<PAGE> 1
As Filed with the Securities and Exchange Commission on September 6, 2000
Registration No. 333-44476
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
GREENSTONE ROBERTS ADVERTISING, INC.
(Exact Name of Registrant as Specified in its Charter)
-------------------
NEW YORK 7311 112250305
(State or other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation Or Organization) Classification Code Number) Identification No.)
GREENSTONE ROBERTS ADVERTISING, INC.
401 BROADHOLLOW ROAD
MELVILLE, NEW YORK 11747
TEL. (631) 249-2121
(Address, Including Zip Code, And Telephone Number, Including Area code,
Of Registrant's Principal Executive Offices)
-------------------
RONALD M. GREENSTONE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
GREENSTONE ROBERTS ADVERTISING, INC.
401 BROAD HOLLOW ROAD
MELVILLE, NEW YORK 11747
(Name And Address, Including Zip Code, And Telephone Number, Including
Area Code, Of Agent For Service)
-------------------
COPIES TO:
ANTHONY V. CURTO, ESQ.
FORCHELLI, CURTO, SCHWARTZ, MINEO, CARLINO & COHN, LLP
330 OLD COUNTRY ROAD
MINEOLA, NEW YORK 11501 (516) 248-1700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after the effectiveness of this Registration Statement and
the effective time of the merger of Kupper Parker Communications, Incorporated
("KPCI"), a Missouri corporation, with and into Greenstone Roberts Advertising,
Inc. ("GRAI"), a New York corporation, pursuant to the Agreement and Plan of
Merger dated as of August 23, 2000, as amended, between KPCI and GRAI,
described in the enclosed Prospectus/Proxy Statement.
<PAGE> 2
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each Proposed
class of Amount maximum Proposed maximum
securities to to be offering price aggregate Amount of
be registered registered(1) per unit (2) offering price Registration fee(3)
------------- ------------- ------------ -------------- -------------------
<S> <C> <C> <C> <C>
Common Stock 5,073,950 $2.09375 $10,623,582 $2,804
Par value $0.01 per
share
</TABLE>
(1) Based on 5,073,950 shares of common stock, $.01 par value, of GRAI, which
is the maximum number of shares of GRAI common stock that will be issued in
connection with the consummation of the transactions herein. Calculated
based on the exchange ratio of 5,450 shares of GRAI common stock for each
share of KPCI common stock outstanding (931 shares as of August 11, 2000).
(2) The average of the high and low prices of GRAI common stock on the OTC
Electronic Bulletin Board on August 11, 2000 or the previous day if there
were no trades on such date.
(3) Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act of 1933, as
amended, the registration fee previously paid was calculated as 0.000264
multiplied by $2.09375 multiplied by the total number of shares of GRAI
common stock expected to be exchanged for the shares of the KPCI common
stock hereunder.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
--------------------------------------------------------------------------------
ii
<PAGE> 3
This Prospectus/Proxy Statement is not an offer to sell and is not soliciting
offers to buy, securities in any state where the offer or sale is not permitted.
GREENSTONE ROBERTS ADVERTISING, INC.
401 Broadhollow Road
Melville, New York 11747
(631) 249-2121
PROSPECTUS/PROXY STATEMENT
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
September 8, 2000
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders
of Greenstone Roberts Advertising, Inc. ("GRAI") to be held at the offices of
GRAI at 401 Broadhollow Road, Melville, New York on September 29, 2000 at 9:00
a.m., New York time.
At the meeting, GRAI stockholders will consider and vote upon a
proposal to approve the Agreement and Plan of Merger ("Merger Agreement") dated
as of August 23, 2000 between Kupper Parker Communications, Incorporated
("KPCI") and GRAI and approve an amendment to the GRAI Certificate of
Incorporation to eliminate the minimum size requirement for the Board of
Directors. The Merger Agreement provides for KPCI to merge into GRAI and for
GRAI to change its name to KPCI.
If the merger is completed, KPCI stockholders will receive 5,450 shares
of GRAI common stock for each share of KPCI common stock that they own. You as a
GRAI shareholder shall have the option to have GRAI, the Surviving Entity,
repurchase your pro rata share of 300,000 shares at $4.50 per share.
Stockholders of record at the close of business on August 31, 2000 are
entitled to notice of and to vote at the special meeting and any postponement
thereof. The proposed merger requires the approval of at least two-thirds of the
outstanding shares of GRAI common stock cast at the meeting. The enclosed
Prospectus/Proxy Statement provides you with detailed information about the
proposed merger. Please read the Prospectus/Proxy Statement carefully. IN
PARTICULAR, YOU SHOULD READ THE "RISK FACTORS" SECTION BEGINNING ON PAGE 21 FOR
A DESCRIPTION OF VARIOUS RISKS YOU SHOULD CONSIDER IN EVALUATING THE PROPOSED
TRANSACTION. It is important that your shares are represented at the meeting,
regardless of whether you plan to attend in person. Please complete, execute and
date the enclosed proxy and return it in the enclosed postage prepaid envelope,
which does not require postage if mailed in the United States. Please do not
send in any stock certificates for repurchase until you have received a letter
of transmittal, which will be sent to you if the merger is completed.
1
<PAGE> 4
Your Board of Directors has determined that approval of the merger is
in the best interests of GRAI and its stockholders and has unanimously approved
the merger. The Board unanimously recommends that you vote "FOR" approval of the
merger.
TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING IN PERSON. ANY EXECUTED BUT UNMARKED PROXY CARDS WILL BE VOTED FOR
APPROVAL OF THE MERGER. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED IN
THIS PROSPECTUS/PROXY STATEMENT AT ANY TIME BEFORE IT HAS BEEN VOTED AT THE
SPECIAL MEETING. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON EVEN
IF YOU HAVE RETURNED A PROXY.
----------------------------------------------------------------------------
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THIS PROSPECTUS/PROXY STATEMENT OR
DETERMINED IF THIS PROSPECTUS/PROXY STATEMENT IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------------------------------------------------------------
This Prospectus/Proxy Statement is dated September __, 2000, and is first
being mailed to stockholders of GRAI on September 8, 2000.
GREENSTONE ROBERTS ADVERTISING, INC.
Ronald M. Greenstone, Chairman and
Chief Executive Officer
2
<PAGE> 5
GREENSTONE ROBERTS ADVERTISING, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders of
GREENSTONE ROBERTS ADVERTISING, INC. ("GRAI") will be held at 401 Broadhollow
Road, Melville, New York 11747, on September 29, 2000 at 9:00 a.m., New York
time, for the following purposes:
1. To approve the issuance of 5,073,950 shares of Common Stock to Kupper
Parker Communications, Incorporated ("KPCI") in exchange for all of the shares
of KPCI and the merger of KPCI into GRAI, with (a) a repurchase by GRAI of
300,000 shares of GRAI from the existing stockholders at $4.50 per share, (b)
the amendment of GRAI's stock option plan to increase the number of options that
may be granted to 250,000 and to convert the 34 KPCI options to 185,300 GRAI
options with exercise prices of $1.00 per 5,450 shares; and (c) to amend the
Certificate of Incorporation to eliminate the minimum size requirement for the
board of directors.
2. To consider and act upon any other business as may properly be brought
before the meeting, and any adjournments or postponements thereof, in connection
with the foregoing or otherwise.
Stockholders of record at the close of business on August 31, 2000 will
be entitled to notice of and to vote at the meeting.
By order of the Board of Directors,
Ronald M. Greenstone, Secretary
Dated: Melville, New York
September 8, 2000
IF YOU DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WISH YOUR SHARES
TO BE VOTED, PLEASE DATE, SIGN AND MAIL THE ACCOMPANYING FORM OF PROXY AS
PROMPTLY AS POSSIBLE IN THE ENCLOSED ENVELOPE ADDRESSED TO GRAI'S TRANSFER
AGENT.
3
<PAGE> 6
AVAILABLE INFORMATION
This document incorporates important business and financial information
about GRAI from documents filed with the SEC that we have not included in or
delivered with this document. GRAI will provide you with copies of this
information relating to GRAI, without charge, upon written or oral request to:
Greenstone Roberts Advertising, Inc.
401 Broad Hollow Road
Melville, New York 11747
Attention: Ronald M. Greenstone
Telephone number: (631) 249-2121
KPCI will provide you with copies of this information relating to KPCI,
without charge, upon written or oral request to:
Kupper Parker Communications, Inc.
8301 Maryland Avenue
St. Louis, Missouri 63105
Attention: Bruce D. Kupper
Telephone number: (314) 290-2000
IN ORDER TO RECEIVE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE
SPECIAL STOCKHOLDERS' MEETING, GRAI STOCKHOLDERS SHOULD MAKE A REQUEST NO LATER
THAN SEPTEMBER 25, 2000.
For more information on the matters incorporated by reference in this
document, see "Where You Can Find More Information" on page 67.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents heretofore filed by GRAI with the SEC (file number
000-17468) pursuant to the Securities and Exchange Act of 1934, as amended (the
"Exchange Act") are incorporated herein by reference:
1. GRAI's Annual Report on Form 10-KSB for the year ended October 31,
1999;
2. GRAI's Quarterly Report on Form 10-QSB for the quarter ended January
31, 2000 and Amendment No. 1 thereto on Form 10-QSB/A dated March 30,
2000;
3. GRAI's Quarterly Report on Form 10-QSB for the quarter ended April 30,
2000; and
4. GRAI's Current Report on Form 8-K dated April 27, 2000.
All documents filed by GRAI pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus/Proxy Statement and prior
to the GRAI Special Meeting or the KPCI Special Meeting shall be deemed to be
incorporated by reference herein and to be a part hereof from the respective
dates of filing of such documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus/Proxy Statement to the extent that a statement
contained herein, or in any other subsequently filed document which also is or
is deemed to be incorporated by reference herein, modifies or supersedes such
4
<PAGE> 7
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus/Proxy
Statement.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LETTER FROM GRAI ................................................. 1
NOTICE OF GRAI STOCKHOLDERS MEETING .............................. 3
AVAILABLE INFORMATION ............................................. 4
INCORPORATION BY REFERENCE ....................................... 4
SUMMARY........................................................... 8
The Companies................................................. 8
The Special Stockholders Meeting.............................. 9
The Merger Proposal........................................... 9
Consideration to be Received in the Merger.................... 10
Risk Factors.................................................. 10
KPCI Reasons for the Merger................................... 10
GRAI Reasons for the Merger................................... 10
Joint Reasons for the Merger.................................. 11
Recommendation to GRAI Stockholders........................... 11
Record Date; Voting Power..................................... 12
Votes Required................................................ 12
Share Ownership by GRAI Management and the Principal
Stockholders................................................. 12
Federal Income Tax Consequences of the Merger................. 12
The Merger Agreement.......................................... 13
Conditions to the Merger...................................... 13
Termination of the Merger Agreement........................... 13
Interests of Certain Persons in the Merger.................... 14
The Rights of KPCI Stockholders Will Change................... 14
Accounting Treatment.......................................... 14
Dissenters' Rights of Appraisal............................... 14
Comparative Market Data....................................... 14
Selected Historical Consolidated Financial Data of GRAI....... 17
Selected Historical Consolidated Financial Data of KPCI....... 18
Selected Unaudited Pro Forma Consolidated Financial Data...... 19
Comparative Per Share Data of GRAI and KPCI................... 20
RISK FACTORS...................................................... 21
Risks Associated with the Merger.............................. 21
Risks of KPCI Business........................................ 22
Risks of GRAI Business........................................ 24
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS....................................................... 26
THE SPECIAL STOCKHOLDERS MEETING................................... 28
Proposed Time and Place........................................ 28
Record Date; Stock Entitled to Vote; Quorum.................... 29
Voting; Proxies................................................ 29
Revoking Proxies............................................... 30
Solicitation of Proxies........................................ 30
</TABLE>
5
<PAGE> 8
<TABLE>
<S> <C>
Votes Required; Share Ownership by Management and
Principal Stockholders........................................ 30
THE MERGER......................................................... 30
Background of the Merger....................................... 30
KPCI Reasons for the Merger.................................... 31
GRAI Reasons For The Merger.................................... 32
Recommendation to GRAI Stockholders............................ 33
No Opinion of Financial Advisor................................ 33
Joint Reasons for the Merger................................... 33
Material Federal Income Tax Consequences....................... 33
Dissenters' Rights of Appraisal................................ 35
Accounting Treatment........................................... 35
Federal Securities Laws Consequences; Stock Transfer
Restrictions.................................................. 36
MATERIAL PROVISIONS OF THE MERGER AGREEMENT.................... 36
General........................................................ 36
Structure of the Merger........................................ 36
Closing; Effective Time........................................ 36
Consideration to be Received in the Merger..................... 37
Cancellation of Shares......................................... 37
Procedures for Surrender of KPCI Certificates.................. 37
Procedures for Surrender of GRAI Certificates.................. 38
Representations and Warranties................................. 38
Conditions to Completion of the Merger......................... 41
Conduct of Business Pending the Merger......................... 41
Termination.................................................... 42
Fees and Expenses; Termination Fees............................ 43
Other Covenants and Agreements................................. 44
Indemnification................................................ 44
Amendment and Waiver........................................... 44
No Solicitation ............................................... 44
MARKET PRICE AND DIVIDENDS 45
Market Price and Dividend on KPCI Common Stock
And Related Stockholder Matters ............................. 45
Market Price and Dividend on GRAI Common Stock
And Related Stockholder Matters ............................. 45
THE COMPANIES...................................................... 46
Business of KPCI .............................................. 46
Revenues ...................................................... 46
Clients ....................................................... 47
Competition ................................................... 47
Employees...................................................... 47
Regulation .................................................... 47
Properties .................................................... 48
Legal Proceedings.............................................. 48
Business of GRAI............................................... 48
Solicitation of New Business................................... 49
Revenues ...................................................... 50
Clients ....................................................... 50
Suppliers ..................................................... 50
Seasonality ..................................................... 51
Government Regulation ........................................... 51
Employees ....................................................... 51
Competition ..................................................... 52
</TABLE>
6
<PAGE> 9
<TABLE>
<S> <C>
Property ..................................................... 52
Legal Proceedings ............................................. 52
KPCI MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION............................... 53
Results of Operations.......................................... 53
Liquidity and Capital Resources................................ 54
PROPOSED AMENDMENT TO GRAI STOCK OPTION PLAN ...................... 56
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF KPCI............................................... 56
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF GRAI............................................... 57
DIRECTORS AND EXECUTIVE OFFICERS OF KPCI and GRAI.................. 59
EXECUTIVE COMPENSATION............................................. 61
RELATED PARTY TRANSACTIONS......................................... 64
COMPARISON OF STOCKHOLDER RIGHTS................................... 65
DESCRIPTION OF KPCI CAPITAL STOCK.................................. 66
General........................................................ 66
Common Stock................................................... 66
DESCRIPTION OF GRAI CAPITAL STOCK.................................. 67
General........................................................ 67
Common Stock................................................... 67
WHERE YOU CAN FIND MORE INFORMATION................................ 67
EXPERTS............................................................ 69
LEGAL MATTERS...................................................... 70
INDEPENDENT PUBLIC ACCOUNTANTS..................................... 70
INDEX TO FINANCIAL STATEMENTS...................................... F-1
PRO FORMA FINANCIAL INFORMATION ................................... F-2
UNAUDITED FINANCIAL STATEMENTS OF KPCI............................. F-7
AUDITOR'S REPORT................................................... F-12
FINANCIAL STATEMENTS OF KPCI....................................... F-13
LIST OF ANNEXES
ANNEX A Agreement and Plan of Merger (without schedules
and exhibits)............................................ A-1
ANNEX B Amendment to Certificate of Incorporation ............. A-40
ANNEX C Employment Agreements ................................. A-41
ANNEX D Amendment to Stock Option Plan ........................ A-52
ANNEX E Section 351.455 of the General and Business
Corporation Law of Missouri........................... A-53
</TABLE>
7
<PAGE> 10
SUMMARY
This summary highlights selected information from this Prospectus/Proxy
Statement. This summary is not complete and does not contain all of the
information that GRAI stockholders should consider before deciding to vote on
the merger proposal. To understand the proposed transactions fully and the
consequences to GRAI stockholders, GRAI urges its stockholders to read carefully
the entire Prospectus/Proxy Statement and the documents referred to in this
document. See "Where You Can Find More Information" on page 67. GRAI has
included page references directing its stockholders to a more complete
description of each item presented in this summary.
This document contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements include information concerning
possible or assumed future results of operations and other statements and
information regarding assumptions about earnings per share, capital and other
expenditures, financing plans, cash flow, capital structure, pending legal
proceedings and claims, future economic performance, operating income,
management's plans, goals and objectives for future operations and growth and
markets for GRAI stock.
Forward-looking statements are also identified by words such as "believes,"
"expects," "anticipates," "intends," "estimates" or similar expressions. GRAI
stockholders should understand that these forward looking statements are
necessarily estimates based on assumptions believed to be reasonable. These
statements are subject to a number of risks and uncertainties that could cause
actual results to differ materially from those expressed or implied in the
forward-looking statements. "See Cautionary Statements Concerning
Forward-Looking Statements" on page 26.
THE COMPANIES
Kupper Parker Communications, Incorporated ("KPCI")
8301 Maryland Avenue
St. Louis, Missouri 63105
Attention: Bruce D. Kupper
Telephone number: (314) 290-2000
KPCI is a regional advertising and marketing communications company.
KPCI operates a full service agency which plans and creates advertising
campaigns for clients and places advertising with media, and provides marketing
consultation, market research, branding, public relations and investor
relations, graphic design services, digital interactive design and marketing,
branding, direct response and database marketing, sales promotion services, and
communications management. KPCI's clients are in a broad range of industries and
include business-to-consumer, business-to-business, and business-to-stakeholder
clients. In addition, KPCI provides specialized marketing consultation services
to television and radio stations.
8
<PAGE> 11
Greenstone Roberts Advertising, Inc. ("GRAI")
401 Broad Hollow Road
Melville, New York 11747
Attention: Ronald M. Greenstone
Telephone number: (631) 249-2121
GRAI is a full-service advertising agency located in Melville, Long
Island, New York, which analyzes and provides advertising for its clients, and
plans and creates advertising for dissemination through various media such as
television, radio, newspapers, magazines, the internet and billboards. GRAI 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 SPECIAL STOCKHOLDERS MEETING (PAGE 28)
GRAI will hold a special meeting of its stockholders on September 29,
2000 at 9:00 a.m., New York time, at the offices of GRAI, 401 Broadhollow Road,
Melville, New York. At the special meeting, GRAI will ask its stockholders to
approve the merger proposal, approve an amendment in the GRAI Certificate of
Incorporation, and approve an amendment to GRAI's stock option plan.
THE MERGER PROPOSAL (PAGE 30)
The Board of Directors of GRAI has approved, subject to shareholder
approval, the merger of KPCI into GRAI and the change of the name of GRAI to
Kupper Parker Communications, Incorporated.
Promptly after the Closing at the "Effective Time" as defined in the
Agreement and Plan of Merger ("Merger Agreement"), KPCI would merge with and
into Greenstone. Upon consummation of the Merger, all of the issued and
outstanding shares of KPCI would be converted into 5,073,950 of the outstanding
shares of GRAI.
Upon closing, the Surviving Entity (the "Surviving Entity") will
purchase 300,000 shares of common stock currently owned by the stockholders of
GRAI as of the August 31, 2000 record date for the special meeting of
stockholders (the "Share Buybock Program"). The Share Buyback Program will be in
an amount equal to $1.35 million ($1,350,000). GRAI shareholders deciding to
participate in the Share Buyback program must so indicate on the proxy card for
the GRAI special meeting of stockholders, indicating the number of shares to be
repurchased, and return the proxy card to GRAI prior to the meeting. If the
Share Buyback program is oversubscribed, the offer will be prorated.
ALL EXISTING STOCKHOLDERS OF GRAI ELECTING TO HAVE GRAI PURCHASE THEIR PRO RATA
SHARE OF SUCH SHARE BUYBACK PROGRAM SHOULD INDICATE ACCORDINGLY ON THE PROXY
CARD. THERE WILL BE NO SEPARATE TENDER FORM.
GRAI's stock option plan would be amended (see Annex D hereto) to
increase the number of options that may be granted thereunder to 250,000 and to
9
<PAGE> 12
convert the 34 KPCI options to 185,300 GRAI options with an exercise price of
$1.00 per 5,450 shares.
The Surviving Entity will be responsible for all of the corporate
contracts of both KPCI and GRAI.
The name of the Surviving Entity will be changed to Kupper Parker
Communications, Inc., with its headquarters in St. Louis, Missouri.
CONSIDERATION TO BE RECEIVED IN THE MERGER (PAGE 37)
If the merger is completed, KPCI stockholders will receive 5,450 shares
of GRAI common stock for each share of KPCI common stock that they own. There is
no minimum or floor on the market price of GRAI common stock to be received in
the merger.
RISK FACTORS (PAGE 21)
An investment in GRAI common stock involves a high degree of risk.
There may be additional risks associated with the business of GRAI and KPCI and
with the merger. You should consider the risk factors beginning on page 21 of
this Prospectus/Proxy Statement before voting.
KPCI REASONS FOR THE MERGER (PAGE 31)
KPCI believes that the merger provides many benefits to KPCI and its
stockholders, including:
expected synergies and cost savings including an expected reduction in
administrative overhead, marketing and sales costs. In addition, both
KPCI and GRAI obtain services from some of the same suppliers. The
merger of these two companies is expected to reduce purchasing costs;
KPCI stockholders will receive GRAI common stock that is listed on the
over the counter electronic bulletin board and most stockholders after
a certain waiting period provided in the KPCI ESOP documents will be
able to freely sell the common stock they receive in the merger
provided there is a market;
although there can be no assurances, the expected treatment of the
merger will be as a tax-free exchange of stock;
the anticipated continuation and expansion of KPCI's business by the
combined companies and the expected retention of a significant number
of GRAI's operational employees; and
the reasons expressed in "The Merger -- Joint Reasons for the Merger".
