing and
shall be deemed to have been given at the time when delivered personally,
against appropriate receipt, or when mailed in any general or branch office of
the United States Postal Service, by registered or certified mail, postage
prepaid, return receipt requested, addressed to the address of the other party
hereinbefore set forth, or to such changed address as the other party may fix by
notice; provided, however, that any notice of change of address shall be
effective only upon receipt.
15. This Agreement shall inure to the benefit of and be binding upon
the Corporation, its successors and assigns, including, without limitation, any
corporation which may acquire all or substantially all of the Corporation's
assets and business or with or into which the Corporation may be consolidated or
merged, and the Executive his heirs, executors, administrators and legal
representative, provided that the obligations of the Executive hereunder may not
be delegated.
16. If any provision of this Agreement or the application of any
provision to this Agreement is declared to be illegal, invalid or otherwise
unenforceable by a court of competent jurisdiction, the remainder of this
Agreement shall not be affected except to the extent necessary to delete such
illegal, invalid or unenforceable provision, unless such declaration shall
substantially impair the benefit of the remaining portions of this Agreement.
17. This Agreement shall be governed by the laws of the State of New
York governing contracts made to be performed in such State without giving
effective to principles of conflicts of law.
18. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall be
deemed to be the same Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed
this Agreement as of the date first set forth above.
GREENSTONE ROBERTS ADVERTISING, INC.
By: ____________________________ _____________________________
Name: Anthony V. Curto Ronald Greenstone
Title: Secretary
Exhibit 10.14
AGREEMENT, made as of January 1, 1998, by and between GREENSTONE
ROBERTS ADVERTISING, INC., a New York corporation (the "Corporation"), and GARY
C. ROBERTS, an individual residing at 22 School House Lane, Roslyn, New York
11577 (the "Executive")
W I T N E S S E T H :
WHEREAS, the Corporation desires to employ the Executive, and the
Executive is agreeable to accepting such employment, under the terms of this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties agree to as follows:
1. The Corporation employs the Executive, and the Executive agrees to
serve the Corporation, for a period of two (2) years commencing on January 1,
1998 and ending at 12:00 midnight on December 31, 1999 (the "Termination Date"),
Notwithstanding this two (2) year term, the Corporation at its option may
terminate the second year of this Agreement by giving the Executive written
notice of termination on or before September 1, 1998, and such termination shall
be effective as of 12:00 midnight on December 31, 1998. "Period of Employment"
as used in this Agreement shall mean January 1, 1998 through December 31, 1999,
unless the second year of this Agreement is terminated pursuant to this
paragraph 1, in which case "Period of Employment" shall mean January 1, 1998
through December 31, 1998.
2. During the period of employment hereunder, the Executive shall be
employed by the Corporation as Vice Chairman of the Corporation, and, except as
hereinafter provided, shall devote his full business time and efforts to the
business and affairs of the Corporation, use his best efforts to promote the
business of the Corporation, hold the offices in the Corporation to which from
time to time he may be elected or appointed, and perform such executive duties
as shall be assigned to him by the Chairman of the Board and/or the Board of
Directors of the Corporation provided that such duties are of a degree of
responsibility commensurate with a senior executive position. In connection with
the performance of his duties hereunder, the Executive from time to time may be
required to travel both within and outside of the United States of America. The
Executive shall be reimbursed for all travel and other expenses incidental to
the performance of services hereunder in accordance with the usual practices of
the Corporation. The Executive shall be entitled to vacations in accordance with
the Corporation's existing vacation policy and the Corporation shall provide the
Executive with reasonable perquisites suitable to the office in the Corporation
which he holds. The Corporation agrees that, consistent with the foregoing, the
Executive may devote such time and attention as is reasonably necessary to his
personal and financial affairs.
3. (a) During the Period of Employment hereunder, the Corporation
shall compensate the Executive for the services to be rendered by him hereunder,
including all services to be rendered as an officer or director of the
Corporation, by paying the Executive a salary at the rate of not less than Two
Hundred Twenty Five Thousand ($225,000.00) Dollars per year. Such salary shall
be payable in accordance with the usual salary payment practices of the
Corporation or as otherwise determined by the Board of Directors.
For each fiscal year ending October 31st in which the Executive is
employed, he shall receive as an additional incentive compensation in the sum of
two (2%) percent pre-tax earnings, the dollar amount of which shall be
determined by the Corporation's auditors which shall be binding upon the
Corporation and the Executive. If the Executive's employment shall terminate on
a date other than October 31st, then the Executive's share of the bonus pool
shall be pro-rated for that portion of the year the Executive has rendered
service.
The Board of Directors of the Corporation annually shall review the
services rendered by the Executive and, in its sole discretion, may award the
Executive bonus compensation for the services rendered during the year under
review. The Board of Directors of the Corporation also shall review the salary
of the Executive at least annually. Nothing herein contained shall prevent the
Board of Directors of the Corporation from prospectively increasing the salary
or other compensation of the Executive during the period of employment
hereunder.
(b) In the event that the Corporation exercises its option to
terminate this Agreement with respect to the second year of employment in
accordance with paragraph 1 hereof otherwise than for "cause" (as hereinafter
defined in Paragraph 6):
(i) The Corporation shall, on or before January
5, 1999, pay to the Executive in one lump sum as a special severance and
termination payment the amount of Three Hundred Thousand Dollars ($300,000.00),
which payment shall be in addition to, and not in lieu of, any other amounts
payable by the Corporation to the Executive; and
(ii) The Corporation shall continue to employ and
compensate the Executive, including all perquisites and benefits provided for
herein, until the end of the Period of Employment.
(c) If there is no termination of this Agreement by the Corporation
prior to the Termination Date to which paragraphs 3(b) and 3(d) hereof apply,
then the term of employment pursuant to this Agreement shall terminate on the
Termination Date. If by September 1, 1999, the Corporation and the Executive
have not entered into a mutually acceptable written renewal employment agreement
for a period of at least one year beyond the Termination Date (a "Renewal
Agreement") the Corporation shall pay to the Executive, on or before January 5,
2000, in one lump sum as a special severance and termination payment, the amount
of $225,000.00, which amount shall be in addition to, and not in lieu of, any
other amounts payable to the Executive by the Corporation. The Corporation and
the Executive each has the right, but not any obligation, to seek to negotiate a
"Renewal Agreement", and the Corporation shall be obligated to make this special
severance and termination payment whether or not there is any attempt to enter
into a Renewal Agreement and irrespective of the reasons the parties do not
enter into such a Renewal Agreement.
(d) In the event that the Executive's employment is terminated by the
Corporation prior to the Termination Date without "cause" (as hereafter defined
in paragraph 6), other than by exercising the Corporation's option to terminate
the second year of this Agreement pursuant to paragraph 1 hereof (a "Cessation
of Employment"):
(i) The Corporation shall, within five (5) days
of the Cessation of Employment, pay the Executive in one lump as a special
severance and termination payment the amount of (A) Three Hundred Thousand
Dollars ($300,000.00) if the second year of the Executive's employment is
terminated pursuant to paragraph 1 hereof or (B) Two Hundred Twenty Five
thousand Dollars ($225,000.00) if the second year of the Executive's Employment
is not terminated pursuant to paragraph 1 hereof; which payment shall be in
addition to, and not in lieu of, any other amounts payable to the Executive by
the Corporation.
(ii) For the entire remaining portion of the
Period of Employment, the Corporation shall continue to pay to the Executive the
salary then being paid by the Corporation to the Executive pursuant to the
provisions of this Agreement prior to the date of the Cessation of Employment;
and
(iii) For the entire remaining portion of the
Period of Employment, the Executive shall continue to be eligible to, and shall
participate in, all employee benefit programs of the Corporation in which the
Executive participated prior to the Cessation of Employment including, without
limitation, all savings, life, accident, medical and dental insurance plans and
programs; and the Executive shall be entitled to make whatever elections may be
available to him with respect to his interests in savings and comparable plans.
(e) Nothing in the Agreement shall be construed as giving the
Corporation the right to terminate the Executive's employment without cause (as
defined in paragraph 6 hereof), other than a termination of the second year of
employment pursuant to paragraph 1 hereof, and the provisions of paragraph 3(d)
are not intended to preclude or limit in any way the Executive's right to enjoin
any attempt to so terminate his employment or to assert any legal rights or
remedies he otherwise might have for the wrongful termination of this
employment.
4. In the event of the Executive's death during the term hereof, this
agreement shall terminate on the date of death of the Executive.