GRAI REASONS FOR THE MERGER (PAGE 32)
GRAI has identified several potential benefits of the merger that it
10
<PAGE> 13
believes will contribute to the success of the Surviving Entity. These potential
benefits include the ability to:
have existing shareholders obtain $4.50 per share for their pro rata
share of 300,000 shares;
provide solutions to a wider segment of the total marketplace;
introduce KPCI's customers and prospects to GRAI's complete solutions
offerings;
avoid time consuming and costly internally developed alternatives;
realize synergies and cost savings; and
the reasons expressed in "the Merger - - Joint Reasons for the Merger."
Additionally, GRAI considered the pro forma contribution of KPCI to its
net income. Based on the pro forma analyses, GRAI believes the merger will be
accretive; however, there can be no assurance that the merger will be accretive
in the near future, if ever. GRAI, for the strategic reasons stated above, has
determined that the merger is in the best interests of GRAI and its stockholders
and GRAI should proceed with the merger.
JOINT REASONS FOR THE MERGER (PAGE 33)
KPCI and GRAI believe that the merger will provide the Surviving Entity
with greater prospects for growth and profitability and the ability to:
compete effectively in the rapidly changing advertising business;
offer a comprehensive range of services and creative solutions for its
customers;
cultivate a more diverse customer base with broader geographic
coverage; and
achieve economies of scale that are currently beyond the independent
capability of the companies separately.
RECOMMENDATION TO GRAI STOCKHOLDERS (PAGE 33).
ITEM 1: APPROVAL OF ISSUANCE OF 5,073,950 SHARES TO KUPPER PARKER
COMMUNICATIONS, INCORPORATED ("KPCI") AND THE MERGER OF KPCI INTO GRAI, WITH (a)
THE REPURCHASE BY GRAI OF 300,000 SHARES OF GRAI FROM EXISTING STOCKHOLDERS AT
$4.50 PER SHARE, (b) THE AMENDMENT OF THE STOCK OPTION PLAN TO INCREASE THE
NUMBER OF OPTIONS THAT MAY BE GRANTED TO 250,000 AND TO CONVERT THE KPCI OPTIONS
INTO 185,300 GRAI OPTIONS, AND (c) THE AMENDMENT TO CERTIFICATE OF INCORPORATION
TO ELIMINATE THE MINIMUM SIZE REQUIREMENT FOR THE OF BOARD OF DIRECTORS.
ITEM 2: OTHER BUSINESS. As of the date of this Prospectus/Proxy Statement, the
only business which GRAI Board of Directors intends to present, and knows that
others will present, at the Special Meeting of Stockholders is set forth herein.
If any other matter or matters are properly brought before the Special Meeting
of Stockholders or any adjournment or postponement thereof, it is the intention
11
<PAGE> 14
of the persons named in the accompanying form of proxy to vote the proxy on such
matters in accordance with their best judgment.
THE BOARD OF DIRECTORS DEEMS ITEM 1 TO BE IN THE BEST INTEREST OF GRAI AND ITS
STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
GRAI's board of directors has determined that the merger is fair to and
in the best interests of its stockholders, has unanimously approved the merger
agreement and the merger, and unanimously recommends that the stockholders vote
in favor of the merger proposal and the other proposals set forth herein.
RECORD DATE; VOTING POWER (PAGE 29)
GRAI stockholders may vote at the special stockholders' meeting only if
they owned shares of common stock of record at the close of business on August
31, 2000.
At the close of business on August 31, 2000, 918,277 shares of GRAI's
common stock were outstanding. Each share of GRAI's common stock will have one
vote at the special stockholders' meeting on the proposal to approve the merger
and the other proposals set forth herein.
VOTES REQUIRED (PAGE 30)
Approval of the merger proposal requires the favorable vote of at least
two-thirds of the outstanding shares of GRAI's common stock cast at the meeting.
Stockholders of approximately 62% of the outstanding shares of GRAI's common
stock have agreed to vote their shares for approval of the merger proposal.
Assuming those shares are voted in favor of the merger proposal at the
stockholders' meeting, the merger will likely be approved. The merger does not
require the approval of a majority of unaffiliated stockholders. The other
proposals set forth herein require the vote of the holders of a majority of the
GRAI shares represented at the meeting.
SHARE OWNERSHIP BY GRAI MANAGEMENT AND THE PRINCIPAL STOCKHOLDERS (PAGE 57)
At the close of business on August 11, 2000, GRAI's directors and
executive officers and their affiliates were entitled to vote 545,000 shares of
its common stock (excluding options to purchase 58,750 shares). These shares and
options represent approximately 58.7% of the outstanding shares of GRAI's common
stock.
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (PAGE 33)
The parties intend the merger to be a reorganization for United States
federal income tax purposes so that KPCI stockholders generally will not
recognize any gain or loss for United States federal income tax purposes on the
exchange of their shares for shares of GRAI common stock in the merger.
Tax matters are very complicated, and the tax consequences of the
merger to each KPCI stockholder will depend on the facts of that stockholder's
12
<PAGE> 15
situation. Each stockholder is urged to consult a tax advisor for a full
understanding of the tax consequences of the merger.
THE MERGER AGREEMENT (PAGE 36)
GRAI has attached the Merger Agreement to this Prospectus/Proxy
Statement as Annex A. KPCI encourages each stockholder to read the Merger
Agreement because it is the legal document that governs the merger.
CONDITIONS TO THE MERGER (PAGE 41)
KPCI and GRAI can complete the merger only if a number of conditions
are satisfied or, as to some conditions, waived including the following:
holders of 2/3 of GRAI's common stock approve the merger proposal;
holders of 2/3 of KPCI's common stock approve the merger proposal;
the representations and warranties of the parties to the Merger
Agreement are materially accurate as of closing;
since the most recent fiscal quarter end, there shall not have been any
material adverse change in the in the business, properties, prospects,
assets, liabilities, condition (financial or otherwise) or results of
operations of KPCI or GRAI, and no event shall have occurred or
circumstance exist that could, individually or in the aggregate,
reasonably be expected to result in such a material adverse change;
since the date of this Agreement, there must not have been commenced or
threatened against KPCI or GRAI, or against any person affiliated with
GRAI, any proceeding (a) involving any challenge to, or seeking damages
or other relief in connection with the merger or the transactions
contemplated in this Agreement, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with the
merger or the transactions contemplated in this Agreement; and
each of Ronald M. Greenstone and Gary C. Roberts shall have received
Employment Agreements in the forms of Annex C hereto, duly executed by
the Surviving Entity.
TERMINATION OF THE MERGER AGREEMENT (PAGE 42)
KPCI and GRAI can jointly agree to terminate the Merger Agreement at
any time without completing the merger. In addition, KPCI or GRAI can terminate
the Merger Agreement if any of the following occurs:
the merger is not completed on or before October 31, 2000 (unless
mutually extended)by reason of the failure of a party to satisfy a
condition precedent under the Merger Agreement unless such failure
results primarily
13
<PAGE> 16
from a breach by that party of a material representation or warranty or
covenant in the Merger Agreement;
GRAI's stockholders fail to approve the merger;
KPCI's stockholders fail to approve the merger; or
the other party breaches any material representation, warranty,
covenant or agreement in any material respect and the breaching party
does not cure the breach within 30 days.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 58)
When you consider the Merger Agreement and the recommendation of GRAI
board of directors that you vote in favor of the merger, you should be aware
that some GRAI officers and directors may have interests in the merger that may
be different from, or in addition to, yours. In particular, Ronald M. Greenstone
and Gary Roberts would have new employment agreements with the Surviving Entity
(see Annex C hereto).
THE RIGHTS OF KPCI STOCKHOLDERS WILL CHANGE (PAGE 65)
The rights of KPCI stockholders are determined by Missouri law and
KPCI's Articles of Incorporation and by-laws. When the merger is completed, the
stockholders' rights as stockholders of the Surviving Entity will be determined
by New York law and by the Surviving Entity's Certificate of Incorporation and
by-laws.
ACCOUNTING TREATMENT (PAGE 35)
The acquisition by GRAI of 100% of the outstanding capital stock of
KPCI will be accounted for as a reverse acquisition under the purchase method of
accounting. As such, for accounting purposes, KPCI is deemed to be the acquirer.
The consideration paid by KPCI is comprised of $1,350,000 in cash and
approximately 10.9% of the assets and operations of KPCI which has a value of
approximately $806,000. On the date the merger is completed, the assets and
liabilities of GRAI will be recorded at fair value and the excess of purchase
price over the fair value of the net assets of GRAI will be recorded as goodwill
and amortized into income over a twenty-year period.
DISSENTERS' RIGHTS OF APPRAISAL (PAGE 35)
GRAI - The current shareholders of GRAI will not have dissenters'
rights of appraisal upon the merger.
KPCI - No holder of KPCI common stock will be entitled to any
dissenters' rights unless the holder has perfected such rights in accordance
with Section 351.455 of the General and Business Corporation Law of Missouri,
which is included in this Prospectus/Proxy Statement as Annex E.
14
<PAGE> 17
COMPARATIVE MARKET DATA (PAGE 20)
GRAI's common stock is traded on the over-the-counter bulletin board
market and is quoted under the symbol GRRI. After the merger, GRAI will obtain a
new symbol to reflect its new name.
The following table sets forth the high and low closing bid quotations
for GRAI's common stock, as reported by Standard & Poors Comstock 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 EACH QUARTER
FOR THE FISCAL YEARS ENDED OCTOBER 31, 1998 AND OCTOBER 31, 1999
AND FOR THE SIX MONTHS ENDING APRIL 30, 2000
<TABLE>
<CAPTION>
2000 1999 1998
------------------ ------------------ ------------------
HIGH LOW HIGH LOW HIGH LOW
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
First Quarter $2.25 $0.88 $1.44 $0.91 $2.88 $1.88
Second Quarter 2.44 1.50 1.00 0.88 2.88 1.75
Third Quarter -- -- 2.75 0.88 2.75 1.25
Fourth Quarter -- -- 2.50 0.88 1.31 .90
</TABLE>
GRAI's common stock was held by approximately 248 stockholders of
record as and 462 beneficial stockholders of August 11, 2000.
GRAI 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.
The following table presents trading information for GRAI common stock
and KPCI common stock on April 24, 2000 and August 11, 2000. April 24, 2000 was
the last full trading day prior to the announcement of the signing of the letter
of intent. August 11, 2000 was the last practicable trading day for which
information was available prior to the date of this Prospectus/Proxy Statement.
For GRAI, the market price, historical, represents the high and low bid
price of a share of GRAI common stock as reported on the OTC Electronic Bulletin
Board as of the dates indicated. For KPCI, as a privately-held company, there
has been no public market price, and the equivalent, represents the exchange
ratio of 5,450 shares of GRAI common stock multiplied by the closing price of
GRAI common stock on the dates indicated. Stockholders should read the
information presented below in conjunction with "Comparative Per Share Data"
beginning on page 20.
15
<PAGE> 18
<TABLE>
<CAPTION>
KPCI KPCI
GRAI (HISTORICAL) (EQUIVALENT)
HIGH LOW CLOSING HIGH LOW HIGH LOW
------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
April 24, 2000 $1.50 $1.50 -- -- -- $ 8,175 $ 8,175
August 11, 2000 $2.28(1) $2.28(2) -- -- -- $12,426 $12,426
</TABLE>
-------------------
(1) no trades - ask price
(2) no trades - bid price
The market prices of shares of GRAI common stock fluctuates. As a result,
KPCI stockholders should obtain current market quotations.
16
<PAGE> 19
SELECTED HISTORICAL FINANCIAL DATA OF KPCI
1 GRAI SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial data
(amounts in thousands except per share data) for GRAI for each of the two years
in the period ended October 31, 1999 and for the six-month periods ended April
30, 2000 and 1999. Such data have been derived from, and should be read in
conjunction with, the audited Consolidated Financial Statements and other
financial information contained in GRAI's Annual Report on Form 10-KSB for the
year ended October 31, 1999, and the unaudited consolidated interim financial
statements contained in GRAI's Quarterly Report on Form 10-QSB for the six
months ended April 30, 2000, including the notes thereto, incorporated by
reference herein. See "AVAILABLE INFORMATION" and "INCORPORATION OF DOCUMENTS BY
REFERENCE." The operating results for the six months ending April 30, 2000 are
not necessarily indicative of the results that may occur for the full fiscal
year or future period.
<TABLE>
<CAPTION>
Year Ended October 31, Six Months Ended April 30,
1999 1998 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $ 3,878 $ 5,652 $ 1,720 $ 2,170
Net (loss) (494) (939) (116) (143)
Basic and diluted income (loss) per share (0.61) (1.26) (0.13) (0.19)
Shares used in computation of basic and
diluted income (loss) per share 813 743 918 743
Dividends per share -- -- -- --
Total assets 7,093 6,849 5,219 5,173
Long-term debt (includes current portion) -- -- -- --
Total liabilities 4,929 4,670 3,172 3,157
Stockholders' equity 2,164 2,159 2,047 2,016
Book value per share 2.36 2.90 2.23 2.71
</TABLE>
17
<PAGE> 20
KPCI SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected historical financial data
(amounts in thousands except per share data) for KPCI for each of the two years
in the period ended October 31, 1999 and for the six-month periods ended April
30, 2000 and 1999. Such data have been derived from, and should be read in
conjunction with, the audited Financial Statements and the unaudited interim
financial statements of KPCI, including the notes thereto, and other financial
information of KPCI contained elsewhere herein. See "KPCI FINANCIAL STATEMENTS."
The operating results for the six months ending April 30, 2000 are not
necessarily indicative of the results that may occur for the full fiscal year or
future period.
<TABLE>
<CAPTION>
Year Ended October 31, Six Months Ended April 30,
------------------------- ------------------------
1999 1998 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ 10,847 $ 8,860 $ 6,051 $ 5,248
Net income (loss) (59) (100) 11 94
Basic income (loss) per share (80.68) (186.85) 12.62 126.75
Shares used in computation of basic income
(loss) per share 734 533 852 745
Diluted income (loss) per share (80.68) (186.85) 12.13 121.22
Shares used in computation of diluted income
(loss) per share 734 533 886 779
Dividends per share -- -- -- --
Total assets 9,496 6,810 8,149 9,556
Long-term debt (includes current portion) 509 784 364 684
Total liabilities 8,682 6,214 6,692 8,834
Stockholders' equity 814 596 1,457 722
Book value per share 913.45 638.53 1,533.47 810.11
</TABLE>
18
<PAGE> 21
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table (amounts in thousands except per share data) sets
forth certain Selected Unaudited Pro Forma Combined Financial Data giving effect
to the merger using the purchase method of accounting. For a description of the
purchase method of accounting with respect to the merger, see "THE MERGER --
Accounting Treatment."
The historical financial statements of GRAI are incorporated by
reference into this Prospectus/Proxy Statement. The historical financial
statements of KPCI are included elsewhere in this Prospectus/Proxy Statement.
This information should be read in conjunction with such financial statements
and in conjunction with the Unaudited Pro Forma Combined Financial Information,
including the notes thereto, appearing elsewhere in this Prospectus/Proxy
Statement. See "INCORPORATION OF DOCUMENTS BY REFERENCE," "KPCI FINANCIAL
STATEMENTS" and "UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION."
KPCI expects to achieve operating cost savings post-Merger primarily
through reductions in staff and the consolidation of certain corporate
administrative and operations functions in both companies. The operating cost
savings are expected to be achieved in various amounts at various times during
the years subsequent to the consummation of the Merger and not ratably over or
at the beginning or end of such periods. No adjustment has been reflected in the
Unaudited Pro Forma Combined Statements of Operations for the anticipated cost
savings.
The Selected Unaudited Pro Forma Combined Financial Data included
herein are not necessarily indicative of the results of future operations of the
combined entity or the actual results that would have been achieved had the
Merger been consummated prior to the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED APRIL
OCTOBER 31,1999 30, 2000
-------- --------
<S> <C> <C>
Revenues $ 14,725 $ 7,770
Net income (loss) (520) (109)
Basic and diluted income (loss) per share (0.09) (0.02)
Shares used in computation of basic and diluted income (loss)
per share 5,587 5,692
Dividends per share -- --
Total assets 15,388 12,286
Long-term debt (includes current portion 509 364
Total liabilities 13,768 10,022
Stockholders' equity 1,620 2,264
Book value per share 0.28 .40
</TABLE>
19
<PAGE> 22
COMPARATIVE PER SHARE DATA OF GRAI AND KPCI
The following table presents selected comparative per share data for
GRAI and KPCI on a historical and unaudited pro forma combined and pro forma
equivalent basis giving effect to the merger using the purchase method of
accounting. For a description of the purchase method of accounting with respect
to the merger and the related effects on the historical financial statements of
GRAI, see "THE MERGER -- Accounting Treatment." The information is derived from
the historical financial statements of GRAI and KPCI and the Unaudited Pro Forma
Combined Financial Information. The financial statements of GRAI are
incorporated by reference into this Prospectus/Proxy Statement. The financial
statements of KPCI and the Unaudited Pro Forma Combined Financial Information
appears elsewhere herein. This information should be read in conjunction with
such historical and pro forma financial statements and the related notes
thereto. See "AVAILABLE INFORMATION," "INCORPORATION OF DOCUMENTS BY REFERENCE,"
"KPCI FINANCIAL STATEMENTS" and "UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION."
<TABLE>
<CAPTION>
GRAI KPCI
------------------------------- -------------------------------
Pro Forma Pro Forma
Combined (1) Combined (2)
Historical (unaudited) Historical (Unaudited)
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Book Value Per Common Share:
At October 31, 1999 $ 2.36 $ 0.28 $ 913.45 $1,526.00
At April 30, 2000 2.23 0.40 1,533.47 2,180.00
Diluted Net Income (Loss) Per Share:
Year Ended October 31, 1999 (0.61) (0.09) (80.68) (490.05)
Six Months Ended April 30, 2000 (0.13) (0.02) 12.13 (109.00)
Cash Dividends Declared Per Common Share:
Year Ended October 31, 1999 -- -- -- --
Six Months Ended April 30, 2000 -- -- -- --
</TABLE>
NOTES TO COMPARATIVE PER SHARE DATA
1. The Pro Forma Combined Book Value per Common Share, Diluted Net Income (Loss)
per Common Share, and Cash Dividends Declared per Common Share represent the pro
forma combined common stockholders' equity, Net Income From Continuing
Operations, and Cash Dividends Declared for GRAI and KPCI divided by total pro
forma common shares of the combined entity, assuming an Exchange Ratio of 5,450.
2. The Pro Forma equivalent Book Value per Common Share, Net Income From
Continuing Operations per Common Share, and Cash Dividends Declared Per Common
Shares of KPCI are computed by multiplying the Pro Forma Combined per share
amounts discussed in Note 1 above, by the Exchange Ratio of 5,450.
20
<PAGE> 23
RISK FACTORS
The following risk factors, in addition to the other information
contained in this Prospectus/Proxy Statement, should be considered carefully by
the stockholders of GRAI in determining whether to vote in favor of the merger
proposal. KPCI's stockholders should be aware that ownership of GRAI common
stock involves risks, including those described below, which could adversely
affect the value of their common stock in the Surviving Entity. The risks
described below are not the only risks facing GRAI, KPCI or the Surviving
Entity.
RISKS ASSOCIATED WITH THE MERGER
VALUE OF GRAI COMMON STOCK TO BE RECEIVED IN THE MERGER MAY DECLINE
SIGNIFICANTLY
The number of shares of GRAI common stock that KPCI stockholders will
receive upon closing of the merger is fixed as of August 23, 2000, the date of
the execution of the Merger Agreement. The market price of GRAI common stock may
decline significantly during the period between the special stockholders meeting
and the actual day the merger occurs. There is no minimum or floor on the market
price of GRAI common stock to be received in the merger. There can be no
assurances as to the market value of GRAI common stock at the time of the
merger, and after the merger.
INTEGRATING THE BUSINESS OF GRAI AND KPCI WILL BE COMPLEX, TIME-CONSUMING AND
EXPENSIVE, AND THE SURVIVING ENTITY MAY NOT SUCCESSFULLY INTEGRATE THE
BUSINESSES, WHICH WOULD HARM THE OPERATIONS OF THE COMBINED GRAI/KPCI
Integrating GRAI and KPCI will be a complex, time-consuming and
expensive process. Before the merger, GRAI and KPCI each operated independently,
each with its own business, culture, clients, employees and systems. After the
merger, the companies must operate as a combined organization, utilizing common
information and communication systems, operating procedures, financial controls
and human resource practices, including benefit, training and professional
development programs. There may be substantial difficulties, costs and delays
involved in this type of integration. These include:
diversion of management resources from the business of the Surviving
Entity;
potential incompatibility of business cultures;
perceived adverse changes in client service standards, business focus,
billing practices, or service offerings available to clients;
perceived uncertainty in career opportunities, benefits and the
long-term value of stock options available to employees;
costs and delays in implementing common systems and procedures;
potential inefficiencies in delivering services to the clients of the
Surviving Entity; and
21
<PAGE> 24
merger related costs to be expensed in the quarter in which the merger
is consummated.
Any one or all of these factors may cause increased operating costs,
lower than anticipated financial performance or the loss of customers and
employees. Some of these factors are outside the control of the Surviving
Entity.
THE ISSUANCE OF SHARES OF GRAI COMMON STOCK IN THE MERGER MAY HAVE A DILUTIVE
EFFECT ON THE SURVIVING ENTITY'S RESULTS.
The issuance of shares of GRAI common stock in this merger may have a
dilutive effect on Surviving Entity's earnings per share. The pro forma
financial statements reflect that the merger would have caused a "dilution"
(reduction) in KPCI's earnings per share. This dilution is reflected in the pro
forma financial statements and can be seen in the table under "Comparative Per
Share Data" on page 20 by comparing the section captioned "KPCI Historical per
Common Share Data" with the section captioned "KPCI Pro Forma Combined per
Common Share Data."
RISKS OF KPCI BUSINESS
THERE CAN BE NO ASSURANCE THAT KPCI WILL BE ABLE TO MAINTAIN ITS HISTORICAL RATE
OF GROWTH OF REVENUES.
KPCI does not have long-term contracts with any of its clients. Its
clients generally hire KPCI for one assignment at a time. Once an assignment is
completed there can be no assurance that a client will engage KPCI for further
services. As a result, a client that generates substantial revenue for KPCI in
one period may not be a substantial source of revenue in a subsequent period. In
addition, its clients generally have the right to terminate their relationships
with KPCI without penalty and with relatively short or no notice.
KPCI's operating results have fluctuated in the past, and may continue
to fluctuate in the future, as a result of a variety of factors, many of which
are outside of its control, including:
- timing of new projects;
- reductions, cancellations or completions of major projects;
- the loss of significant clients;
- the opening or closing of an office;
- its relative mix of business;
- changes in pricing by KPCI or its competitors;
- employee utilization rates;
22
<PAGE> 25
- changes in personnel;
- costs related to expansion of its business;
- increased competition; and
- marketing budget decisions by its clients.
As a result of these fluctuations, KPCI believes that period-to-period
comparisons of its operating results cannot be relied upon as indicators of
future performance. In some quarters after the merger its operating results may
fall below the expectations of securities analysts and investors due to any of
the factors described above. In such event, the trading price of the common
stock of the Surviving Entity would likely decline.
Continued growth of its business will place increased demands on KPCI's
systems and resources and may impact its operating results.
The expansion of KPCI's business and customer base has placed increased
demands on its management, operating systems, internal controls and financial
and physical resources. Its continued growth, if any, may strain existing
management and human resources in particular, affecting its ability to attract
and retain talented personnel. Consequently, the Surviving Entity may be
required to increase expenditures to hire new employees, open new offices and
invest in new equipment or make other capital expenditures. Any failure to
expand any of the foregoing areas in an efficient manner could adversely affect
its business. There also can be no assurance that the Surviving Entity will be
able to sustain the rates of growth that KPCI have experienced in the past.
KPCI DEPENDS ON ITS KEY MANAGEMENT PERSONNEL FOR ITS FUTURE SUCCESS.
KPCI relies on its key management personnel, including Bruce Kupper,
its Chief Executive Officer, and Mary De Hahn, its Chief Operating Officer. KPCI
believes that the Surviving Entity's future success will depend upon its ability
to attract and retain additional highly skilled personnel. If any of its
officers or key employees leaves the Surviving Entity, the relationships that
they have with KPCI's clients could be lost. In addition, the Surviving Entity's
ability to generate revenues directly relates to its personnel, both in terms of
the number and expertise of the personnel the Surviving Entity has available to
work on its projects and the mix of full time employees, temporary employees and
contract service providers the Surviving Entity utilizes. Much of the Surviving
Entity potential growth is likely to be in the area of digital interactive
marketing. The competition for employees at all levels in their area is intense
and is increasing. As a result, if KPCI fails to retain existing employees or
hire new employees when necessary, its business, financial condition and
operating results could be materially and adversely affected.
23
<PAGE> 26
CONFLICTS OF INTEREST AND EXCLUSIVITY ARRANGEMENTS WITH KPCI'S CLIENTS MAY LIMIT
ITS ABILITY TO PROVIDE SERVICES TO OTHERS.
Conflicts of interest between clients and potential clients are
inherent in the marketing communications industry. Moreover, as is customary in
the marketing communications industry, KPCI has entered into exclusivity
arrangements with certain of its clients that restrict its ability to provide
services to their competitors. KPCI has in the past been, and may in the future
be, unable to take on new clients because such opportunities would require KPCI
to provide services to direct competitors of its existing clients. In addition,
KPCI risks harming relationships with existing clients when KPCI agrees to
provide services to indirect competitors of existing clients. Prospective
clients may choose also not to retain KPCI for reasons of actual or perceived
conflicts of interest.
CHANGES IN GOVERNMENT REGULATION COULD ADVERSELY AFFECT KPCI's BUSINESS.
The marketing communications industry is subject to extensive
government regulation, both domestic and foreign, with respect to the truth in
and fairness of advertising. KPCI must comply with Federal Trade Commission
regulations governing the marketing of products and services and similar state
regulations. In addition, there has been an increasing tendency in the United
States on the part of businesses to resort to the judicial system to challenge
comparative advertising of their competitors on the grounds that the advertising
is false and deceptive. There can be no assurance that KPCI will not be subject
to claims against KPCI or its clients by other companies or governmental
agencies or that any such claims, regardless of merit, would not have a material
adverse effect on its future operating performance.
KPCI MAY BE LIABLE TO ITS CLIENTS FOR DAMAGES.
Many of KPCI's engagements involve the development, implementation and
maintenance of marketing programs that are critical to its clients' businesses.
KPCI's failure or inability to meet a client's expectations in the performance
of services could injure its business reputation or result in a claim for
substantial damages against KPCI regardless of its responsibility for such
failure. In addition, the marketing programs KPCI provides for its clients may
include confidential or proprietary client information. Although KPCI has
implemented policies to prevent such client information from being disclosed to
unauthorized parties or used inappropriately, any such unauthorized disclosure
or use could result in a claim against KPCI for substantial damages. Its
contractual provisions attempting to limit such damages may not be enforceable
in all instances or may otherwise fail to protect KPCI from liability for
damages, which could adversely affect its future operating performance.
RISKS OF GRAI BUSINESS
THE SURVIVING ENTITY FACES AGGRESSIVE COMPETITION AND RAPID TECHNOLOGICAL CHANGE
IN THE ADVERTISING MARKETPLACE
24
<PAGE> 27
GRAI operates in an industry characterized by aggressive competition,
and rapid technological change. GRAI competes against many companies that
utilize similar technologies some of which are larger and have substantially
greater resources and expertise in financial, technical and marketing areas.
Failure by the Surviving Entity to respond to changing technologies, customer
needs and industry standards could have material adverse consequences to its
business and results of operations. Future operating results of the Surviving
Entity will depend on its ability to:
design, develop, introduce, deliver or obtain new and innovative
services on a timely and cost-effective basis;
mitigate the effects of competitive pressures and volatility in the
advertising services and its market on revenues, pricing and margins;
effectively manage the shift of its business mix; and
attract and retain highly skilled personnel.
FAILURE BY THE SURVIVING ENTITY TO MANAGE GROWTH EFFECTIVELY COULD ADVERSELY
AFFECT ITS BUSINESS
Current expansion plans of the Surviving Entity may place a significant
strain on its personnel and management resources and financial and management
control systems. Personnel, management resources and the Surviving Entity
management and financial control systems may not be adequate to address future
expansion of its business and operations. Failure by the Surviving Entity to
maintain adequate personnel and management resources or to upgrade its
operating, management and financial control systems or any difficulties
encountered during such upgrades could adversely affect its business. The
success of the Surviving Entity's expansion plans will depend in part on its
ability to expand personnel and management resources and to improve its
management and financial control systems. The Surviving Entity may not be
successful in any of these regards.
THE SURVIVING ENTITY'S ACQUISITION STRATEGY MAY ADVERSELY AFFECT ITS FINANCIAL
CONDITION AND PERFORMANCE
KPCI continues to look for opportunities to acquire businesses. To that
end, KPCI has had, and continues to have, discussions with acquisition
candidates. The level of this activity will vary from time to time depending on
the type of acquisition candidates KPCI identifies.
Acquiring additional businesses may require additional capital and may have
a significant impact on the financial position and results of operations of the
Surviving Entity. Acquisitions made with stock of the Surviving Entity could
dilute existing stockholders. There can be no assurance that it will be
successful in identifying acceptable acquisition candidates or that any acquired
operations will be profitable or will be successfully integrated or that any
such future acquisitions will not materially and adversely affect its business,
financial condition and results of operations.
25
<PAGE> 28
The ability of the Surviving Entity to accomplish its strategy will
depend upon a number of factors including, among other things, its ability to
identify acceptable acquisition candidates, to acquire the necessary funds for
such acquisitions, to consummate such acquisitions on terms favorable to it and
to promptly and profitably integrate the acquired operations into its
operations.
Opportunities for growth through acquisitions, future operating results
and the success of acquisitions may be subject to the effects of, and changes
in, United States and foreign trade and monetary policies, laws and regulations,
political and economic developments, inflation rates, and the effect of taxes
and operating conditions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
GRAI STOCK PRICE HAS BEEN VOLATILE
GRAI cannot assure stockholders of the prices at which its common stock
will trade. The market prices for securities of companies such as GRAI
historically have been highly volatile. From August 12, 1999 to August 11, 2000,
the market price of GRAI common stock has ranged from a high of $3.00 per share,
to a low of $0.875 per share. The following factors may have a significant
impact on the market price of the common stock:
announcements of new commercial services by GRAI or its competitors:
client development; and
economic and other external factors, as well as period-to-period
fluctuations in financial results.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements include information concerning
possible or assumed future results of operations and other statements and
information regarding assumptions about earnings per share, capital and other
expenditures, financing plans, cash flow, capital structure, pending legal
proceedings and claims, future economic performance, operating income,
management's plans, goals and objectives for future operations and growth and
markets for GRAI stock and KPCI stock.
Forward-looking statements are also identified by words such as
"believes," "expects," "anticipates," "intends," "estimates" or similar
expressions. KPCI stockholders should understand that these forward looking
statements are necessarily estimates based on assumptions believed to be
reasonable. These statements are subject to a number of risks and uncertainties
that could cause actual results to differ materially from those expressed or
implied in the forward-looking statements.
GRAI and KPCI stockholders should understand that the risks and
uncertainties including, but not limited to, the following important factors, in
addition to those discussed above in "Risk Factors" and elsewhere in this
26
<PAGE> 29
document and in the documents which are incorporated by reference, could affect
the future results of KPCI and GRAI and the combined companies, and could cause
those results or other outcomes to differ materially from those expressed or
implied in its forward-looking statements:
ECONOMIC AND INDUSTRY CONDITIONS
materially adverse changes in economic and industry conditions and
customer demand generally or in the markets served by GRAI and KPCI;
supply and demand for and pricing of services; and
changes in demographics and consumer preferences and demands for KPCI
and GRAI services.
OPERATING FACTORS
supplier disruptions;
the timing of and value received in connection with acquisitions or
divestitures;
changes in operating conditions and costs; and
risks relating to performance of contracts, including dependence on
performance of third parties.
TRANSACTION FACTORS
the risk that the companies may not fully realize the benefits expected
to result from the merger.
COMPETITIVE FACTORS
the actions of competitors;
new technologies; and
industry consolidation.
Accordingly, GRAI and KPCI stockholders should not place undue reliance
on forward-looking statements, which speak only as of the date of this proxy
statement/prospectus, or, in the case of documents incorporated by reference,
the date of those documents. There can be no assurance that any of the
forward-looking statements will prove accurate.
All subsequent written and oral forward-looking statements attributable
to KPCI or GRAI or any person acting on their behalf are expressly qualified in
their entirety by the cautionary statements contained or referred to in this
section. Neither KPCI nor GRAI undertakes any obligation to release publicly any
revisions to these forward-looking statements to reflect events or circumstances
after the date of this Prospectus/Proxy Statement or to reflect the occurrence
of unanticipated events.
27
<PAGE> 30
THE SPECIAL STOCKHOLDERS MEETING
The accompanying proxy is solicited by the Board of Directors of GRAI
on behalf of GRAI for use at the Special Meeting of Stockholders to be held at
401 Broadhollow Road, Melville, New York 11747, on September 29, 2000 at 9:00
a.m., New York time, and any adjournments or postponements thereof, at which
stockholders of record on August 31, 2000 will be entitled to vote. On August
31, 2000, GRAI had outstanding 918,277 shares of Common Stock, par value $.01
per share (the "Common Stock"). The Common Stock is the only outstanding class
of voting securities of GRAI. Each shareholder will be entitled to one vote for
each share of Common Stock held.
The costs of soliciting proxies will be borne by GRAI. Such costs will
include charges by brokers and other custodians, nominees and fiduciaries for
forwarding proxies and proxy material to beneficial owners of shares.
Solicitation may be made by mail, personally, by telephone or telegraph, by
officers, directors and regular employees of GRAI; such persons will not be
separately compensated for such solicitation.
The shares represented by an executed form of the accompanying proxy
will be voted as directed with respect to the proposed items or, if no direction
is indicated, will be voted in favor of the proposed items. Each proxy executed
and returned by a shareholder may be revoked at any time thereafter except as to
any matter or matters upon which, prior to such revocation, a vote shall have
been cast pursuant to the authority conferred by such proxy. Subject to the
foregoing, a shareholder may revoke his proxy by executing another proxy at a
later date, by notifying the Secretary of GRAI in writing of his revocation or
by attending and voting at the Special Meeting.
With respect to each proposal that comes before the stockholders at the
Special Meeting, stockholders may vote For the proposal, vote Against the
proposal or Abstain from voting with respect to the proposal. Assuming a quorum
is present, (i) the affirmative vote of the stockholders of two-thirds (2/3) of
all of the outstanding shares of Common Stock entitled to vote will be required
to act with respect to the merger of KPCI into GRAI and (ii) the affirmative
vote of a majority of the votes cast by the stockholders of the shares of Common
Stock entitled to vote will be required to act on all other proposals that come
before the Special Meeting. Abstentions and broker non-votes (when a nominee
holding shares for a beneficial owner has not received voting instructions from
the beneficial owner with respect to a particular matter and such nominee does
not possess or choose to exercise discretionary authority with respect thereto)
will be included in the determination of the number of shares of Common Stock
present at the meeting for quorum purposes. However, abstentions and broker
non-votes will not be included in the tabulations of votes cast on proposals
presented to stockholders.
PROPOSED TIME AND PLACE
This Prospectus/Proxy Statement is being provided to stockholders of
GRAI in connection with the solicitation of proxies by GRAI's Board of Directors
for use at GRAI's special meeting of stockholders, and at any adjournment or
postponement thereof.
28
<PAGE> 31
The special meeting of stockholders of GRAI is to be held at the
offices of GRAI, 401 Broadhollow Road, Melville, New York time at 9:00 a.m., on
September 29, 2000.
At the meeting, stockholders of GRAI common stock will be asked to
consider and vote upon the proposal to approve the merger and approve an
amendment to the certificate of incorporation relating to the number of
directors and name change and approve an amendment to GRAI's stock option plan
as described herein. GRAI is not aware of any other matters that may come before
the special meeting. However, GRAI stockholders may be asked to consider and
vote upon any other matters incidental to the business to be conducted at the
meeting.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Only stockholders of record of GRAI common stock at the close of
business on August 31, 2000, the record date for the special meeting, are
entitled to receive notice of and to vote at the meeting. This Prospectus/Proxy
Statement is first being mailed to stockholders on September 8, 2000. At the
close of business on the record date, August 31, 2000, 918,277 shares
of GRAI common stock were issued and outstanding and entitled to vote at the
meeting. Each share of common stock is entitled to one vote at the meeting.
The presence at the meeting in person or by proxy of a majority of the
shares of GRAI common stock entitled to vote at the meeting is necessary to
constitute a quorum for the purpose of transacting business at the meeting.
Abstentions and broker non-votes are considered as present for the purpose of
establishing a quorum. If a quorum is not present at the meeting, GRAI expects
that the meeting will be adjourned or postponed to solicit additional proxies.
VOTING; PROXIES
The approval of the merger proposal requires the affirmative vote of at
least two-thirds of the outstanding shares of GRAI common stock cast at the
meeting and the approval of all other proposals require the affirmative vote of
a majority of the votes cast. Abstentions and broker non-votes are not counted
in tabulating the number of votes cast with respect to the proposal to approve
the merger and the other proposals.
GRAI stockholders may vote by attending the meeting and voting their
shares in person or by completing the enclosed proxy card. Shares represented by
properly executed proxies received before the meeting will be voted at the
meeting in accordance with the instructions given. If the proxy is properly
executed but does not contain voting instructions, the shares represented by
that proxy will be voted FOR approval of the merger proposal. It is not expected
that any matter other than the proposal to approve the merger and amendment to
the certificate of incorporation will be brought before the stockholders at the
meeting. If any matters incidental to the merger are properly presented at the
meeting for consideration by the stockholders, the persons named in your proxy
will have authority to vote on those matters without consulting you.
If shares are held by a broker or nominee, that is, in street name,
unless those brokers or nominees receive instructions from GRAI stockholders as
to
29
<PAGE> 32
how to vote their shares, those shares will not be voted at the meeting.
REVOKING PROXIES
GRAI stockholders may revoke their proxy at any time prior to the time
it is voted at the meeting by:
Delivering by mail, prior to the date of the meeting, to GRAI, 401
Broadhollow Road, Melville, New York 11747, Attention: Ronald M.
Greenstone, written notice of revocation bearing a later date than the
proxy;
Delivering to Mr. Greenstone a duly executed proxy bearing a later date
than the revoked proxy; or
Attending the meeting and voting in person in accordance with the
voting procedures established for the meeting. Attendance at the
meeting will not in and of itself constitute a revocation of a proxy.
SOLICITATION OF PROXIES
GRAI's Board of Directors is soliciting the enclosed proxy. GRAI will
bear the costs of the solicitation. Arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of GRAI common stock held of
record by those persons and GRAI will reimburse those custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses. In addition to
solicitation by mail, the directors, officers and employees of GRAI may solicit
proxies from stockholders by telephone, telegram or in person. They will not
receive any additional compensation for their solicitation activities.
VOTES REQUIRED; SHARE OWNERSHIP BY MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The approval of the merger proposal requires the affirmative vote of at
least two-thirds of the outstanding shares of GRAI common stock cast at the
meeting. All other proposals require a majority vote of the attending
stockholders.
As of the close of business on August 11, 2000, the directors of GRAI,
and the principal stockholders of GRAI owned and were entitled to vote 545,000
shares of GRAI common stock (excluding 58,750 options). These shares represent
approximately 58.7% of the outstanding shares of common stock entitled to vote
at the special meeting.
THE MERGER
BACKGROUND OF THE MERGER
In March 2000, a representative of KPCI approached management of GRAI
regarding the possibility of pursuing a business combination. Further
discussions ensued during the month of March. During this time, members of the
GRAI Board Directors were apprised by GRAI management of the discussions
30
<PAGE> 33
concerning a possible business combination. Management of GRAI and KPCI executed
a customary nondisclosure agreement on March 24, 2000.
On April 10, 2000 representatives of GRAI met with KPCI's officers to
negotiate further the terms of the proposed transaction, including the form of
the Merger Agreement. After extensive negotiation, in return for the acceptance
by GRAI of KPCI's requests to modify the terms of the merger a proposal, KPCI
agreed to accept an offer of 5,450 shares of GRAI common stock in return for
each share of KPCI common stock, with GRAI's repurchase of 300,000 existing GRAI
shares at $4.50 per share.
On April 18, 2000, GRAI's Board of Directors met at its regularly
scheduled meeting to consider the possibility of a merger with KPCI, as well as
other strategic alternatives. After presentation from management, the Board
advised GRAI's Chairman/CEO that he should continue negotiations with KPCI.
On April 25, 2000 a Letter of Intent was signed by both parties after
extensive negotiations. A news release to the general public immediately
followed to announce this event.
KPCI's Board of Directors considered the terms of the proposed merger.
Management advised the Board that no other solicitations of interest were
pending or expected. KPCI's Board of Directors approved the consideration
offered by GRAI for the merger and authorized KPCI's President to continue to
negotiate the merger documents. At this time, GRAI common stock was trading on
the over the counter electronic bulletin board for approximately $2.125 per
share and KPCI's common stock was not publicly traded.
Negotiations of the proposed merger documents continued. GRAI's Board
of Directors approved the merger on June 8, 2000 and the Merger Agreement was
executed by the parties as of August 23, 2000.
KPCI REASONS FOR THE MERGER
The KPCI board of directors has identified several potential benefits
of the merger that it believes will contribute to the success of the Surviving
Entity. These potential benefits include the following:
KPCI stockholders receiving GRAI common stock that is listed on the
over the counter electronic bulletin board and most stockholders, after
a certain waiting period provided in the KPCI ESOP documents, being
able to freely sell the common stock they receive in the merger;
providing solutions to a wider segment of the total marketplace;
introducing GRAI's customers and prospects to the complete service
offerings of KPCI;
avoiding time consuming and costly internally developed alternatives;
and
achieving synergies and cost savings.
Additionally, the KPCI board considered the pro forma contribution of
GRAI to its net income. Based on the pro forma analyses, KPCI believes
31
<PAGE> 34
the merger will be accretive; however, there can be no assurance that the merger
will be accretive in the near future.
GRAI REASONS FOR THE MERGER
GRAI's Board of Directors believes that the merger is fair to, and in
the best interests of, GRAI and its stockholders. In reaching this
determination, the Board considered a number of factors, including, without
limitation:
expected synergies and cost savings including an expected reduction in
administrative overhead, marketing and sales costs. In addition, both
KPCI and GRAI obtain services from some of the same suppliers. The
merger of these two companies is expected to reduce purchasing costs;
a review of strategic alternatives;
the anticipated continuation and expansion of GRAI's business by KPCI
and the expected retention of a significant number of GRAI's
operational employees; and
the reasons expressed in "The Merger -- Joint Reasons for the Merger".
GRAI's Board also considered negative factors relating to the merger,
including:
the possibility of a significant decrease in the market value of GRAI
common stock prior to and after the completion of the merger; and
the risk that the merger would not be completed and the effect of a
public announcement of the merger on GRAI's sales and operating
results.
GRAI Board concluded that these negative factors were substantially
outweighed by the potential benefits to be gained by the merger.
In view of the wide variety of factors considered by GRAI Board, the
Board did not find it practicable to quantify, rank or otherwise assign relative
weights to the specific factors considered. In addition, the Board did not
undertake to make any specific determination as to whether any particular
factor, or any aspect of any particular factor, was favorable or unfavorable to
the Board's ultimate determination, but rather the Board conducted an overall
analysis of the factors described above. In considering the factors described
above, individual members of the Board may have given different weight to
different factors.
After taking into account all of the factors set forth above, GRAI
Board unanimously determined that the Merger Agreement and merger were in the
best interests of GRAI and its stockholders and that KPCI should proceed with
the merger and the transactions contemplated by the Merger Agreement.
When GRAI stockholders consider the Merger Agreement and the
recommendation of GRAI's board to vote in favor of the merger, the stockholders
should be aware that a number of GRAI's officers and directors may have
interests in the merger that may be different from, or in addition to,
32
<PAGE> 35
its stockholders interests. See "Interests of Certain Persons in the Merger".
RECOMMENDATION TO GRAI STOCKHOLDERS
GRAI's Board of Directors unanimously recommends that GRAI's
stockholders vote FOR the merger proposal.