5. While employed hereunder, the Executive shall not engage in or
carry on, directly or indirectly, either for himself or as a member of a
partnership or as a stockholder, investor, lender, officer or director of a
corporation (other than the Corporation), or as an employee or agent of, or
consultant to, any person, partnership or corporation (other than the
Corporation), or in any capacity on behalf of any trust or other organization or
entity, any business in competition with (as defined in Paragraph 6) any
business then carried on by the Corporation as long as any like business is
carried on by the Corporation or by any person, corporation, partnership, trust
or other organization or entity deriving title to the good will of such
business, directly or indirectly, from the Corporation; provided, however, that
nothing herein contained shall prevent the Executive from purchasing securities
of any publicly-owned company, the securities of which are listed on a national
securities exchange or registered pursuant to Section 12(g) of the Securities
Exchange Act of 1934, as amended, but the total holding of any such security so
listed or registered shall be limited to one percent (1%) of the amount of any
such security outstanding. The Executive may make investments, without
restriction on amount, in non-competitive private businesses.
6. To induce the Corporation to execute and deliver this Agreement,
and to protect the trade secrets of the business of the Corporation, the
Executive hereby covenants and agrees that if the Executive shall terminate his
employment hereunder in breach of this Agreement, or if his employment is
terminated by the Corporation for cause (as hereinafter defined), then for a
period of twelve (12) months from the effective date of termination of the
period of employment hereunder, the Executive will not engage in or carry on,
directly or indirectly, either for himself or as a member of a partnership or as
a stockholder, investor, lender, officer or director of a corporation, or as an
employee or agent of, or consultant to, any person, partnership or corporation,
or in any capacity on behalf of any trust or other organization or entity, any
business with or for any person or entity which at any time during the
twenty-four (24) months preceding the date of termination of this Agreement was
a client of Corporation in completion with any business then carried on by the
Corporation; provided, however, that nothing herein contained shall prevent the
Executive from purchasing securities of any publicly-owned company, the
securities of which are listed on a national securities exchange or are
registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended, but the total holding of any such securities so listed or registered
shall be limited to one percent (1%) of the amount of any such security
outstanding. Nothing contained herein shall prevent the Executive from
purchasing or otherwise beneficially owning, without restriction on amount, any
securities issued by the Corporation. The term "in competition with" as used in
this Agreement shall mean a business which is conducted anywhere within the
United States or in other areas in the world where the Corporation then carries
on business and which is substantially similar in whole or in part to the
business then conducted by the Corporation.
For the purposes of this Agreement, the term "for cause" shall mean,
and be limited exclusively to, the following actions by the Executive: actual
(as distinguished from statutory) fraud; misappropriation of funds or property
of the Corporation for his own use; embezzlement of the Corporation's property;
or a material and intentional breach by Executive of the provisions to be
performed by him of Paragraph 2, 7 or 9 of this Agreement. A mere allegation by
the Corporation shall not be sufficient; the burden of proving that a
termination is "for cause" shall be on the Corporation. It is specifically
agreed that "cause" shall not include any act of commission or omission by the
Executive in the exercise of Executive's business judgment as a senior executive
of the Corporation or a member of the Board of Directors of the Corporation.
7. The Executive agrees that any and all systems, work-in-progress,
inventions, discoveries, improvements, processes, compounds, formulae, patents,
copyrights and trademarks, made, discovered or developed by him, solely or
jointly with others, or otherwise, during the period of his employment by the
Corporation, and which may be useful in or relate to any business of the
Corporation, shall be fully disclosed by the Executive to the Board of Directors
of the Corporation, and shall be the sole and absolute property of the
Corporation, and the Corporation will be the sole and absolute owner thereof.
The Executive agrees that at all times, both during his employment and after the
termination of his employment, he will keep all of the same secret from everyone
except the Corporation and will disclose the same to no one except as required
for the business of the Corporation or unless otherwise authorized in writing by
the Board of Directors or the Chairman of the Board of Directors of the
Corporation, unless such information shall have become public knowledge or shall
have become known generally to competitors through sources other than the
Executive.