NO OPINION OF FINANCIAL ADVISOR
GRAI's Board of Directors did not engage the assistance of a financial
advisor to assist in the sale of GRAI or render an opinion as to the fairness,
from a financial point of view, of the exchange ratio in the merger. The Board
determined that the factors which weighed in favor of the merger, as discussed
above, were substantial in relation to the factors which weighed against the
merger. The Board also considered the cost of obtaining a fairness opinion as
prohibitively expensive in light of GRAI's financial condition.
JOINT REASONS FOR THE MERGER
KPCI and GRAI believe that the merger will provide two companies on a
combined basis with greater prospects for growth and profitability to:
compete effectively in the rapidly growing and changing advertising
business;
offer a comprehensive range of services for their customers;
cultivate a more diverse customer base with broader geographic
coverage; and
achieve economies of scale that are currently beyond the independent
capability of the companies separately.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material federal income tax consequences
of the merger is provided for general information purposes only and does not
constitute, and is not intended to constitute, and should not be considered as,
legal or tax advice to stockholders. This summary is not a comprehensive
description of all of the tax consequences that may be relevant to you. For
example, this summary does not describe tax consequences that arise from rules
that apply generally to all taxpayers or to some classes of taxpayers. This
summary does not discuss tax consequences under the laws of states or local
governments or of any other jurisdiction. This summary is based upon the
Internal Revenue Code, the regulations of the U.S. Treasury Department,
published positions of the Internal Revenue Service, and court and
administrative rulings and decisions in effect on the date of this
prospectus/proxy statement. These laws may change, possibly retroactively, and
any change could affect the continuing validity of this summary. This summary is
provided for general information purposes only, and does not constitute, and
should not be considered as, legal or tax advice. Each holder of GRAI and KPCI
stock is urged to obtain, and should rely only upon, his or her own tax
33
<PAGE> 36
advice.
KPCI has received a tax opinion from Armstrong Teasdale LLP, tax
counsel to KPCI, to the effect that, for federal income tax purposes, the merger
will constitute a "reorganization" within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder, and that the federal income tax consequences of the merger to KPCI
stockholders, KPCI and GRAI will be as follows:
No gain or loss will be recognized by KPCI or GRAI as a result of the
merger;
No gain or loss will be recognized by the stockholders of KPCI who
exchange their KPCI common stock solely for GRAI common stock;
The aggregate tax basis of GRAI common stock received by a KPCI
stockholder who exchanges all of his or her KPCI common stock for GRAI
common stock in the merger will be the same as the aggregate tax basis
of his or her KPCI common stock surrendered in the exchange; and
The holding period of GRAI common stock received by a KPCI stockholder
will include the holding period of shares of KPCI common stock
surrendered by the KPCI stockholder in the exchange; provided that the
shares of KPCI common stock were held as capital asset at the time of
the merger.
The parties are not requesting a ruling from the Internal Revenue
Service in connection with the merger. An opinion of counsel only represents
counsel's best judgment and neither binds the Internal Revenue Service nor the
courts nor precludes the Internal Revenue Service from adopting a contrary
position. In addition, the tax opinion is subject to certain assumptions and
qualifications and is based upon representations made by GRAI and KPCI and
assumes that the representations made by GRAI and KPCI are true, correct and
complete and will remain true, correct and complete through and after the
effective time of the merger. For example, of particular importance are those
assumptions and representations relating to the "continuity of interest" and
"continuity of business enterprise" requirements.
To satisfy the "continuity of interest" requirement, KPCI's
stockholders must not, pursuant to a plan or intent existing at or prior to the
merger, sell or otherwise transfer to GRAI or a party related to GRAI so much of
either their KPCI common stock prior to the merger or their shares of GRAI
common stock to be received in the merger, such that the KPCI stockholders, as a
group, would no longer have a substantial proprietary interest in the KPCI
business being conducted by GRAI after the merger. This includes, among other
things, shares sold to GRAI before the merger. KPCI's stockholders will
generally be regarded as having retained a substantial proprietary interest as
long as the shares of GRAI common stock received in the merger, after reduction
for any dispositions described above, in the aggregate, represent at least 50%
of the entire consideration received by the KPCI stockholders in the merger and
in sales to GRAI in advance of the merger. To satisfy the "continuity of
business enterprise" requirement, GRAI must continue the historic business
conducted by KPCI or use a significant portion of the historic business assets
of KPCI in a business.
34
<PAGE> 37
A successful Internal Revenue Service challenge to the "reorganization"
status of the merger would result in a KPCI stockholder recognizing gain or loss
with respect to each share of KPCI common stock surrendered equal to the
difference between the stockholder's basis in the share and the fair market
value, as of the effective time of the merger, of the shares of GRAI common
stock received in exchange therefor. In that event, a stockholder's aggregate
basis in the shares of GRAI common stock received would equal their fair market
value and the holding period of those shares would begin the day after the
merger.
This summary also assumes that stockholders hold their shares of KPCI
common stock as a capital asset and does not address the tax consequences that
may be relevant to a particular stockholder receiving special treatment under
some federal income tax laws. Stockholders receiving this special treatment
include: banks and other financial institutions; tax-exempt organizations;
insurance companies; investment companies and real estate and financial asset
securitization investment trusts; dealers in securities or foreign currencies;
KPCI stockholders who received their KPCI common stock through the exercise of
employee stock options or otherwise as compensation; KPCI stockholders who are
not U.S. persons; and KPCI stockholders who hold common stock as part of a
hedge, straddle or conversion transaction.
As to the Surviving Entity's repurchase of 300,000 shares from existing
GRAI stockholders, the electing shareholder could have a taxable gain (or loss)
representing the difference between such consideration received for such shares
and his or her adjusted tax basis in such shares. Such gain (or loss) could be a
capital gain or loss or ordinary income (or loss) depending on the holding
period of the shares in question.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER
TO KPCI STOCKHOLDERS WILL DEPEND ON EACH PARTICULAR SITUATION. STOCKHOLDERS ARE
ENCOURAGED TO CONSULT THEIR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE
APPLICABILITY OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS AND THE EFFECT OF
ANY PROPOSED CHANGE IN THE TAX LAWS.
DISSENTERS' RIGHTS OF APPRAISAL
GRAI - The current shareholders of GRAI will not have dissenters'
rights of appraisal upon the merger.
KPCI - No holder of KPCI common stock will be entitled to any
dissenters' rights unless the holder has perfected such rights in accordance
with Section 351.455 of the General and Business Corporation Law of Missouri,
which is included in this Prospectus/Proxy Statement as Annex E.
ACCOUNTING TREATMENT
The acquisition by GRAI of 100% of the outstanding capital stock of
KPCI will be accounted for as a reverse acquisition under the purchase method of
accounting. As such, for accounting purposes, KPCI is deemed to be the acquirer.
The consideration paid by KPCI is comprised of $1,350,000 in cash
35
<PAGE> 38
and approximately 10.9% of the assets and operations of KPCI value of
approximately $806,000. On the date the merger is completed, the assets and
liabilities of GRAI will be recorded at fair value and the excess of purchase
price over the fair value of the net assets of GRAI will be recorded as goodwill
and amortized into income over a twenty-year period.
FEDERAL SECURITIES LAWS CONSEQUENCES; STOCK TRANSFER RESTRICTIONS
This Prospectus/Proxy Statement does not cover any resales of GRAI
common stock to be received by KPCI stockholders in the merger, and no person is
authorized to make any use of this Prospectus/Proxy Statement in connection with
any such resale.
All shares of GRAI common stock to be received by KPCI stockholders in
the merger will be freely transferable, except as noted above in connection
with the KPCI ESOP documents and except shares received by those persons deemed
to be "affiliates" of KPCI under the Securities Act of 1933 at the time of the
special stockholders meeting, who may resell their shares only in transactions
permitted by Rule 145 under the Securities Act or as otherwise permitted under
the Securities Act. Persons who may be affiliates of KPCI for those purposes
generally include directors, officers and other individuals or entities that
control, are controlled by, or are under common control with, KPCI, and would
not include stockholders who are not officers, directors or principal
stockholders of KPCI.
MATERIAL PROVISIONS OF THE MERGER AGREEMENT
GENERAL
The following is a summary of the material provisions of the merger
agreement which documents are incorporated by reference and attached to this
Prospectus/Proxy Statement as Annex A. This summary is not a complete
description of every provision of the Merger Agreement, and is qualified in its
entirety by reference to the full and complete text of the Merger Agreement and
amendment thereto. We urge each GRAI and KPCI stockholder to read the entire
Merger Agreement and the amendment to the Merger Agreement.
STRUCTURE OF THE MERGER
Under the Merger Agreement, KPCI, will merge with and into GRAI, which
will then change its name to Kupper Parker Communications, Incorporated. With
the merger all but two of GRAI directors will resign and five KPCI directors
will be added to the Board of Directors of the merged entity. Assuming the
simultaneous exercise of the option to have 300,000 existing GRAI shares
repurchased by GRAI at $4.50 per share at the closing of the merger, KPCI
stockholders will own approximately 88% of the outstanding GRAI common stock
immediately following the merger.
CLOSING; EFFECTIVE TIME
KPCI and GRAI will close the merger at 10:00 a.m., New York
36
<PAGE> 39
time, no later than October 31, 2000 (unless mutually extended) after the
conditions set forth in the Merger Agreement have been satisfied or waived,
unless another date is agreed to in writing.
On the date of the closing of the merger, GRAI will file a certificate
of merger and other appropriate documents with the State of New York in
accordance with the relevant provisions of New York law, and KPCI will file
corresponding documents with the State of Missouri in accordance with the
relevant provisions of Missouri law. The merger will become effective when the
certificate of merger is filed with the State of New York and corresponding
documents with the State of Missouri, or at such later time as specified in the
certificate of merger.
CONSIDERATION TO BE RECEIVED IN THE MERGER
At the time of the merger, each outstanding share of KPCI common stock
will be automatically converted into the right to receive 5,450 shares of GRAI
common stock. There is no minimum or floor on the market price of GRAI common
stock to be received in the merger.
CANCELLATION OF SHARES
Any share of KPCI common stock owned by the Surviving Entity, or held
by KPCI as treasury stock, will be automatically canceled and retired in the
merger and will cease to exist.
PROCEDURES FOR SURRENDER OF KPCI CERTIFICATES
As soon as reasonably practicable after the effective time of the
merger, the exchange agent for the merger will send KPCI stockholders a letter
of transmittal. The letter of transmittal will contain instructions with respect
to the surrender of KPCI stock certificates. KPCI STOCKHOLDERS SHOULD NOT SEND
STOCK CERTIFICATES TO GRAI.
Commencing immediately after the effective time of the merger, upon
surrender by KPCI stockholders of stock certificates representing KPCI shares in
accordance with the instructions in the letter of transmittal, KPCI stockholders
will be entitled to receive stock certificates representing shares of GRAI
common stock into which those KPCI shares have been converted.
After the merger, each certificate that previously represented shares
of KPCI common stock will represent only the right to receive the shares of GRAI
common stock into which shares of KPCI common stock were converted in the
merger.
KPCI's transfer books will be closed at the effective time of the
merger and no further transfers of shares will be recorded on the transfer
books. If a transfer of ownership of KPCI's stock that is not registered in the
records of KPCI's transfer agent has occurred, then, so long as the KPCI stock
certificates are accompanied by all documents required to evidence and effect
the transfer, as set forth in the transmittal letter and accompanying
instructions, and by evidence of payment of any applicable stock transfer taxes,
a certificate representing the proper number of shares of GRAI common stock will
37
<PAGE> 40
be issued to a person other than the person in whose name the certificate so
surrendered is registered.
If certificates for any shares of KPCI common stock have been lost,
stolen or destroyed, the holder will be instructed in the letter of transmittal
to submit an affidavit to that effect. The stockholders may also be required to
deliver to the exchange agent a bond in an amount reasonably required to
indemnify the exchange agent and GRAI against claims with respect to the lost
certificates.
No fractional share of GRAI common stock will be issued upon surrender
of certificates previously representing KPCI shares. Instead, the exchange agent
will pay KPCI stockholders an amount in cash determined by multiplying the
fractional share interest to which KPCI stockholders would otherwise be entitled
by the closing price for a share of GRAI common stock on the over the counter
electronic bulletin board on the closing date of the merger.
PROCEDURES FOR SURRENDER OF GRAI CERTIFICATES
Upon closing the Surviving Entity would purchase 300,000 shares of
common stock currently owned by the stockholders of GRAI (the "Share Buyback
Program"). The Share Buyback Program will be in an amount equal to $1.35 million
($1,350,000). Such repurchase will be made on a pro rata basis of the
stockholders electing to have shares repurchased (i.e., (a) the number of shares
owned by the shareholder electing divided by (b) the total number of shares
owned by stockholders electing multiplied by (c) 300,000).
ALL EXISTING STOCKHOLDERS OF GRAI ELECTING TO HAVE GRAI PURCHASE THEIR PRO RATA
SHARE OF SUCH SHARE BUYBACK PROGRAM, SHOULD INDICATE ACCORDINGLY ON THE PROXY
FORM. THERE WILL BE NO SEPARATE TENDER FORM.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains representations and warranties by KPCI
relating to:
organization, qualification, and corporate power;
capitalization;
charter documents and corporate records;
authorization of transaction;
noncontravention;
financial statements;
events subsequent to most recent fiscal quarter end;
undisclosed liabilities;
38
<PAGE> 41
brokers' fees;
continuity of business enterprise;
company receivables; inventories;
absence of certain changes;
contracts;
claims and proceedings;
taxes;
benefit plans;
employees-related matters;
insurance;
compliance with laws;
permits;
potential conflicts of interest;
intangible property;
deferred compensation;
properties; title;
tangible personal property;
customers and suppliers;
depositaries, powers of attorney, etc.;
stock ownership;
consents; and
disclosure.
The Merger Agreement contains representations and warranties by GRAI
relating to:
organization, qualification, and corporate power;
capitalization;
charter documents and corporate records;
39
<PAGE> 42
authorization of transaction;
noncontravention;
filings with SEC;
financial statements;
events subsequent to most recent fiscal quarter end;
undisclosed liabilities;
brokers' fees;
continuity of business enterprise;
company receivables; inventories;
absence of certain changes;
contracts;
claims and proceedings;
taxes;
benefit plans;
employees-related matters;
insurance;
compliance with laws;
permits;
potential conflicts of interest;
intangible property;
deferred compensation;
properties; title;
tangible personal property;
customers and suppliers;
depositaries, powers of attorney, etc.;
consents; and
disclosure.
40
<PAGE> 43
All of the representations, warranties, and covenants of the parties
(other than certain provisions above concerning issuance of GRAI shares, certain
provisions concerning insurance and indemnification, and certain provisions
above concerning certain requirements for a tax-free reorganization) will
survive the Effective Time for a period of six (6) months.
CONDITIONS TO COMPLETION OF THE MERGER
Each party's obligation to complete the merger is subject to a number
of conditions which must be met or, where permitted by law, waived by the
closing date. These conditions include:
holders of 2/3 of GRAI's common stock approve the merger proposal;
holders of 2/3 of KPCI's common stock approve the merger proposal;
the representations and warranties of the parties to the Merger
Agreement are materially accurate as of closing;
since the most recent fiscal quarter end, there shall not have been any
material adverse change in the in the business, properties, prospects,
assets, liabilities, condition (financial or otherwise) or results of
operations of KPCI or GRAI, and no event shall have occurred or
circumstance exist that could, individually or in the aggregate,
reasonably be expected to result in such a material adverse change;
since the date of this Agreement, there must not have been commenced or
threatened against KPCI or GRAI, or against any person affiliated with
GRAI, any proceeding (a) involving any challenge to, or seeking damages
or other relief in connection with the Merger or the transactions
contemplated in this Agreement, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with the
Merger or the transactions contemplated in this Agreement;
each of Ronald M. Greenstone and Gary C. Roberts shall have received
Employment Agreements in the forms of Annex C hereto, duly executed by
GRAI as the Surviving Entity;
the effectiveness of the registration statement of which this proxy
statement/prospectus is a part, and the absence of a stop order or any
proceedings or threats to suspend its effectiveness; and
each party's performance of and compliance in all material respects
with all of its obligations under the Merger Agreement at or before the
closing date.
CONDUCT OF BUSINESS PENDING THE MERGER
Pursuant to the Merger Agreement, KPCI and GRAI have agreed to take or
refrain from taking the actions below from the date of the Merger Agreement
41
<PAGE> 44
until the completion of the merger. Subject to exceptions contained in the
Merger Agreement, KPCI has agreed as follows:
except as contemplated by the Merger Agreement none of KPCI, GRAI or
their respective subsidiaries will authorize or effect any change in
their respective charters or bylaws;
none of KPCI, GRAI or their respective subsidiaries will grant any
options, warrants, or other rights to purchase or obtain any of its
capital stock or issue, sell, or otherwise dispose of any of its
capital stock (except upon the conversion or exercise of options,
warrants, and other rights currently outstanding)and except for the
grant of options to Ronald M. Greenstone by GRAI and the conversion of
KPCI options to GRAI options pursuant to the Merger Agreement;
none of KPCI, GRAI or their respective subsidiaries will declare, set
aside, or pay any dividend or distribution with respect to its capital
stock (whether in cash or in kind), or redeem, repurchase, or otherwise
acquire any of its capital stock;
none of KPCI, GRAI or their respective subsidiaries, without written
approval from each other, will issue any note, bond, or other debt
security or create, incur, assume, or guarantee any indebtedness for
borrowed money or capitalized lease obligation outside the ordinary
course of business except that KPCI may borrow funds for the Share
Buyback Program and pledge the assets of KPCI as collateral in
connection therewith;
except as set forth in above, none of KPCI, GRAI or their respective
subsidiaries will impose any security interest upon any of their
respective assets outside the ordinary course of business;
none of KPCI, GRAI or their respective subsidiaries will make any
capital investment in, make any loan to, or acquire the securities or
assets of any other party outside the ordinary course of business;
none of KPCI, GRAI or their respective subsidiaries will make any
change in employment terms for any of its directors, officers, and
employees outside the ordinary course of business; and
none of KPCI, GRAI or their respective subsidiaries will commit to any
of the foregoing.
TERMINATION
The Merger Agreement may be terminated at any time prior to the
effective time by either of the parties with the prior authorization of its
board of directors (whether before or after stockholder approval) as provided
below:
the parties may terminate the Merger Agreement by mutual written
consent at any time prior to the Effective Time;
42
<PAGE> 45
GRAI may terminate the Merger Agreement by giving written notice to
KPCI at any time prior to the Effective Time (A) in the event KPCI has
breached any material representation, warranty, or covenant contained
in the Merger Agreement in any material respect, GRAI has notified KPCI
of the breach, and the breach has continued without cure for a period
of 30 days after the notice of breach or (B) if the Closing shall not
have occurred on or before October 31, 2000, by reason of the failure
of any condition precedent under the Merger Agreement hereof (unless
the failure results primarily from GRAI breaching any representation,
warranty, or covenant contained in the Merger Agreement);
KPCI may terminate this Agreement by giving written notice to GRAI at
any time prior to the Effective Time (A) in the event GRAI has breached
any material representation, warranty, or covenant contained in this
Agreement in any material respect, KPCI has notified GRAI of the
breach, and the breach has continued without cure for a period of 30
days after the notice of breach or (B) if the Closing shall not have
occurred on or before October 31, 2000, by reason of the failure of any
condition precedent under the Merger Agreement hereof (unless the
failure results primarily from KPCI breaching any representation,
warranty, or covenant contained in the Merger Agreement); or
any party may terminate the Merger Agreement by giving written notice
to the other party at any time after the Special GRAI Meeting or the
Special KPCI Meeting in the event the Merger Agreement and the merger
fail to receive the requisite GRAI stockholder approval or the
requisite KPCI stockholder approval, respectively.
If any party terminates the Merger Agreement pursuant to the above, all
rights and obligations of the parties hereunder shall terminate without any
liability of any party to any other party (except for any liability of any Party
then in breach); provided, however, that the confidentiality provisions
contained in therein above shall survive any such termination and further
provided that within fifteen (15) days after written demand therefor reimburse
GRAI for one half (50%) of all legal and accounting fees incurred by it in
connection with the preparation, distribution and filing of any and all
documents with the SEC in connection with this transaction provided that GRAI is
not in default under the Agreement.
FEES AND EXPENSES; TERMINATION FEES
All costs and expenses incurred in connection with the Merger Agreement
and the merger will be paid by the party incurring the expenses, whether or not
the merger is completed
KPCI and GRAI will bear their own expenses and costs of the
transactions contemplated hereby, including, but not limited to, the fees of
attorneys and financial advisors. Notwithstanding the foregoing, KPCI has agreed
that in the event this merger transaction is abandoned or terminated by either
party, it will reimburse GRAI for one half (50%) of the legal and accounting
fees in connection with the preparation, distribution and filing of various
documents with the SEC in connection with this transaction ("SEC Expenses")
incurred by
43
<PAGE> 46
GRAI, within fifteen (15) days after written demand, provided GRAI is not in
default.
OTHER COVENANTS AND AGREEMENTS
The Merger Agreement contains other covenants of the parties, including
covenants relating to:
public announcements and notification of material changes;
access to information;
commercially reasonable efforts and further assurances;
compliance with legal requirements and cooperation in connection with
governmental and regulatory filings and in obtaining consents and
approvals; and
confidential treatment of non-public information.
INDEMNIFICATION
From and after the Closing, GRAI, as the Surviving Entity in the
Merger, will (i) observe and continue to observe any indemnification provisions
now existing (or as same may be hereafter expanded to the full extent of the
law) in the certificates of incorporation or bylaws of either GRAI or KPCI or
the Merger Agreement; and (ii) shall provide director and officer liability
insurance which shall provide continuous and uninterrupted coverage for the full
statute of limitations for any potential claims in amounts and extent of
coverage equal to or better than that which is presently offered by GRAI, which
indemnification benefits and which insurance coverage shall be for the benefit
of any individual who served as a director or officer of GRAI or KPCI at any
time at or prior to the Effective Time.
GRAI, as the Surviving Entity, will indemnify each individual who
served as a director or officer of GRAI or KPCI at any time at or prior to the
Effective Time from and against any and all actions, suits, Proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including all court costs and attorneys' fees and expenses,
resulting from, arising out of, relating to, in the nature of, or caused by the
Merger Agreement or any of the transactions contemplated herein.
AMENDMENT AND WAIVER
The provisions of the Merger Agreement may be waived or amended in
writing signed by all parties to the agreement. Some provisions, including the
requirement that KPCI and GRAI stockholders approve the merger, may not be
waived.
NO SOLICITATION
44
<PAGE> 47
The parties have agreed in the Merger Agreement that, from the date of
execution of the Merger Agreement until its termination, GRAI will not initiate,
solicit or encourage any proposal or offer relating to the acquisition of all or
substantially all of the capital stock or assets of such party that lead to a
merger, consolidation or other business combination involving GRAI other than
the transactions contemplated by the Merger Agreement.
MARKET PRICES AND DIVIDENDS
Market Price and Dividends on KPCI Common Stock and Related Stockholder Matter
At August 11, 2000, there were issued and outstanding 931.0805 shares
of KPCI Common Stock, the only class of KPCI equity securities, held by
approximately 26 owners of record, one of which was the KPCI Employee Stock
Option Plan that had 54 participating employees. There is no established public
trading market for KPCI Common Stock.
KPCI has not paid a cash dividend on the KPCI Common Stock within the
past two years.
Market Price and Dividends on GRAI Common Stock and Related Stockholder Matter
GRAI's common stock was delisted from the NASDAQ SmallCap market
effective with the close of business July 28, 1998, because the price of GRAI's
common stock had fallen below the requirements for continued listing. Effective
July 29, 1998 the GRAI's common stock is traded on the over-the-counter bulletin
board market and continues to be quoted under the symbol GRRI.
The following table sets forth the high and low closing bid quotations
for GRAI's common stock, as reported by Standard & Poors Comstock 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 EACH QUARTER
FOR THE FISCAL YEARS ENDED OCTOBER 31, 1998 AND OCTOBER 31, 1999
AND FOR THE SIX MONTHS ENDING APRIL 30, 2000
<TABLE>
<CAPTION>
2000 1999 1998
HIGH LOW HIGH LOW HIGH LOW
---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C>
First Quarter $2.25 $0.88 $1.44 $0.91 $2.88 $1.88
Second Quarter 2.44 1.50 1.00 0.88 2.88 1.75
Third Quarter -- -- 2.75 0.88 2.75 1.25
Fourth Quarter -- -- 2.50 0.88 1.31 .90
</TABLE>
45
<PAGE> 48
GRAI's common stock was held by approximately 248 stockholders of
record as and 462 beneficial stockholders of August 11, 2000.
GRAI 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.
THE COMPANIES
BUSINESS OF KPCI
KPCI is a regional advertising and marketing communications company.
KPCI operates a full service agency which plans and creates advertising
campaigns for clients and places advertising with media, and provides marketing
consultation, market research, branding, public relations and investor
relations, graphic design services, digital interactive design and marketing,
branding, direct response and database marketing, sales promotion services, and
communications management. KPCI's clients are in a broad range of industries and
include business-to-consumer, business-to-business, and business-to-stakeholder
clients. In addition, KPCI provides specialized marketing consultation services
to television and radio stations.
KPCI's predecessor, Kupper Advertising, Inc., was founded in St. Louis,
Missouri in 1978. KPCI was formed in 1992 in anticipation of the merger of its
predecessor with the Parker Group, Inc., a St. Louis, Missouri advertising
agency. The merger was consummated in 1993.
KPCI has its headquarters in St. Louis, Missouri and maintains branch
offices in Kansas City, Missouri; New Orleans, Louisiana; Nashville and Memphis,
Tennessee; Columbus, Ohio; and Louisville, Kentucky.
All of KPCI's operations are conducted in leased premises located in
the various cities in which KPCI does business. KPCI's physical property
consists primarily of leasehold improvements, furniture, fixtures and equipment.
No difficulty is anticipated in negotiating lease renewals or in finding other
satisfactory space if premises become unavailable. For further information
regarding KPCI's obligations under noncancellable operating leases, see "KPCI
FINANCIAL STATEMENTS".
REVENUES
KPCI's principal source of revenues is from commissions and fees earned
on advertising placed with the various media, and commissions and fees earned
for the production and preparation of advertising. In addition, KPCI's agency
brands receive fees for various other services performed in connection with
advertising, public relations, research and marketing studies. KPCI has over 100
clients. Major clients include Anheuser Busch, Missouri Department of Economic
46
<PAGE> 49
Development, Express Scripts, Zilog, RightChoice Managed Care, and Graybar
Distributors.
CLIENTS
KPCI considers its relations with its clients to be satisfactory. 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 KPCI. Representation of a client
does not necessarily mean that KPCI handles all advertising for that client
exclusively. In many cases, KPCI handles the advertising of only a portion of a
client's products or services or only the advertising in particular geographic
areas.
COMPETITION
The advertising agency business is highly competitive, with agencies of
all sizes competing primarily on the basis of quality of service to attract and
retain clients and personnel. Advertisers are able to move from one agency to
another with relative ease, in part because accounts are terminable on short
notice, usually 60 to 90 days. Clients may also reduce advertising and marketing
budgets at any time. An agency's ability to compete for clients is sometimes
affected by the policy, followed by many clients, of not permitting their
agencies to represent competitive accounts in the same market. As a result,
increasing size can impact an agency's ability to secure some new clients. In
most cases, however, KPCI's separate agency groups have enabled KPCI to
represent competing clients.
EMPLOYEES
At April 30, 2000, KPCI employed approximately 125 people in the United
States.
There is significant competition among advertising agencies for
talented and qualified personnel. The ability to attract and retain such people
is a key element of KPCI's personnel policies. KPCI believes its compensation,
benefits and training policies are competitive with industry peers. Overall,
KPCI considers relations with its employees to be satisfactory.
REGULATION
KPCI's business is subject to government regulation, both domestic and
foreign. Federal, state and local governments and governmental agencies 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 have regulated
the form and content of certain types of advertising for many consumer products.
The Federal Trade Commission ("FTC") and various State Attorneys General have
also required proof of accuracy of advertising claims with respect to various
products and, in their enforcement policies, are seeking to establish more
stringent standards with respect to advertising practices. The FTC and State
Attorneys General have the authority to investigate and to institute proceedings
against advertisers and their advertising agencies for false or misleading
advertising. Proposals have also been made for the
47
<PAGE> 50
adoption of additional statutes and regulations which would further restrict the
advertising activities of advertising agencies and their clients. The effect on
the advertising business of future application of existing statutes or
regulations, or the extent, nature or effect of future legislation or regulatory
activity with respect to advertising, cannot be predicted.
PROPERTIES
The following table provides data on KPCI's offices:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
ANNUAL BASE APPROXIMATE LEASE
LOCATION RENT SQUARE FEET EXPIRATION DATE
Office
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
St. Louis 8301 Maryland Avenue
Clayton, Missouri $436,761 22,595 5/31/10
--------------------------------------------------------------------------------------------------------
Kansas City 106 West 14th Street
Kansas City, Missouri 33,210 2,711 10/31/02
--------------------------------------------------------------------------------------------------------
Louisville 135 West Muhammad Ali Blvd.
Louisville, Kentucky 48,000 5,200 12/31/02
--------------------------------------------------------------------------------------------------------
Memphis 6060 Poplar Avenue
Memphis, Tennessee 60,548 3,105 8/31/04
--------------------------------------------------------------------------------------------------------
Nashville 2505 Hillsboro Road
Nashville, Tennessee 30,096 1,672 12/31/00
--------------------------------------------------------------------------------------------------------
New Orleans 433 Metairie Road
Metairie, Louisiana 60,871 4,499 2/28/03
--------------------------------------------------------------------------------------------------------
Columbus 1080 Kingsmill Parkway
Columbus, Ohio 2,580 144 Month-to-month
--------------------------------------------------------------------------------------------------------
</TABLE>
LEGAL PROCEEDINGS
A former KPCI employee has alleged, in essence, wrongful termination by KPCI.
This matter, in which the former KPCI employee demands certain lost wages and
damages which exceed $50,000, has been submitted to arbitration through the
American Arbitration Association. KPCI management believes that the claim by the
former employee has no merit and that the matter will not have a material
adverse impact on either the results of operation or on the financial condition
of KPCI.
BUSINESS OF GRAI
GRAI 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 Roberts Advertising, Inc. On July 29, 1997 GRAI
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.
GRAI 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, the
internet and billboards. GRAI 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
48
<PAGE> 51
and materials, corporate identification, and public relations. GRAI creates an
advertising program within the limits imposed by the client's advertising budget
or its annual retainer. GRAI'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.
GRAI maintains its operations in Long Island, New York. On July 15,
1998 GRAI closed its Florida operation, due primarily to the loss of several
significant customers of the Florida office. GRAI does not believe that the
closing of the Florida office has had or will have an adverse effect on its
financial condition and results of operations. In addition, as of October 31,
1998, GRAI had fully amortized its 49% equity interest in The Gothard Group
("Gothard"), a Miami-based public relations agency. In July 1998, GRAI filed a
lawsuit against Gothard seeking among other things, damages under a certain
management agreement and repayment of certain loans made by the GRAI to Gothard.
In October 1998, Gothard filed for Chapter 7 protection and all assets were
placed in trust. During 1998, GRAI advanced Gothard approximately $126,000, and
as of October 31, 1998 was owed $186,000 for advances of monies and $126,000 in
accounts receivable. In connection with Gothard filing for Chapter 7, GRAI, in
the fourth quarter of fiscal 1998, fully reserved approximately $126,000 of
accounts receivable and the $186,000 of advances due from Gothard. Also for the
year ended October 31, 1998, GRAI recorded an equity loss of $66,258
representing its proportionate share of Gothard's losses up to GRAI's remaining
investment in Gothard. No additional loss of Gothard will be recognized as GRAI
has no plans to support the operations of Gothard. Any monies recovered by GRAI
from Gothard will be recorded as Other Income.
GRAI believes, based on management's knowledge of and experience in the
market, that it is one of the largest advertising agencies on Long Island, New
York in terms of commissions and fee revenues. GRAI'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, healthcare and
education. In the past fifteen years, GRAI 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, GRAI has received in excess of one hundred "Best on
Long Island" awards for its creativity in advertisements and collateral
materials. The strategy of GRAI 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 GRAI offers and
that larger advertising firms based in major metropolitan areas are not always
able to provide. GRAI plans to continue to expand its business by focusing on
such accounts and through possible acquisitions of other advertising agencies on
Long Island, and in other east coast markets.
SOLICITATION OF NEW BUSINESS
GRAI has been in business for 28 years and believes it is well known in
the Long Island marketplace. GRAI generally obtains new clients through
referrals or by identifying prospects through market research in product and
service industries in which GRAI does not have a competing client. GRAI solicits
prospective clients through personal contacts and presentations by agency
49
<PAGE> 52
principals, backed by a team of creative and media personnel. The initial step
in the selection process normally involves preparing a capability study
demonstrating GRAI'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, GRAI often incurs
expenses prior to obtaining such clients, and there is no assurance that GRAI
will be able to obtain such clients or, if the clients are obtained, that such
expenses will be reimbursed by the client. GRAI considers the potential revenue
from a new client when determining the appropriate level of expenses for such
presentations. The period of time required by GRAI to obtain a new client and
generate revenues therefrom may range from weeks to several months.
REVENUES
The primary sources of GRAI's revenues are commissions earned from
advertising placed with the various media and service fees for creative time.
GRAI places advertising for its clients only in the capacity of an agent and not
as a principal. It is expressly understood that GRAI is acting only as an agent
of its clients and that ultimate responsibility for the costs incurred rests
solely with such clients and not with GRAI. Clients pay GRAI the full media
charge for these advertisements. GRAI 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 GRAI require that
billings be collected from its clients in sufficient time for GRAI to make the
corresponding payment to the related media, usually within 30 to 60 days of
invoice. Service fees for creative and typesetting time are established on a
case-by-case basis. GRAI 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.
CLIENTS
GRAI 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 GRAI. Representation of a client does not
necessarily mean that all advertising for such client is handled by GRAI
exclusively. In some cases, GRAI handles the advertising of only a portion of a
client's products or services.
For the twelve months ended October 31, 1999, five of GRAI's clients
represented 17%, 17%, 12%, 11% and 11%, respectively, of GRAI's revenues. GRAI
depends upon a core of approximately 15 clients from which it obtains the bulk
of its revenues.
Advertising industry clients can terminate their relationship with GRAI
on relatively short notice, typically 60 to 90 days. GRAI can terminate, at any
time, personnel working directly on the accounts to reduce its overhead.
SUPPLIERS
50
<PAGE> 53
GRAI 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. GRAI does not maintain any written
contracts with its suppliers. Substantially all of such suppliers are located on
Long Island.
SEASONALITY
Historically, first quarter revenues have been less than other quarters 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
interpretations 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 GRAI to
date and GRAI believes that it is in compliance in all material respects with
all applicable regulations. GRAI 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 GRAI has a "hold
harmless" clause in most agreements with clients.
EMPLOYEES
As of October 31, 1999, GRAI employed 28 people, all but one of which
are employed on a full-time basis, including 8 in account management, 4 in
media, 3 in production, 5 in creative services and 8 in general administration
and finance.
GRAI believes its future success will depend, in part, on its ability
to recruit and retain highly skilled management and creative personnel.
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. GRAI, 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 GRAI voluntarily, for a
period of one year such employee is prohibited from soliciting and accepting
business from GRAI's clients and from trying to persuade any of GRAI's other
employees to sever their employment with GRAI.
51
<PAGE> 54
None of GRAI's employees is represented by a labor union. GRAI has
experienced no work stoppages and believes that its employee relationships are
good. In order to recruit and retain key personnel, GRAI 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
GRAI has restructured 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 GRAI
and many of them are large conglomerates and/or have an international clientele.
GRAI 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 GRAI will be able to maintain its current position in the
industry.
PROPERTY
GRAI does not own any real property. GRAI leases its office, which is
considered ample for its present needs. The following table provides data on
GRAI's office.
<TABLE>
<CAPTION>
ANNUAL APPROXIMATE LEASE
OFFICE LOCATION BASE RENT SQUARE FEET EXPIRATION DATE
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
New York 401 Broadhollow Rd. $284,136 2,944 7/31/08
Melville, New York
</TABLE>
LEGAL PROCEEDINGS
In June 1997, a former client of GRAI filed a civil claim against GRAI
and Gothard. The former client sought, among other remedies, to be relieved of
its obligations to pay outstanding bills due and owing GRAI and to collect
damages. GRAI and Gothard filed a counterclaim against the former client seeking
payment of amounts due for advertising and public relations services and
expenses. In February 1998, GRAI obtained a judgment against the former client
in the total amount of $1,196,000. Efforts to collect the judgment have, thus
far, been unsuccessful. On September 20, 1999 the former client filed for
Chapter 7 Bankruptcy in United States Bankruptcy Court, Middle District of
Florida, Tampa Division. GRAI is filing its claim as a creditor with the
bankruptcy trustee.
Greenstone Roberts Advertising Florida, Inc. ("Greenstone Florida"), a
wholly-owned subsidiary of GRAI, Gothard, an entity which is 49% owned by
Greenstone Florida and Ronald Greenstone, Chairman of the Board, Chief Executive
52
<PAGE> 55
Officer and Director of GRAI were named as defendants in litigation filed by
Barbara W. Gothard in Circuit Court in Miami-Dade County, Florida on April 21,
1998. The action arises from a dispute between GRAI and Barbara Gothard
concerning the management and operation of Gothard. This case has been
consolidated under court order with an earlier filed action between Greenstone
Florida against Gothard and Barbara W. Gothard in which Greenstone Florida
seeks, among other things, damages for breaches of contract and breaches of
fiduciary duty. The Gothard claim against the Greenstone entities has been
dismissed. Written discovery by the Greenstone entities is on-going.
On October 15, 1998, a Chapter 7 bankruptcy was filed on behalf of
Gothard, by Barbara Gothard and a bankruptcy trustee has been appointed. GRAI
has filed a claim as a creditor in that case. Management believes that the
outcome of such litigation will not have a material adverse impact on its
financial condition or annual results of operations.
Barbara Gothard and The Gothard Group, Inc., d/b/a Gothard/Greenstone
Roberts were named defendants in litigation filed by Centurion Capital Corp in
Circuit Court in Miami-Dade County Florida on April 29, 1998. This action
asserts a claim against the defendants in the amount of approximately $60,000
based on alleged claims of breach of contract, money lent, conversion and
account stated. GRAI is vigorously defending the claims. Management believes
that the outcome of such litigation will not have a material effect on its
financial condition or annual results of operations.
KPCI MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion relates to KPCI's results of operations, financial
condition and liquidity for the periods indicated without giving effect to the
Merger and should be read in conjunction with KPCI's financial statements and
the notes thereto.
Results of Operations - Year Ended October 31, 1999
Revenues for the year ended October 31, 1999 were $10,846,769, a 22.4%
increase over 1998 revenues of $8,860,103. Public relations revenues increased
47% between years and now amount to 15.8% of total revenues compared to 13.1% in
1998. Sales promotion and direct marketing revenues increased 7.6% to 4.9% of
total revenues in 2000.
Salaries and benefits expense increased 17.6% to $8,781,833. The most
significant increase in this category of expense relates to the fair value of
the shares of KPCI common stock released for allocation to its ESOP participants
($403,179 in fiscal 1999 compared to $327,722 in fiscal 1998). As more fully
discussed below, KPCI intends to terminate its ESOP during fiscal 2000.
Excluding this ESOP expense, salaries and benefits expense increased
approximately $1,239,000 or 17.4% - 5 percentage points less than the revenue
increase.
Office and general expenses increased approximately $548,000 or 37.7%
as compared to the 22.4% increase in revenues. The principal reason for this
53
<PAGE> 56
increase was that the Company leased additional space in St. Louis to
accommodate its increased staff.
KPCI reported net interest expense of $7,410 in 1999 compared to net
interest income of $9,237 in 1998. Interest income decreased between years due
to lower average collected cash balances. Interest expense decreased between
years due to lower long-term debt balances.
KPCI's effective tax rate was high in both years due principally to the
fact that the difference between the fair market value and the historical costs
of shares allocated to ESOP participants is not deductible for tax purposes. See
Footnote 11 of the KPCI Financial Statements as of October 31, 1999 and 1998 for
the reconciliation of the Company's effective tax rate to the U.S. statutory
income tax rate.
Liquidity and Capital Resources - At October 31, 1999
As of October 31, 2000, KPCI's cash and cash equivalents totaled $538,783
compared to the 1998 year-end balance of $589,950. Working capital at October
31, 1999 was $175,612, compared to $194,749 at October 31, 1998. The principal
reason for the decline in cash and cash equivalents as well as working capital
is that KPCI did not issue stock in fiscal 1999 to fund the cash required to
repurchase shares from ex-employees.
Operating Activities: KPCI's funds from operating activities consist
primarily of net income adjusted for non-cash items and changes in operating
assets and liabilities. The most significant non-cash item is entitled "Shares
earned and released by ESOP" and represents the fair market value of the related
shares that are allocated to ESOP participants. This non-cash charge increased
23% between years from $327,722 in 1998 to $403,179 in 1999. The principal
reason for the increase is that the fair value of KPCI common stock increased by
25.5% between years as a result of internal growth. KPCI intends to terminate
its ESOP effective August 31, 2000. As a result, operating results in periods
subsequent to August 31, 2000 will not contain similar non-cash charges to
earnings. Cash provided by operating activities was $607,768 in 1999 compared to
cash provided by operating activities of $383,665 in 1998.
Investing Activities: KPCI's capital expenditures for property and
equipment were $198,969 for the year ended October 31, 1999 compared to $490,688
in 1998. Capital expenditures in 1998 were higher than normal because the
Company substantially upgraded its computer and communications systems during
that year. At October 31, 1999, KPCI had no material commitments for future
expenditures.
Financing Activities: At October 31, 1999, KPCI was in compliance with
all covenants and conditions related to its debt agreements.
Results of Operations - Six Months Ended April 30, 2000
Revenues for the six months ended April 30, 2000 were $6,050,612, a
15.3% increase over 1999 revenues of $5,248,391. Public relations revenues
increased 50% between years and now amount to 18.8% of total revenues compared
54
<PAGE> 57
to 14.5% in 1999. Sales promotion and direct marketing revenues increased 31% to
5.5% of total revenues in 2000 compared to 4.8% in 1999.
Salaries and benefits expense increased 19.1% to $4,794,636. The most
significant increase in this category of expense relates to the fair value of
the shares of KPCI common stock released for allocation to its ESOP participants
($402,000 in fiscal 2000 compared to $155,000 in fiscal 1999). As more fully
discussed below, KPCI intends to terminate its ESOP during fiscal 2000.
Excluding this ESOP expense, salaries and benefits expense increased
approximately $522,000 or 13.5% - 1.8 percentage points less than the revenue
increase.
Office and general expenses increased approximately $79,000 or 8.0% as
compared to the 15.3% increase in revenues.
KPCI reported net interest income of $25,000 in 2000 compared to net
interest expense of $18,000 in 1999. Interest income increased between years due
to higher interest rates and higher average collected cash balances. Interest
expense decreased between years due to lower long-term debt balances.
KPCI's effective tax rate was high in both years due principally to the
fact that the difference between the fair market value and the historical costs
of shares allocated to ESOP participants is not deductible for tax purposes.
Excluding this non-cash expense, the Company's effective tax rate was 41.5% in
2000 compared to 42.5% in 1999.
LIQUIDITY AND CAPITAL RESOURCES - At April 30, 2000
As of April 30, 2000, KPCI's cash and cash equivalents totaled
$1,094,082, which is an increase of $555,299 over the 1999 year-end balance of
$538,783. Working capital also increased to $748,951 at April 30, 2000 from
$175,612 at October 31, 1999.
Operating Activities: KPCI's funds from operating activities consist
primarily of net income adjusted for non-cash items and changes in operating
assets and liabilities. The most significant non-cash item is entitled "Shares
earned and released by ESOP" and represents the fair market value of the related
shares that are allocated to ESOP participants. This non-cash charge increased
160% between years from $155,000 in 1999 to $402,000 in 2000. The principal
reason for the increase is that the fair value of KPCI common stock has
increased from $5,000 per share to approximately $11,000 per share as a result
of internal growth and the impending merger with GRAI. KPCI intends to terminate
its ESOP effective August 31, 2000. As a result, operating results in periods
subsequent to August 31, 2000 will not contain similar non-cash charges to
earnings. Cash provided by operating activities was $511,123 in the first six
months of 2000 compared to cash provided by operating activities of $95,413 in
1999. Operating cash flows are impacted by the seasonal spending patterns of
clients. KPCI's policy is to bill and collect monies from its clients prior to
payments due to the media.