8. The Executive agrees, at the request of the Corporation, to make
application in due form for United States Letters Patent and foreign Letters
Patent on any of said systems, inventions, discoveries, improvements, processes,
compounds and formulae, and to assign to the Corporation all of his right, title
and interest in and to said systems, inventions, discoveries, improvements,
processes, compounds, formulae and patent applications therefore or any patents
thereon, and to execute at any and all times any and all instruments, and to do
any and all acts necessary, or which the Corporation may deem desirable, in
connection with such application for Letters Patent, to establish and perfect in
the Corporation the entire right, title and interest in and to said systems,
inventions, discoveries, improvements, processes, compounds, formulae and patent
applications therefor or patents thereon or in the conduct of any proceedings or
litigation in regard thereto. It is understood and agreed that all costs and
expenses, including, but not limited to, reasonable attorneys' fees, incurred at
the request of the Corporation in connection with any action taken by the
Executive pursuant to this Paragraph 8, shall be borne by the Corporation.
9. The Executive agrees that, during or after the termination of this
Agreement, he shall not divulge, furnish or make accessible to any person,
corporation, partnership, trust or other organization or entity, any
information, trade secrets, technical data or know-how relating to the business,
business practices, methods, products, processes, equipment or any confidential
or secret aspect of the business of the Corporation without the prior written
consent of the Corporation, unless such information shall have become public
knowledge or shall have become known generally to competitors of the Corporation
through sources other than the Executive.
10. The Executive shall be entitled to participate in the life
insurance, dental, 401(k) and major medical group plans of the Corporation, and
in each other employee benefit plan that the Corporation has or may establish
and maintain for the benefit of the employees of the Corporation.
11. The Executive agrees that the Corporation may procure life
insurance on the life of the Executive, in such amount as the Corporation may
deem appropriate, with the Corporation named as the sole beneficiary under such
policy or policies. The Executive agrees that upon request from the Corporation,
he will submit to a physical examination and will execute such applications and
other documents as may be required for the procurement of such insurance.
12. The Executive acknowledges that he has been employed for his
unique talents and that his leaving the employ of the Corporation would
seriously hamper the business of the Corporation.
13. This Agreement sets forth the entire agreement and understanding
between the parties and merges and supersedes all prior discussions, agreements
and understandings of every kind and nature between them concerning the subject
matter hereof. No variation hereof shall be deemed valid unless in writing and
signed by the party to be bound thereby and no discharge of the terms hereof
shall be deemed valid unless by full performance by the parties or by a writing
signed by both parties. No waiver by a party of any breach by the other party of
any provision or condition of this Agreement by him or its to be performed shall
be deemed a waiver of the breach of a similar or dissimilar provision or
condition at the same time or any prior or subsequent time or of the provision
or condition itself.
14. All notices relating to this Agreement shall be in writing and
shall be deemed to have been given at the time when delivered personally,
against appropriate receipt, or when mailed in any general or branch office of
the United States Postal Service, by registered or certified mail, postage
prepaid, return receipt requested, addressed to the address of the other party
hereinbefore set forth, or to such changed address as the other party may fix by
notice; provided, however, that any notice of change of address shall be
effective only upon receipt.
15. This Agreement shall inure to the benefit of and be binding upon
the Corporation, it successors and assigns, including, without limitation, any
corporation which may acquire all or substantially all of the Corporation's
assets and business or with or into which the Corporation may be consolidated or
merged, and the Executive, his heirs, executors, administrators and legal
representatives, provided that the obligations of the Executive hereunder may
not be delegated.
16. If any provision of this Agreement or the application of any
provision to this Agreement is declared to be illegal, invalid or otherwise
unenforceable by a court of competent jurisdiction, the remainder of this
Agreement shall not be affected except to the extent necessary to delete such
illegal, invalid or unenforceable provision, unless such declaration shall
substantially impair the benefit of the remaining portions of this Agreement.
17. This Agreement shall be governed by the laws of the State of New
York governing contracts made to be performed in such State without giving
effect to principles of conflicts of law.
18. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which together shall be
deemed to be the same Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first set forth above.
GREENSTONE ROBERTS ADVERTISING, INC.
By:___________________________ ______________________________
Name: RONALD M. GREENSTONE GARY C. ROBERTS
Title: Chairman of the Board
EXHIBIT INDEX
Exhibit 21
Subsidiaries of the Company
NAME OF SUBSIDIARY STATE OF INCORPORATION % OWNERSHIP
Greenstone Roberts Advertising, Florida 100%
Florida, Inc.
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0
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