Investing Activities - KPCI's net capital expenditures for property and
equipment were $41,405 for the six months ended April 30, 2000, down slightly
55
<PAGE> 58
from prior year's levels. KPCI anticipates that capital expenditures in 2000
will approximate 1999's level and has no material commitments for future
expenditures.
Financing Activities - At April 30, 2000, KPCI was in compliance with
all covenants and conditions related to its debt agreements. In February 2000,
the company sold 65 common shares to its employees to fund its anticipated
purchases of property and equipment and to fund its anticipated needs to
purchase common stock from departing employees. In July 2000, KPCI fully paid
its ESOP debt.
In May 2000, KPCI renewed its $1,000,000 bank line-of-credit for a
period of one year. KPCI believes that cash flow from operations, along with
current cash balances, will be sufficient to satisfy working capital and other
operating requirements in 2000. In the event additional funds are required, KPCI
believes it will have sufficient resources, including borrowing capacity, to
meet such requirements.
PROPOSED AMENDMENT TO GRAI STOCK OPTION PLAN
As a part of the merger, it is proposed that the options for shares of
GRAI be increased from 90,000 to 250,000. This increase is needed so that the
plan will have enough options for the conversion of the existing KPCI options
into options of the Surviving Entity (185,300), as well as additional options to
grant employees in the future. (See Annex D hereto.)
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF KPCI
The following table sets forth the beneficial ownership of KPCI common
stock, as of August 11, 2000 by: (i) each present director and the chief
executive officer, (ii) each other person known to KPCI to be the beneficial
owner of 5 percent (5%) or more of KPCI common stock, and (iii) all directors
and executive officers as a group. Except as otherwise indicated by footnote,
the named persons possess sole voting and investment power with respect to the
shares.
Voting Securities and Principal Stockholders Thereof
The following table sets forth certain information regarding the
beneficial ownership of KPCI Common Stock (i) by each stockholder known by KPCI
to own more than five percent (5%) of KPCI Common Stock, (ii) by each member of
the KPCI Board, and (iii) by all directors and officers of KPCI as a group. This
information is as of August 14, 2000.
56
<PAGE> 59
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF BENEFICIAL
OWNERSHIP
NAME AND ADDRESS OF BENEFICIAL OWNER (1) PERCENT OF
CLASS
<S> <C> <C>
Trustees for the benefit of
KPCI Employee Stock Ownership Plan 471.0805 42.8%
Bruce Kupper 264 24.0%
Mary De Hahn 51.4833 5.5%
John Rezich 30 3.8%
Ian Cohen 17 1.8%
All directors and executive officers of KPCI as a group
(four persons)
362.4833 38.9%
</TABLE>
(1) Unless otherwise shown, the address for each beneficial owner is c/o Kupper
Parker Communications, Incorporated, 8301 Maryland Avenue, St. Louis, Missouri
63105.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF GRAI
The following table sets forth certain information regarding GRAI Common
Stock owned as of August 11, 2000 by (i) each person who is known by the GRAI to
own beneficially more than 5% of its outstanding Common Stock,
(ii) each director and named executive officer, and (iii) all officers and
directors as a group. Except as otherwise set forth below, the address of each
such person is c/o GRAI, 410 Broadhollow Road, Melville, New York 11747.
57
<PAGE> 60
NAME OF NUMBER OF SHARES PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
---------------- ------------------ ----------
Ronald M. Greenstone............. 323,750 (1) 33.1%
Herman Fialkov................... 175,000 (2) 17.9%
Gary C. Roberts.................. 105,000 (3) 10.7%
All Directors and executive officers as a group (3 persons) 61.7%
---------------
(1) Includes 43,750 shares of Common Stock that the holder has the right to
acquire within one year upon the exercise of options granted by GRAI.
(2) Shares of unregistered Common Stock acquired in a private placement in June
1999.
(3) Includes 15,000 shares of Common Stock that the holder has the right to
acquire within one year upon the exercise of options granted by GRAI.
PROJECTED STOCK OWNERSHIP BY DIRECTORS, NOMINEES AND OFFICERS
The following table sets forth the number of shares of Common Stock of
the Surviving Entity that would have been beneficially owned as of August 11,
2000, and the percentage of the outstanding shares of Common Stock so held, by
(i) each beneficial owner of more than five percent of Common Stock, (ii) each
person who is a Director or nominee of the Surviving Entity, (iii) each
executive officer of the Surviving Entity; and (iv) all Directors and executive
officers as a group. There were no other stockholders of 5% or more of the
outstanding shares of common stock. There were no stock options granted or
exercised in the last fiscal year.
NAME OF NUMBER OF SHARES PERCENTAGE
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
-------------------- ------------------ ----------
Kupper Parker ESOP 2,566,950 43.0%
Bruce Kupper 1,580,500 (1) 26.5%
Mary De Hahn 280,584 4.7%
Ronald M. Greenstone 232,750 (2)(5) 3.9%
John Rezich 163,500 2.7%
Herman Fialkov 118,000 (3)(5) 2.0%
Gary C. Roberts 75,000 (4)(5) 1.3%
All Directors and executive officers as a group (5 persons) 39.1%
----------------
(1) Includes 141,700 shares of Common Stock that the holder has the right
to acquire within one year upon exercise of the options granted by
KPCI/GRAI.
(2) Includes 43,750 shares of Common Stock which the holder has the right
to acquire within one year upon the exercise of options granted by the
Company.
(3) Shares of unregistered Common Stock acquired in a private placement in
June 1999. Mr. Fialkov will resign from the Board as of the effective
date of the merger.
(4) Includes 15,000 shares of Common Stock which the holder has the right
to acquire within one year upon the exercise of options granted by the
Company.
(5) Assumes shareholder's election of repurchase of a pro rata share of the
300,000 shares by the Surviving Entity.
58
<PAGE> 61
DIRECTORS AND EXECUTIVE OFFICERS OF KPCI AND GRAI
The current directors and executive officers of KPCI are as follows:
NAME AGE POSITION
---- --- --------
Bruce Kupper 47 Director, President and CEO
Mary De Hahn 51 Director, Vice President and Chief
Operating Officer
John J. Rezich 45 Director, Executive Vice President,
Chief Financial Officer, Treasurer
and Secretary
S. Lee Kling 71 Advisory Director
James A. Saitz 51 Advisory Director
-------------------
All directors hold office until the next annual meeting of stockholders or
until their successors are elected and qualify. Executive officers hold office
until their successors are chosen and qualify, subject to earlier removal by the
Board of Directors.
Set forth below is a biographical description of each director, advisory
director, and executive officer of KPCI based on information supplied by each
of them.
S. Lee Kling Chairman, Kling Rechler & Co., merchant banking
(1994-present)
James A. Saitz Chairman and CEO, Trustcorp Financial, Inc.,
commercial bank holding company (1994-present);
Chairman & CEO, Missouri State Bank, commercial bank
(1994-present)
Bruce Kupper Chairman and CEO, Kupper Parker Communications, Inc.,
marketing communications (1978-present)
Mary De Hahn Chief Operating Officer, Kupper Parker
Communications, Inc., marketing communications
(1995-present)
John J. Rezich Executive Vice President and CFO, Kupper
Parker Communications, Inc., marketing communications
(5/00-present); Executive Vice President - Mergers
and Acquisitions, Kupper Parker Communications, Inc.,
marketing communications (10/99-5/00); Vice
President- Controller, True North Communications,
Inc., advertising (12/85-3/99)
The current directors and executive officers of GRAI are as follows:
Ronald M. Greenstone Chairman, Secretary, Director
59
<PAGE> 62
Gary C. Roberts President, Director
Herman Fialkov Director
In anticipation of the merger and the new directors being appointed by
the Board on the effective date of the merger, former directors Anthony V.
Curto, Monsignor Thomas Hartman, Richard Projain and Victor Trizzino resigned as
directors (and as Secretary in the case of Mr. Curto) as of August 22, 2000, and
Mr. Fialkov was appointed to fill Mr. Curto's seat on the Board until the merger
effective date, and Mr. Greenstone was elected Secretary.
The Directors are divided into two classes and hold office until the
second succeeding Annual Meeting of Stockholders following the election of their
respective class and the qualification of their successors. None of the officers
or Directors is related to one another.
INFORMATION AS TO DIRECTORS WHOSE TERMS EXPIRE AT 2002 ANNUAL MEETING
FIRST
NAME AGE POSITION ELECTED
Ronald M. Greenstone............ 59 Director 1972
Chairman of the Board
Secretary
Ronald M. Greenstone founded the Company in 1972 and has been Chairman
of the Board of Directors, Chief Executive Officer and a Director for more than
the past five years. Mr. Greenstone served as President of the Company from
December 1988 to December 1991. Prior to founding the Company, Mr. Greenstone
served as Vice President in charge of account services for the former SH
Goldstein Advertising (Great Neck, New York).
INFORMATION AS TO DIRECTORS WHOSE TERMS EXPIRE AT 2001 ANNUAL MEETING
FIRST
NAME AGE POSITION ELECTED
Gary C. Roberts 61 Director, President 1988
Herman Fialkov 78 Director 2000
Gary C. Roberts has been President and Director of the Company since
January 1992. Mr. Roberts served as Executive Vice President since joining the
Company in January 1988. From January 1983 until December 1987, Mr. Roberts
served as Executive Vice President, Chief Operating Officer and Partner at
Slater Hanft Martin (a New York, New York based advertising agency). From
January 1970 to December 1982, Mr. Roberts served as Executive Vice President
and group head at Wells Rich Greene (a New York, New York based advertising
agency). Mr. Roberts received his Bachelor of Science degree in Marketing from
New York University in 1960.
Herman Fialkov has been a consultant to Newlight Management LLC and Poly
Ventures Associates II, LLP, venture capital firms since 1997 and 1993,
60
<PAGE> 63
respectively. He has been associated with various venture capital firms since
1968. Previously, he was an officer and director of General Instrument
Corporation which he joined in 1960 as a result of an acquisition of General
Transistor corporation, a company Mr. Fialkov founded. Mr. Fialkov is a director
of Primus Telecommunications, Inc. and of Globecomm Systems, inc., and several
private companies.
Upon completion of the merger, Mr. Fialkov will resign, and Mr. Kupper,
Ms. De Hahn and Mr. Kling will be appointed by the Board to fill the vacancies
of the directors whose terms expire in 2002, and Mr. Rezich and Mr. Saitz will
be appointed by the Board to fill the vacancies of the director whose terms
expire in 2001.
EXECUTIVE COMPENSATION
The Summary Compensation Table shows the compensation for the past
three fiscal years of KPCI for the Chief Executive Officer and the three other
most highly compensated executive officers for the fiscal year ended October 31,
1999:
<TABLE>
<CAPTION>
ALL OTHER
YEAR SALARY BONUS COMPENSATION (1)
<S> <C> <C> <C> <C>
Bruce Kupper 1999 288,000 485,000 1,500
Chief Executive Officer 1998 288,000 589,000 3,000
1997 288,000 250,000 1,000
Mary De Hahn 1999 120,000 145,500 10,823
Chief Operating Officer 1998 120,000 130,000 17,336
1997 120,000 80,000 1,000
Ian Cohen 1999 90,000 33,500 1,500
Secretary 1998 89,334 27,000 3,000
1997 86,004 24,000 18,017
John Rezich (2) 1999 22,615 -- --
Chief Financial Officer 1998 -- -- --
1997 -- -- --
</TABLE>
1. Amounts shown in this column are for cash payments for attendance of
KPCI's Board of Directors' meetings and for KPCI's contributions to its
Employee Stock Ownership Plan.
Cash payments for attendance of KPCI's Board of Director's were $1,500
in 1999, $3,000 in 1998, and $1,000 in 1997, respectively, for Mr.
Kupper, Ms. De Hahn, and Mr. Cohen.
KPCI's contributions to its Employee Stock Ownership Plan for Ms. De
Hahn were $9,323 in 1999, $14,336 in 1998, and $17,017 in 1997. No
other named executives were eligible for contributions under this plan.
61
<PAGE> 64
2. Mr. Rezich commenced employment with KPCI in October 1999. Under the
terms of his employment agreement, he receives a base salary of
$120,000 and a minimum cash bonus of $20,000.
For information regarding executive compensation, see the section captioned
"Executive Compensation" in GRAI annual report on Form 10-K for the year ended
October 31, 1999 incorporated herein by reference.
The following is a summary of some of the pertinent terms and
conditions of the Employment Agreements under the merger; all undefined
capitalized terms shall have the same meaning as specified in the Employment
Agreements. This is not intended to be a full description of all of the terms of
such agreement; for a complete description of such agreement, see Annex C
hereto.
Employment Agreements of GRAI Executives. Under the merger, both Ronald
M. Greenstone and Gary C. Roberts will execute two-year employment contracts
with the Surviving Entity on terms described below.
RONALD M. GREENSTONE
On the Effective Date of the merger, the Surviving Entity will employ
Mr. Greenstone ("Greenstone") for a period (the "Period of Employment") of two
(2) years, ending at 12:00 midnight on the second anniversary thereof (the
"Termination Date").
The Surviving Entity shall compensate Greenstone for the services to be
rendered by him, including all services to be rendered as an officer or director
of the Surviving Entity, by paying Greenstone a salary at the rate of not less
than Two Hundred Fifteen Thousand and No/100 Dollars ($215,000.00) per annum.
During the Period of Employment hereunder, Greenstone shall be employed
by the Surviving Entity as the Chief Executive Officer of the Long Island
operations of the Surviving Entity, and, except as hereinafter provided, shall
devote eighty (80%) percent of a usual full-time Monday through Friday work week
to the business and affairs of the Surviving Entity, use his best efforts
consistent with such time requirements to promote the business of the Surviving
Entity, hold the offices in the Surviving Entity 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 Surviving Entity, provided such
duties are consistent with those currently being performed by Greenstone
contemporaneously with the execution of his employment agreement. In connection
with the performance of his duties hereunder, Greenstone, from time to time, may
be required to travel both within and outside of the United States of America,
provided however that Greenstone shall not be required to travel more than ten
(10) consecutive days in any calendar month throughout the term hereof. In
addition, Greenstone may render such services from Greenstone's home in Boca
Raton, Florida or from the Surviving Entity's office on Long Island, New York,
provided, however, that Greenstone shall not be required to render such services
from any location other than his home in Boca Raton, Florida for more than One
Hundred (100) days per year during the term hereof.
62
<PAGE> 65
Greenstone shall be reimbursed for all travel and other expenses
incidental to the performance of services hereunder in accordance with the usual
practices of the Surviving Entity and all expenses so reimbursed shall be deemed
to have been approved. In addition, in the event that Greenstone is requested by
the Surviving Entity to perform services in Long Island, New York, Greenstone
will be reimbursed for: (i) all commuting expenses between his home in Boca
Raton, Florida and the Surviving Entity's Long Island office, including without
limitation, airfare, car service, car rental, parking and other similar
expenses; and (ii) all expenses incident or relating to the maintenance by
Greenstone of an apartment on Long Island, including, without limitation, rent,
maintenance, telephone, utilities, etc. all of which expenses shall be
reimbursed promptly upon presentation by Greenstone of invoices/vouchers
evidencing such expenses.
In the event Greenstone is terminated by the Surviving Entity prior to
the Termination Date (a "Cessation of Employment") otherwise than for "cause" as
defined in such agreement): the Surviving Entity shall within five (5) days of
the Cessation of Employment pay to Greenstone a lump sum payment of Two Hundred
and Fifty Thousand and no/100 Dollars ($250,000.00), as a special severance and
termination payment which amount shall be paid in addition to and not in lieu of
any other amounts payable to Greenstone by the Surviving Entity; and for the
entire remaining portion of the then current Period of Employment, the Surviving
Entity shall continue to pay to Greenstone the salary then being paid by the
Surviving Entity to Greenstone pursuant to the provisions of the agreement prior
to the date of the Cessation of Employment; and for the entire remaining portion
of the then current Period of Employment, Greenstone shall continue to be
eligible to, and shall participate in, all employee benefit programs of the
Surviving Entity in which Greenstone 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 Greenstone shall
be entitled to make whatever elections may be available to him with respect to
his interests in savings and comparable plans. In addition, for the entire
remaining portion of the then current Period of Employment, the Surviving Entity
shall pay 100% of the costs of Greenstone's participation in the Surviving
Entity's medical and dental insurance plans.
If, by the Termination Date, the Surviving Entity and Greenstone 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 Surviving Entity shall pay to Greenstone, on or before the
fifth day following the Termination Date, in one lump sum as a special severance
and termination payment, the amount of Two Hundred Fifty Thousand no/100 Dollars
($250,000.00), which amount shall be in addition to, and not in lieu of, any
other amounts payable to Greenstone by the Surviving Entity.
GARY C. ROBERTS
On the Effective Date of the merger, the Surviving Entity will employ
Mr. Roberts (the "Roberts") for a period (the "Period of Employment") of two (2)
years, ending at 12:00 midnight on the second anniversary thereof (the
"Termination Date").
63
<PAGE> 66
The Surviving Entity shall compensate Roberts for the services to be
rendered by him hereunder, including all services to be rendered as an officer
or director of the Surviving Entity, by paying Roberts a salary at the rate of
not less than Two Hundred Forty Thousand and No/100 Dollars ($240,000.00) per
annum. During the Period of Employment hereunder, Roberts shall be employed by
the Surviving Entity as the President of the Long Island operations of the
Surviving Entity, and, except as hereinafter provided, shall devote his full
time and attention to the business and affairs of the Surviving Entity, use his
best efforts consistent with such time requirements to promote the business of
the Surviving Entity, hold the offices in the Surviving Entity 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 Surviving Entity,
provided such duties are consistent with those currently being performed by
Roberts contemporaneously with the execution of his employment agreement. In
connection with the performance of his duties hereunder, Roberts, from time to
time, may be required to travel both within and outside of the United States of
America, provided however that Roberts shall not be required to travel more than
ten (10) consecutive days in any calendar month throughout the term hereof.
In the event Roberts is terminated by the Surviving Entity prior to the
Termination Date (a "Cessation of Employment) otherwise than for "cause" (as
defined in the agreement): the Surviving Entity shall within five (5) days of
the Cessation of Employment pay to Roberts a lump sum payment of Two Hundred and
Twenty-five Thousand and no/100 Dollars ($225,000.00), as a special severance
and termination payment which amount shall be paid in addition to and not in
lieu of any other amounts payable to Roberts by the Surviving Entity; and for
the entire remaining portion of the then current Period of Employment, the
Surviving Entity shall continue to pay to Roberts the salary then being paid by
the Surviving Entity to Roberts pursuant to the provisions of the agreement
prior to the date of the Cessation of Employment; and for the entire remaining
portion of the then current Period of Employment, Roberts shall continue to be
eligible to, and shall participate in, all employee benefit programs of the
Surviving Entity in which Roberts 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 Roberts shall be
entitled to make whatever elections may be available to him with respect to his
interests in savings and comparable plans. In addition, for the entire remaining
portion of the then current Period of Employment, the Surviving Entity shall pay
100% of the costs of Roberts' participation in the Surviving Entity's medical
and dental insurance plans.
If by the Termination Date, the Surviving Entity and Roberts 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 Surviving Entity shall pay to Roberts, on or before the fifth day following
the Termination Date, in one lump sum as a special severance and termination
payment, the amount of Two Hundred Twenty-five Thousand and no/100 Dollars
($225,000.00), which amount shall be in addition to, and not in lieu of, any
other amounts payable to Roberts by the Surviving Entity.
RELATED PARTY TRANSACTIONS
64
<PAGE> 67
There have been no related transactions or business relationships in which
the amount involved exceeds $60,000 and in which any director, executive officer
or beneficial holder of more than 5% of GRAI'S common stock had or will have a
direct or indirect material interest, other than compensation arrangements which
are described in the executive compensation information incorporated herein by
reference. GRAI has a consulting agreement with Herman Fialkov under which he
receives $50,000 per year for four years commencing May 1999.
COMPARISON OF STOCKHOLDER RIGHTS
Holders of shares of KPCI stock will become holders of shares of GRAI common
stock. The following chart summarizes the material differences between the
rights of KPCI stockholders (left column), and the rights of GRAI stockholders
(right column). This summary is not intended to be complete and is qualified by
reference to GRAI's Certificate of Incorporation and by-laws and GRAI'S
Certificate of Incorporation and by-laws, copies of which are on file with the
SEC.
SUMMARY OF MATERIAL DIFFERENCES BETWEEN CURRENT RIGHTS OF KPCI
STOCKHOLDERS AND RIGHTS THOSE STOCKHOLDERS WILL HAVE FOLLOWING THE MERGER
<TABLE>
<CAPTION>
KPCI GRAI
--------------------------------- ------------------------------
<S> <C> <C>
CORPORATE The rights of KPCI stockholders The rights of GRAI
GOVERNANCE are currently governed by Missouri stockholders are currently
and the certificate of incorporation and will remain governed by
and by-laws of KPCI. Upon completion New York law, GRAI
of the merger, the rights of KPCI certificate of incorporation
stockholders will be governed by New and GRAI by-laws.
York law, GRAI certificate of
incorporation and GRAI by-laws.
AUTHORIZED 30,000 shares of common stock, 30,000,000 shares of common
STOCK $1.00 par value per share. stock, par value $0.10;
1,000,000 shares of preferred
stock, par value $1.00
VOTING Holders of common stock are Holders of common stock are
RIGHTS entitled to one vote for each share entitled to one vote for each
held on all matters on which share held on all matters
stockholders are generally entitled on which stockholders are
to vote. generally entitled to vote.
</TABLE>
65
<PAGE> 68
<TABLE>
<S> <C> <C>
SIZE OF THE The KPCI by-laws provide that the GRAI by-laws provide
BOARD OF that the Board of Directors shall be the Board of directors shall
DIRECTORS 5. be 3 to 15.*
ELECTION The Board has one class. KPCI does The Board is divided into
AND CLASS- not have cumulative voting for the classes of directors. If
IFICATION election of directors. there are 8 or fewer
OF THE directors, there are 2
BOARD OF classes, each serving a year
DIRECTORS two-year term; if there are 9
or more directors, there are
3 classes, each having a
3-year term. GRAI does not
have cumulative voting for
the election of directors.
AMENDMENT KPCI's By-Laws may be amended by a GRAI's By-laws may be
OF BY-LAWS majority of a quorum of its amended by (1) Board of
Shareholders. Directors or (2) a majority
of a quorum of stockholders.
AMENDMENT KPCI's Articles of Incorporation Except in limited
OF may be amended by the affirmative circumstances, the
CERTIFICATE vote of the holders of a majority certificate of incorporation
OF of the outstanding shares. may be amended by a vote of
INCORPORATION the Board, followed by a vote
of a majority of all
outstanding shares entitled
to vote thereon at a meeting
of stockholders.
* The elimination of the minimum size of the
Board of Directors in GRAI's certificate
of incorporation is subject to shareholder
approval.
</TABLE>
DESCRIPTION OF KPCI CAPITAL STOCK
GENERAL
KPCI authorized capital stock consists of 30,000 shares of common stock. As
of August 11, 2000, there were 931.0805 shares of common stock outstanding.
COMMON STOCK
Holders of shares of KPCI common stock:
are entitled to receive dividends when and as declared by KPCI board
from legally available funds;
66
<PAGE> 69
except as otherwise may be required by law, have the exclusive right to
vote;
are entitled, upon any liquidation, dissolution or winding up, to a pro
rata distribution of the assets and funds available for distribution to
stockholders;
are entitled to one vote per share on all matters on which stockholders
generally are entitled to vote; and
have preemptive rights to subscribe for additional shares of KPCI common
stock or securities convertible into shares of KPCI common stock.
DESCRIPTION OF GRAI CAPITAL STOCK
GENERAL
GRAI authorized capital stock consists of 30,000,000 shares of common stock
and 1,000,000 shares of preferred stock. As of August 11, 2000, there were
approximately 918,277 shares of common stock and no shares of preferred stock
outstanding.
COMMON STOCK
Holders of shares of GRAI common stock:
are entitled to receive dividends when and as declared by GRAI board
from legally available funds;
except as otherwise may be required by law, have the exclusive right to
vote;
are entitled, upon any liquidation, dissolution or winding up, to a pro
rata distribution of the assets and funds available for distribution to
stockholders;
are entitled to one vote per share on all matters on which stockholders
generally are entitled to vote; and
do not have preemptive rights to subscribe for additional shares of GRAI
common stock or securities convertible into shares of GRAI common stock.
WHERE YOU CAN FIND MORE INFORMATION
GRAI has filed a registration statement on Form S-4 to register with the SEC
its common stock to be issued to KPCI stockholders in the merger. This
Prospectus/Proxy Statement is a part of that registration statement and
constitutes GRAI's prospectus in addition to being GRAI's proxy statement for
its special meeting of stockholders. As allowed by SEC rules, this
67
<PAGE> 70
Prospectus/Proxy Statement does not contain all the information KPCI
stockholders can find in the registration statement or the exhibits to the
registration statement.
In addition, GRAI files reports, proxy statements and other information with
the SEC under the Exchange Act. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference rooms. KPCI stockholders may read
and copy this information at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois
60661-2511
KPCI stockholders may also obtain copies of this information by mail from
the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. The SEC also maintains an Internet
world wide web site that contains reports, proxy statements and other
information about issuers, including GRAI, who file electronically with the
SEC. The address of that site is www.sec.gov.
The SEC allows GRAI to "incorporate by reference" information into this
document. This means that the companies can disclose important information to
KPCI stockholders by referring them to another document filed separately with
the SEC. The information incorporated by reference is considered to be a part of
this document, except for any information that is superseded by information that
is included directly in this document.
This document incorporates by reference the documents listed below that GRAI
has previously filed with the SEC. They contain important information about GRAI
and its financial condition. Some of these filings have been amended by later
filings, which are also listed.
GRAI SEC FILINGS (FILE NO. 655610) DESCRIPTION OR PERIOD/AS OF DATE
---------------------------------- --------------------------------------------
Annual Report on Form 10-KSB Fiscal Year Ending October 31, 1999
Quarterly Report on Form 10-QSB Quarter Ended January 31, 2000
and Amendment No. 1 thereto on
Form 10-QSB/A dated March 30, 2000
Quarterly Report on Form 10-QSB Quarter Ended April 30, 2000
Current Report on Form 8-K, dated Discloses the entering into the
April 27, 2000 Merger Agreement and related matters
--------------------------------------------------------------------------------
GRAI also incorporates by reference any additional documents that either
GRAI may file with the SEC between the date of this document and the date of the
GRAI special stockholders meeting. These documents include periodic
68
<PAGE> 71
reports, including Annual Reports on Form 10-KSB, Quarterly Reports on Form
10-QSB and Current Reports on Form 8-K, as well as proxy statements.
KPCI stockholders can obtain any of the documents incorporated by reference
in this document through GRAI or KPCI, as the case may be, or from the SEC
through the SEC's web site at the address provided above. Documents incorporated
by reference are available from the companies without charge, excluding any
exhibits to those documents unless the exhibit is specifically incorporated by
reference as an exhibit in this Prospectus/Proxy Statement. KPCI stockholders
can obtain documents incorporated by reference in this Prospectus/Proxy
Statement by requesting them in writing or by telephone from the appropriate
GRAI at the following addresses:
Kupper Parker Communications, Inc.
8301 Maryland Avenue
St. Louis, Missouri 63105
Attention: Bruce D. Kupper
Telephone number: (314) 290-2000
Greenstone Roberts Advertising, inc.
401 Broad Hollow Road
Melville, New York 11747
Attention: Ronald M. Greenstone
Telephone number: (631) 249-2121
IF GRAI STOCKHOLDERS WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY
SEPTEMBER 25, 2000 TO RECEIVE THEM BEFORE THE SPECIAL STOCKHOLDERS MEETING. If
they request any incorporated documents from GRAI, GRAI will mail such documents
to its stockholders by first class mail, or another equally prompt means, within
one business day after GRAI receives such request.
GRAI stockholders may rely only on the information contained or incorporated
by reference in this document in making a decision to vote on the merger
proposal. GRAI has not authorized anyone to give any information or make any
representation about the merger of the companies that differs from, or adds to,
the information in this document or in its documents that are publicly filed
with the SEC.
The information contained in this Prospectus/Proxy Statement speaks only as
of its date unless the information specifically indicates that another date
applies. Information in this document about GRAI has been supplied by GRAI, and
information about KPCI has been supplied by KPCI.
EXPERTS
GRAI consolidated financial statements at October 31, 1999 and 1998, and for
each of the two years in the period ended October 31, 1999, incorporated by
reference in this Prospectus/Proxy Statement, which is made a
part of this Form S-4 registration statement, have been audited by BDO Seidman,
LLP, independent auditors, as set forth in their report incorporated by
reference in GRAI's annual report on Form 10-KSB, dated January 10, 2000,
69
<PAGE> 72
which is incorporated by reference in this Prospectus/Proxy Statement, and are
included in reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The audited financial statements of KPCI, included in this prospectus and
elsewhere in the registration statement to the extent and for the periods
indicated in their reports have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said report.
LEGAL MATTERS
The legality of GRAI common stock offered by this Prospectus/Proxy Statement
has been passed upon for GRAI by Forchelli, Curto, Schwartz, Mineo, Carlino &
Cohn, LLP, Mineola, New York. Members of this firm hold equity securities in
GRAI. Armstrong Teasdale LLP, St. Louis, Missouri, has delivered an opinion to
the effect that the description of the federal income tax consequences of the
merger under the heading "The Merger -- Material Federal Income Tax
Consequences" correctly sets forth the material federal income tax consequences
of the merger.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of BDO Seidman, LLP will be present at the special
stockholders meeting of GRAI. These representatives will have the opportunity to
make a statement if they desire to do so and are expected to be available to
respond to appropriate questions.
70
<PAGE> 73
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
I. Pro Forma Financial Information ....................................... F - 2
II. Unaudited Financial Statements of KPCI as of April 30, 2000
and October 31, 1999 .......................................... F - 7
Unaudited Balance Sheet of KPCI as of April 30, 2000 and
October 31, 1999............................................... F - 7
Unaudited Statements of Operations as of April 30, 2000 and
October 31, 1999 .............................................. F - 8
Unaudited Statements of Cash Flows as of April 30, 2000 and
October 31, 1999 .............................................. F - 9
Notes to Financial Statements ................................. F - 10
II. Financials Statements of KPCI as of October 31, 1999 and 1998
Report of Independent Public Accountants ...................... F - 12
Balance Sheets of KPCI as of October 31, 1999 and 1998 ........ F - 13
Statements of Operations of KPCI as of October 31, 1999
and 1998 ............................................ F - 14
Statements of Stockholders' Equity of KPCI as of October
31, 1999 and 1998 ................................... F - 15
Statements of Cash Flows For the Year Ending
October 31, 1999 and 1998 ............................... F - 16
Notes to Financial Statements.................................. F - 17
</TABLE>
F-1
<PAGE> 74
PRO FORMA FINANCIAL INFORMATION
GREENSTONE ROBERTS ADVERTISING, INC. AND KUPPER PARKER COMMUNICATIONS, INC.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
INTRODUCTION
The following unaudited pro forma combined financial statements give
effect to the acquisition by Greenstone Roberts Advertising, Inc. ("Greenstone
Roberts") of 100% of the outstanding capital stock of Kupper Parker
Communications, Inc. ("Kupper Parker") in a transaction accounted for as a
reverse acquisition under the purchase method of accounting (the "Acquisition").
The consideration is comprised of $1,350,000 in cash and approximately 10.9% of
the assets and operations of Kupper Parker with a fair value of approximately
$806,000.
The unaudited pro forma combined balance sheet of Greenstone Roberts and
Kupper Parker as of April 30, 2000 presents the combined financial position of
such entities assuming that the Acquisition occurred on April 30, 2000. The
unaudited pro forma combined income statements of Greenstone Roberts and Kupper
Parker for the year ended October 31, 1999 and for the six months ended April
30, 2000 present the combined results of operations of such entities assuming
that the Acquisition occurred at the beginning of each period presented. The pro
forma combined financial information does not purport to be indicative of the
results that would have actually occurred had the Acquisition been completed as
of the dates assumed or which may be obtained in the future. The pro forma
adjustments described in the notes to the unaudited pro forma combined financial
statements reflect the preliminary allocation of the purchase price to the net
assets acquired and is subject to final determination.
F-2
<PAGE> 75
KUPPER PARKER / GREENSTONE ROBERTS
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AT APRIL 30, 2000
<TABLE>
<CAPTION>
KUPPER GREENSTONE PRO FORMA
PARKER ROBERTS ADJUSTMENTS TOTAL
------------ ------------ ---------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,094,082 $ 1,269,740 ($ 1,350,000) (a) $ 1,013,822
Accounts receivable, net 5,670,215 2,937,376 - 8,607,591
Other current assets 344,763 278,001 - 622,764
------------ ------------ ------------ ------------
Total current assets 7,109,060 4,485,117 (1,350,000) 10,244,177
------------ ------------ ------------ ------------
Property and equipment, net 674,606 537,695 - 1,212,301
Goodwill, net 220,876 - 267,541 (b) 488,417
Other assets 144,854 196,377 - 341,231
------------ ------------ ------------ ------------
$ 8,149,396 $ 5,219,189 ($ 1,082,459) $ 12,286,126
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 189,761 $ 0 $ 0 $ 189,761
Accounts payable and accrued expenses 6,170,348 3,058,122 158,000 (c) 9,386,470
------------ ------------ ------------ ------------
Total current liabilities 6,360,109 3,058,122 158,000 9,576,231
------------ ------------ ------------ ------------
Noncurrent liabilities
Non current portion of long-term debt 174,591 - - 174,591
Other 157,896 113,526 - 271,422
------------ ------------ ------------ ------------
Total noncurrent liabilities 332,487 113,526 - 446,013
------------ ------------ ------------ ------------
Stockholders' equity 507,400 (d)
Common stock 1,264 106,000 (1,264) (e) 613,400
Paid-in capital 2,369,965 3,343,793 (2,369,965) (e) 3,930,377
586,584 (d)
Retained earnings (178,186) (790,293) 790,293 (e) (178,186)
Treasury stock, at average cost (596,493) (611,959) (1,350,000) (f) (1,961,959)
596,493 (e)
Unearned ESOP shares (139,750) - - (139,750)
------------ ------------ ------------ ------------
1,456,800 2,047,541 (1,240,459) 2,263,882
------------ ------------ ------------ ------------
$ 8,149,396 $ 5,219,189 ($ 1,082,459) $ 12,286,126
============ ============ ============ ============
</TABLE>
F-3
<PAGE> 76
KUPPER PARKER / GREENSTONE ROBERTS
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
YEAR ENDED OCTOBER 31, 1999
<TABLE>
<CAPTION>
KUPPER GREENSTONE PRO FORMA
PARKER ROBERTS ADJUSTMENTS TOTAL
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 10,846,769 $ 3,877,996 $ 0 $ 14,724,765
------------ ------------ ------------ ------------
Operating Expenses:
Salaries and benefits 8,781,833 2,894,914 - 11,676,747
Office and general 2,002,816 1,535,595 13,377 (g) 3,551,788
------------ ------------ ------------ ------------
10,784,649 4,430,509 13,377 15,228,535
------------ ------------ ------------ ------------
Operating Profit (Loss) 62,120 (552,513) (13,377) (503,770)
Other Income (Expense):
Interest income 67,816 58,500 (67,500) (h) 58,816
Interest expense (75,226) - - (75,226)
------------ ------------ ------------ ------------
(7,410) 58,500 (67,500) (16,410)
------------ ------------ ------------ ------------
Pretax Income (Loss) 54,710 (494,013) (80,877) (520,180)
Provision for Taxes 113,928 - (113,928) (I) -
------------ ------------ ------------ ------------
Net Income (Loss) $ (59,218) $ (494,013) $ 33,051 $ (520,180)
============ ============ ============ ============
Basic and Diluted Loss Per Share (j) $ (0.09)
============
Weighted Average Shares Used In Basic
And Diluted Per Share Computation 5,586,813
============
</TABLE>
F-4
<PAGE> 77
KUPPER PARKER / GREENSTONE ROBERTS
UNAUDITED PRO FORMA COMBINED INCOME STATEMENT
SIX MONTHS ENDED APRIL 30, 2000
<TABLE>
<CAPTION>
KUPPER GREENSTONE PRO FORMA
PARKER ROBERTS ADJUSTMENTS TOTAL
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 6,050,612 $ 1,719,790 $ 0 $ 7,770,402
----------- ----------- ----------- -----------
Operating Expenses:
Salaries and benefits 4,794,636 1,196,705 - 5,991,341
Office and general 1,058,624 682,507 6,688 (g) 1,747,819
----------- ----------- ----------- -----------
5,853,260 1,879,212 6,688 7,739,160
----------- ----------- ----------- -----------
Operating Profit (Loss) 197,352 (159,422) (6,688) 31,242
Other Income (Expense):
Interest income 46,433 43,098 (33,750) (h) 55,781
Interest expense (21,109) - - (21,109)
----------- ----------- ----------- -----------
25,324 43,098 (33,750) 34,672
----------- ----------- ----------- -----------
Pretax Income (Loss) 222,676 (116,324) (40,438) 65,914
Provision for Taxes 211,928 - (37,245) (I) 174,683
----------- ----------- ----------- -----------
Net Income (Loss) $ 10,748 $ (116,324) $ (3,193) $ (108,769)
=========== =========== =========== ===========
Basic and Diluted Loss Per Share (j) $ (0.02)
===========
Weighted Average Shares Used In Basic
and Diluted Per Share Computation 5,692,277
===========
</TABLE>
F-5
<PAGE> 78
Greenstone Roberts Advertising, Inc. and Kupper Parker Communications, Inc.
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma combined balance sheet combines the balance sheets of
Greenstone Roberts and Kupper Parker as of April 30, 2000. The unaudited pro
forma combined income statements combines the statements of operations of
Greenstone Roberts and Kupper Parker for the year ended October 31, 1999 and for
the six months ended April 30, 2000. These financial statements are presented as
if the Acquisition occurred at the beginning of each period presented.
The historical statements of operations for the year ended October 31, 1999,
used in the preparation of the unaudited pro forma combined financial
statements, have been derived from the respective audited financial statements
of Greenstone Roberts and Kupper Parker.
The historical balance sheets and statements of operations as of and for the six
months ended April 30, 2000, used in the preparation of the unaudited pro forma
combined financial statements, have been derived from the respective unaudited
financial statements of Greenstone Roberts and Kupper Parker as of and for the
six months ended April 30, 2000.
2. UNAUDITED PRO FORMA ADJUSTMENTS
Descriptions of the adjustments included in the unaudited pro forma combined
financial statements are as follows:
2.1.1.1.1 Balance Sheet Adjustments
(a) Represents cash paid in connection with the Acquisition.
(b) Represents the net excess of acquisition cost over the fair value of net
assets acquired in connection with the Acquisition, calculated as follows:
<TABLE>
<S> <C>
Purchase price................................................................ $2,156,000
Acquisition costs............................................................. 158,000
Total purchase price.......................................................... 2,314,000
Less: Fair value of net assets acquired....................................... 2,047,541
Excess of total purchase price over the fair value of
net assets acquired........................................................... 267,541
</TABLE>
(c) Represents estimated acquisition costs associated with the Acquisition.
(d) Represents equity issued in the Acquisition.
(e) Represents the recasting of the combined equity accounts.
(f) Represents the Greenstone Roberts shares repurchased in connection with the
Acquisition.
3. STATEMENT OF OPERATIONS ADJUSTMENTS
(g) Represents the amortization of $267,541 of goodwill, resulting from the
Acquisition, on a straight-line basis over twenty years.
(h) Represents the reduction of Kupper Parker's interest income that was earned
on cash used to repurchase 300,000 shares of Greenstone Robert's common
stock upon the closing of the Acquisition.
(i) Represents tax benefits related to the losses of Greenstone Roberts that
would have been used to offset Kupper Parker's taxable income, as well as
the income tax effects of the foregoing adjustments. The pro forma combined
effective tax rate differs from the statutory rate primarily due to the
effect of non-deductible goodwill amortization, non-deductible ESOP
contribution expense, and tax loss carryforwards that were not tax
benefited.
(j) Represents the weighted-average number of common shares outstanding for the
period presented, after giving effect to the Acquisition, calculated as
Greenstone Roberts's historical basic weighted-average number of common
shares outstanding during such period, plus the common shares issued in
connection with the Acquisition.
F-6
<PAGE> 79
KUPPER PARKER COMMUNICATIONS, INC.
BALANCE SHEETS
AS OF APRIL 30, 2000 AND OCTOBER 31, 1999
<TABLE>
<CAPTION>
April 30 October 31
2000 1999
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 1,094,082 $ 538,783
Accounts receivable, net of reserve for bad debts of $71,486 and $95,000, respectively 5,670,215 7,389,137
Other current assets 344,763 432,416
----------- -----------
Total current assets 7,109,060 8,360,336
----------- -----------
PROPERTY AND EQUIPMENT, net 674,606 746,669
GOODWILL, net of accumulated amortization of $193,265 and $179,460, respectively 220,876 234,681
OTHER ASSETS 144,854 154,396
----------- -----------
Total assets $ 8,149,396 $ 9,496,082
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 189,761 $ 189,761
Accounts payable 5,133,876 6,891,516
Deferred revenue 290,473 284,429
Accrued expenses 745,999 819,018
----------- -----------
Total current liabilities 6,360,109 8,184,724
----------- -----------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 174,591 319,010
Deferred compensation 157,896 178,466
----------- -----------
Total long-term liabilities 332,487 497,476
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 30,000 shares authorized; 1,264 shares issued and outstanding 1,264 1,264
Paid-in capital 2,369,965 1,941,895
Accumulated deficit (178,186) (188,934)
Treasury stock, at average cost; 314 and 373 shares, respectively (596,493) (686,093)
Unearned ESOP shares (139,750) (254,250)
----------- -----------
Total stockholders' equity 1,456,800 813,882
----------- -----------
Total liabilities and stockholders' equity $ 8,149,396 $ 9,496,082
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-7
<PAGE> 80
KUPPER PARKER COMMUNICATIONS, INC.
UNAUDITED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
REVENUES $ 6,050,612 $ 5,248,391
----------- -----------
OPERATING EXPENSES:
Salaries and benefits 4,794,636 4,025,295
Office and general 1,058,624 979,988
----------- -----------
Total operating expenses 5,853,260 5,005,283
----------- -----------
Income from operations 197,352 243,108
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 46,433 29,443
Interest expense (21,109) (47,011)
----------- -----------
Total other income (expense) 25,324 (17,568)
----------- -----------
Income before income tax provision 222,676 225,540
INCOME TAX PROVISION 211,928 131,112
----------- -----------
Net income $ 10,748 $ 94,428
=========== ===========
BASIC INCOME PER SHARE $ 12.62 $ 126.75
=========== ===========
DILUTED INCOME PER SHARE $ 12.13 $ 121.22
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-8
<PAGE> 81
KUPPER PARKER COMMUNICATIONS, INC.
UNAUDITED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED APRIL 30, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,748 $ 94,428
----------- -----------
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization 127,102 133,297
Loss on sale of property and equipment 171 -
Shares earned and released by ESOP 402,170 154,636
(Increase) decrease in assets-
Accounts receivable 1,718,922 (2,900,782)
Other current assets 87,653 (114,249)
Other assets 9,542 7,690
Increase (decrease) in liabilities-
Accounts payable (1,757,64) 2,381,868
Deferred revenue 6,044 34,357
Accrued expenses (93,589) 304,168
----------- -----------
Total adjustments 500,375 985
----------- -----------
Net cash provided by operating activities 511,123 95,413
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (41,405) ( 111,293)
----------- -----------
Net cash used in investing activities (41,405) ( 111,293)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (144,419) ( 100,152)
Purchase of treasury stock (30,000) ( 123,000)
Proceeds from issuance of common stock 260,000 -
----------- -----------
Net cash provided by (used in) financing activities 85,581 ( 223,152)
----------- -----------
Net increase (decrease) in cash and cash equivalents 555,299 ( 239,032)
CASH AND CASH EQUIVALENTS, beginning of period 538,783 589,950
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,094,082 $ 350,918
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-9
<PAGE> 82
KUPPER PARKER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2000
1. These unaudited interim financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted. It is therefore suggested that these unaudited
interim financial statements be read in conjunction with Kupper Parker's
audited financial statements and notes thereto for the fiscal year ended
October 31, 1999 included elsewhere in this Prospectus.
2. These statements reflect all adjustments consisting of normal recurring
accruals, which, in the opinion of management, are necessary for a fair
presentation of the Company's financial position and results of operations
and cash flows for the periods presented.
3. Results of operations for interim periods are not necessarily indicative
of annual results.
4. Earnings Per Share:
A reconciliation of shares used in calculating basic and diluted earnings per
share is as follows:
<TABLE>
<CAPTION>
-----------------------------------
2000 1999
---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Basic 852 745
---------------------------------------------------------------------------------------------------------------
Effect of assumed conversion of employee stock options 34 34
---------------------------------------------------------------------------------------------------------------
Diluted 886 779
---------------------------------------------------------------------------------------------------------------
</TABLE>
F-10
<PAGE> 83
KUPPER PARKER COMMUNICATIONS, INC.
Financial Statements as of
October 31, 1999 and 1998
Together With Auditors' Report
F-11
<PAGE> 84
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Kupper Parker Communications, Inc.:
We have audited the accompanying balance sheets of Kupper Parker Communications,
Inc. (a Missouri corporation) as of October 31, 1999 and 1998, and the related
statements of operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform an 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 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 Kupper Parker Communications,
Inc. as of October 31, 1999 and 1998, and the results of its operations and its
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States.
/s/ ARTHUR ANDERSEN LLP
St. Louis, Missouri,
May 26, 2000
F-12
<PAGE> 85
KUPPER PARKER COMMUNICATIONS, INC.
BALANCE SHEETS
AS OF OCTOBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 538,783 $ 589,950
Accounts receivable, net of reserve for bad debts of $95,000 and $45,000, respectively
7,389,137 4,823,473
Other current assets 432,416 195,689
----------- -----------
Total current assets 8,360,336 5,609,112
----------- -----------
PROPERTY AND EQUIPMENT, net 746,669 747,660
GOODWILL, net of accumulated amortization of $179,460 and $151,851, respectively 234,681 262,290
OTHER ASSETS 154,396 190,481
----------- -----------
Total assets $ 9,496,082 $ 6,809,543
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 189,761 $ 201,174
Accounts payable 6,891,516 4,724,339
Deferred revenue 284,429 298,825
Accrued expenses 819,018 190,025
----------- -----------
Total current liabilities 8,184,724 5,414,363
----------- -----------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 319,010 582,521
Deferred compensation 178,466 216,915
----------- -----------
Total long-term liabilities 497,476 799,436
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $1 par value; 30,000 shares authorized; 1,264 shares issued and outstanding 1,264 1,264
Paid-in capital 1,941,895 1,756,466
Accumulated deficit (188,934) (129,716)
Treasury stock, at average cost; 373 and 331 shares, respectively (686,093) (560,270)
Unearned ESOP shares (254,250) (472,000)
----------- -----------
Total stockholders' equity 813,882 595,744
----------- -----------
Total liabilities and stockholders' equity $ 9,496,082 $ 6,809,543
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-13
<PAGE> 86
KUPPER PARKER COMMUNICATIONS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
REVENUES $ 10,846,769 $ 8,860,103
------------ ------------
OPERATING EXPENSES:
Salaries and benefits 8,781,833 7,467,043
Office and general 2,002,816 1,454,897
------------ ------------
Total operating expenses 10,784,649 8,921,940
------------ ------------
Income (loss) from operations 62,120 (61,837)
------------ ------------
OTHER INCOME (EXPENSE):
Interest income 67,816 93,864
Interest expense (75,226) (84,627)
------------ ------------
Total other expense (7,410) 9,237
------------ ------------
Income (loss) before income tax provision 54,710 (52,600)
INCOME TAX PROVISION 113,928 46,991
------------ ------------
Net loss $ (59,218) $ (99,591)
============ ============
BASIC AND DILUTED LOSS PER SHARE $ (80.68) $ (186.85)
============ ============
WEIGHTED AVERAGE SHARES USED IN BASIC AND DILUTED PER SHARE COMPUTATION 734 533
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-14
<PAGE> 87
KUPPER PARKER COMMUNICATIONS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Common Stock
---------------------------- Paid-In Accumulated
Shares Amount Capital Deficit
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
BALANCE, October 31, 1997 1,099 $ 1,099 $1,087,975 $ (30,125)
Shares issued (repurchased) 165 165 544,769 -
Shares earned and released by ESOP - - 123,722 -
Net loss - - - (99,591)
---------- ---------- ---------- ----------
BALANCE, October 31, 1998 1,264 1,264 1,756,466 (129,716)
Shares repurchased - - - -
Shares earned and released by ESOP - - 185,429 -
Net loss - - - (59,218)
---------- ---------- ---------- ----------
BALANCE, October 31, 1999 1,264 $ 1,264 $1,941,895 $ (188,934)
========== ========== ========== ==========
<CAPTION>
Treasury Stock
---------------------------- Unearned
Shares Amount ESOP Shares Total
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
BALANCE, October 31, 1997 330 $ (557,432) $ (676,000) $ (174,483)
Shares issued (repurchased) 1 (2,838) - 542,096
Shares earned and released by ESOP - - 204,000 327,722
Net loss - - - (99,591)
---------- ---------- ---------- ----------
BALANCE, October 31, 1998 331 (560,270) (472,000) 595,744
Shares repurchased 42 (125,823) - (125,823)
Shares earned and released by ESOP - - 217,750 403,179
Net loss - - - (59,218)
---------- ---------- ---------- ----------
BALANCE, October 31, 1999 373 $ (686,093) $ (254,250) $ 813,882
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-15
<PAGE> 88
KUPPER PARKER COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (59,218) $ (99,591)
----------- -----------
Adjustments to reconcile net loss to net cash provided by operating activities-
Depreciation and amortization 227,569 205,335
Loss on sale of property and equipment - 14,773
Deferred income taxes 23,040 (4,708)
Bad debt provision 50,000 15,000
Shares earned and released by ESOP 403,179 327,722
(Increase) decrease in assets-
Accounts receivable (2,615,664) 5,921
Other current assets (216,727) (60,436)
Other assets (6,954) (8,977)
Increase (decrease) in liabilities-
Accounts payable 2,167,177 127,588
Deferred revenue (14,396) (36,584)
Accrued expenses 628,993 (166,034)
Deferred compensation (38,449) (35,935)
----------- -----------
Total adjustments 607,768 383,665
----------- -----------
Net cash provided by operating activities 548,550 284,074
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (198,969) (490,688)
----------- -----------
Net cash used in investing activities (198,969) (490,688)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (274,925) (257,799)
Purchase of treasury stock (125,823) (2,838)
Proceeds from issuance of common stock - 544,934
----------- -----------
Net cash (used in) provided by financing activities (400,748) 284,297
----------- -----------
Net (decrease) increase in cash and cash equivalents (51,167) 77,683
CASH AND CASH EQUIVALENTS, beginning of year 589,950 512,267
----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 538,783 $ 589,950
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-16
<PAGE> 89
KUPPER PARKER COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999 AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Nature of Operations
Kupper Parker Communications, Inc. ("the Company") is an advertising and
communications business. The Company provides professional promotion services,
advertising services, public relations services, direct marketing services and
interactive services through various forms of media including television, radio,
print and the internet. In addition to its headquarters in St. Louis, Missouri,
the Company has satellite offices located in Kansas City, Missouri; New Orleans,
Louisiana; Nashville and Memphis, Tennessee; Columbus, Ohio; and Louisville,
Kentucky. The Company operates in only one segment.
Use of Estimates
The preparation of these financial statements requires the use of certain
estimates by management in determining the Company's assets, liabilities,
revenues and expenses. Actual results could differ from those estimates.
Revenue Recognition
The Company earns substantially all of its revenues from fees for services
performed and for production of advertisements. The Company also derives
revenues from commissions for the placement of advertisements in various media.
Revenue is realized when the service is performed, in accordance with the terms
of the contractual arrangement, and collection is reasonably assured. Salaries
and other agency costs are charged to expense at the time incurred.
Deferred revenues represent fees and commissions which have been billed but not
yet earned.
Cash Equivalents
For purposes of balance sheet and statements of cash flow presentation, the
Company considers all highly liquid investments with an original maturity of 90
days or less to be cash equivalents.
Property and Equipment
The Company computes depreciation using the straight-line method over the
estimated useful life of the related asset as follows:
<TABLE>
<S> <C>
Equipment 3-5 years
Furniture and fixtures 5-7 years
Leasehold improvements Lease term or useful life, whichever is shorter
</TABLE>
Goodwill
The Company amortizes goodwill over a 15 year period. Periodically, the Company
reviews and, if necessary, adjusts the carrying value for goodwill based upon
current facts and circumstances. Amortization of goodwill amounted to $27,609 in
1999 and 1998.
F-17
<PAGE> 90
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, accounts
payable and accrued expenses approximate fair value because of the short
maturity of those instruments. At October 31, 1999 and 1998, the Company
estimates that the fair value of its long-term debt is not materially different
from its financial statement carrying value. The fair value of long-term debt
was estimated using quoted market prices or discounted future cash flows.
Stock Options
The Company accounts for its stock option awards under the intrinsic value based
method of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Under the intrinsic value based
method, compensation cost is the excess, if any, of the quoted market price at
grant date or other measurement date over the amount an employee must pay to
acquire the stock. The Company makes pro forma disclosures of net income (loss)
and earnings (loss) per share as if the fair value based method of accounting
had been applied as required by Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation" (SFAS No. 123).
Earnings Per Share
Basic earnings per share is computed by dividing net loss by the weighted
average number of shares outstanding during the year. Diluted earnings per share
is computed by dividing the net loss by the weighted average number of shares
outstanding, unless the calculation is antidilutive.
For all periods presented, the effect of dilutive securities is antidilutive. As
such, the denominator used in determining earnings per share is the same for
both basic and dilutive earnings per share.
Long-Lived Assets
In accordance with SFAS 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of, the Company periodically assesses
the carrying value of its long-lived assets and recognizes impairment losses if
it is determined the carrying values are not recoverable.
Income Taxes
The Company accounts for income taxes in accordance with SFAS 109, which
utilizes the liability method. Under this method, deferred taxes are determined
based on the estimated future tax effects of differences between the financial
statement and tax basis of assets and liabilities given the provisions of the
enacted tax laws.
2. RESERVE FOR BAD DEBTS:
Changes in the Company's reserve for bad debts for the years ended October 31,
1999 and 1998, were as follows:
<TABLE>
<CAPTION>
Balance at Provision for Write-Offs, Net Balance at End
Year Beginning of Year Doubtful Accounts of Recoveries of Year
---- ----------------- ----------------- --------------- --------------
<S> <C> <C> <C> <C>
1999 $45,000 $88,365 $(38,365) $95,000
1998 30,000 15,000 - 45,000
</TABLE>
F-18
<PAGE> 91
3. OTHER CURRENT ASSETS:
At October 31, 1999 and 1998, other current assets consisted of:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Expenditures billable to clients $262,774 $ 55,793
Deferred income taxes 38,000 18,000
Prepaid expenses and other 131,642 121,896
-------- --------
$432,416 $195,689
======== ========
</TABLE>
4. PROPERTY AND EQUIPMENT, net:
At October 31, 1999 and 1998, property and equipment, net consisted of:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Equipment $ 891,380 $ 756,615
Furniture and fixtures 703,375 645,740
Leasehold improvements 27,714 21,144
----------- -----------
1,622,469 1,423,499
Less- Accumulated depreciation (875,800) (675,839)
----------- -----------
$ 746,669 $ 747,660
=========== ===========
</TABLE>
5. LINE-OF-CREDIT AND LONG-TERM DEBT:
The Company has a $1,000,000 revolving line-of-credit with Missouri State Bank.
Borrowings under this agreement are secured by accounts receivable and
assignment of a $500,000 interest in a key-man life insurance policy that the
Company maintains on its chief executive officer. Interest on any borrowings
under this agreement is payable monthly at a rate of prime less 0.5%. This
line-of-credit expires on May 27, 2000, and on May 25, 2000, the Company renewed
the line-of-credit for one year with the terms stated above. During 1999 and
1998, the Company did not use this line-of-credit.
At October 31, 1999 and 1998, long-term debt consisted of:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Term loans $ 254,250 $ 472,000
Subordinated debt 254,521 311,695
--------- ---------
508,771 783,695
Less- Current maturities (189,761) (201,174)
--------- ---------
$ 319,010 $ 582,521
========= =========
</TABLE>
Scheduled maturities of long-term debt are $189,761, $189,822, $68,623 and
$60,565 in 2000, 2001, 2002 and 2003, respectively.
F-19
<PAGE> 92
During the year ended October 31, 1994, the Company established a leveraged
Employee Stock Ownership Plan ("ESOP"). An employee stock ownership trust (the
"Trust") was established to fund the plan. The Trust purchased 501 shares of the
Company's stock with the proceeds of a $1,250,000 loan from a bank. This loan,
scheduled to be repaid on August 22, 2002, called for monthly principal payments
of $12,000 plus interest at prime less 0.5%. The ESOP repaid this loan on May
28, 1999, from proceeds from the issuance of another $388,459 bank term loan.
The term loan, scheduled to be repaid on May 20, 2002, calls for monthly
principal payments of $10,750 plus interest at prime less 0.5%. At October 31,
1999, the interest rate on the term loan was 7.75%. The term loan is secured by
the Company's accounts receivable and assignment of a $500,000 interest in a
key-man life insurance policy that the Company maintains on its chief executive
officer. Under the terms of both of these loans, the Company guaranteed
repayment of the loans and shares held by the Trust but not allocated to
participants were pledged as collateral. As a result, the outstanding trust debt
under these loans is reflected as debt of the Company and the shares pledged as
collateral against these loans is reported as "Unearned ESOP Shares" as a contra
equity account.
On August 31, 1993, the Company purchased 351 shares of its common stock through
the issuance of a subordinated promissory note with a face amount of $557,432.
The terms of the note call for 120 equal monthly payments of principal and
interest of $6,217 at a 6.1% interest rate.
6. CONTINGENCIES:
The Company is a party to a lawsuit incidental to its business. It is not
possible at the present time to estimate the ultimate liability, if any, of the
Company with respect to such litigation; however, management believes that any
ultimate liability will not have material effect on the Company's results of
operations or financial position.
7. STOCKHOLDERS' RESTRICTIVE AGREEMENT:
The Company has entered into restrictive stockholder agreements with all of its
employee-stockholders outside of the Company's ESOP. Under these agreements,
upon termination of employment of an employee-stockholder for any reason, the
Company is obligated to purchase all shares then owned by that
employee-stockholder at a price equal to the most current valuation established
for purposes of administering its ESOP benefits.
8. STOCK OPTIONS:
The Company has fully vested stock options outstanding to purchase up to 34
shares of common stock for $1 per share. No options were granted, or exercised,
during the years ended October 31, 1999 or 1998. The weighted average exercise
price of the options is $1 for the years ended October 31, 1999 and 1998. No
shares of common stock have been reserved related to these options.
SFAS No. 123 requires the Company to provide pro forma information regarding net
income (loss) and earnings (loss) per share as if compensation cost for the
Company's stock options had been determined in accordance with the fair value of
each stock option at the grant date by using the Black-Scholes option-pricing
model. As the options were fully vested at the date of grant and pro forma net
loss and loss per share are unchanged for the periods of October 31, 1999 and
1998, no pro forma information is disclosed.
9. RETIREMENT AND OTHER EMPLOYEE BENEFIT PLANS:
The Company has a 401(k) plan and an employee stock ownership plan. The
Company's annual contribution to the 401(k) plan is discretionary, but may not
exceed the amount permitted as deductible expense under the Internal Revenue
Code. During 1999 and 1998, the Company did not make a contribution to this
plan.
F-20
<PAGE> 93
During fiscal 1994, the Company established a leveraged Employee Stock Ownership
Plan ("ESOP") covering all employees who meet minimum age and length of service
requirements (see Note 5). Under the terms of the plan, the Company makes cash
contributions that may be no less than the required related debt service. The
ESOP shares were initially pledged as collateral for its debt. Shares are
released from collateral and allocated to participants, based on the portion of
debt service paid, as the related debt is repaid (see Note 5). The Company
accounts for its ESOP in accordance with SOP 93-6. The Company records, as
compensation expense, the fair value, as determined in the independent stock
valuation report, of shares released to participants, and the shares become
outstanding for earnings-per-share computations. During 1999 and 1998, the
Company made cash contributions of $247,919 and $279,823, respectively, to the
ESOP and recorded related compensation and interest expense of $403,179 and
$30,169 in 1999 and $327,722 and $54,222 in 1998. Following is a summary of the
ESOP shares at October 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Allocated shares 323 252
Shares allocated during year 81 82
Unreleased shares 86 167
-------- --------
Total ESOP shares 490 501
======== ========
Fair value of unreleased shares $430,000 $665,495
======== ========
</TABLE>
The Company has a deferred compensation agreement with a former employee whereby
annual payments of $50,400 are made to this individual through 2002. The amounts
reflected as "Deferred Compensation" at October 31, 1999 and 1998, represent the
net present value of these future payments using a discount rate of 7%.
Kupper Parker does not provide postretirement medical and life insurance
benefits to its employees.
10. LEASE OBLIGATIONS:
Kupper Parker leases all of its office facilities under operating leases. Rental
expense on these leases was $595,058 in 1999 and $386,700 in 1998.
In February 2000, the Company extended its lease for its St. Louis, Missouri,
headquarters. The future minimum rental obligations for these leases are as
follows:
<TABLE>
<CAPTION>
Year Amount
------------- ----------
<S> <C>
2000 $ 633,173
2001 655,738
2002 634,661
2003 560,134
2004 554,037
Thereafter 3,001,461
</TABLE>
F-21
<PAGE> 94
11. FEDERAL AND STATE INCOME TAXES:
The provision for taxes on income consists of the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Currently payable:
Federal $ 85,113 $ 43,400
State 5,775 8,299
-------- --------
Total 90,888 51,699
-------- --------
Deferred:
Federal 18,673 (3,816)
State 4,367 (892)
-------- --------
Total 23,040 (4,708)
-------- --------
$113,928 $ 46,991
======== ========
</TABLE>
Deferred and prepaid tax expense results from temporary differences in the
recognition of revenue and expense for tax and financial reporting purposes.
Deferred tax assets (liabilities) as of October 31, 1999 and 1998, are as
follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Current deferred:
Reserve for bad debts $ 38,000 $ 18,000
======== ========
Long-term deferred:
Compensation expense related to stock options $ 44,961 $ 44,961
Deferred compensation 71,386 86,766
Depreciation (73,496) (45,836)
-------- --------
$ 42,851 $ 85,891
======== ========
</TABLE>
The reconciliation of the U.S. statutory rate to the effective income tax rate
is as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Provision for federal income taxes at the statutory rate $ 18,601 $(17,884)
State taxes, net of federal tax benefit 6,694 4,889
Impact of nondeductible ESOP compensation expense 63,046 42,065
Impact of nondeductible goodwill amortization 9,387 9,387
Nondeductible travel and entertainment 9,975 8,634
Other 6,225 (100)
-------- --------
$113,928 $ 46,991
======== ========
</TABLE>
12. SUPPLEMENTAL CASH FLOW DATA:
Interest and taxes paid in 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Interest $ 63,273 $ 70,162
Taxes 49,236 50,028
</TABLE>
F-22
<PAGE> 95
13. SUBSEQUENT EVENTS:
On April 25, 2000, the Company signed a letter of intent to merge with
Greenstone Roberts Advertising, Inc. ("Greenstone"), a public company. Under the
proposed terms, all of the shares of the privately held Kupper Parker stock
would be exchanged for 5,074,000 new shares of Greenstone, and 300,000 of
existing Greenstone shares would be repurchased by the merged entity for cash at
$4.50 per share. As a result, Kupper Parker shareholders would own approximately
88% of the merged entity. This transaction is considered a reverse acquisition
and will be accounted for as a purchase business combination with the Company
being the acquirer for accounting purposes.
F-23
<PAGE> 96
LIST OF ANNEXES
ANNEX A Agreement and Plan of Merger (without schedules
and exhibits)............................................... A-1
ANNEX B Amendment to Certificate of Incorporation ............... A-40
ANNEX C Employment Agreements ................................... A-41
ANNEX D Amendment to 1998 Stock Option Plan ..................... A-52
ANNEX E Section 351.455 of the General and Business
Corporation Law of Missouri............................. A-53
<PAGE> 97
ANNEX A
AGREEMENT AND PLAN OF MERGER
This Agreement is entered into as of August 23, 2000 by and between
Greenstone Roberts Advertising, Inc., a New York corporation ("Greenstone"), and
Kupper Parker Communications, Incorporated, a Missouri corporation ("Kupper").
Greenstone and Kupper are referred to collectively herein as the "Parties."
This Agreement contemplates a tax-free merger of Kupper with and into
Greenstone in a reorganization pursuant to Code Section 368(a)(1)(A). Kupper
Stockholders will receive capital stock in Greenstone in exchange for their
capital stock in Kupper.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1 DEFINITIONS.
1.1 "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
1.2 "Audited Balance Sheets" has the meaning set forth in Section 3.6
below.
1.3 "Assumed Option" has the meaning set forth in Section 2.4.7 below.
1.4 "Average Closing Price" means the average closing sale price of the
Greenstone Shares for the twenty (20) Business Days preceding the second
Business Day prior to the Closing Date. For each of such twenty (20) Business
Days on which there is no reported sale of Greenstone Shares, the reported
closing price at which Greenstone Shares were sold on the most recent Business
Day prior thereto on which there was a reported sale of Greenstone Shares shall
be deemed to be the closing sale price.
1.5 "Business Day" means any day that is not a Saturday, Sunday or other
day on which banks are required or authorized by law to be closed in New York.
1.6 "Certificate of Merger" has the meaning set forth in Section 2.3
below.
1.7 "Claims" has the meaning set forth in Section 3.14 below.
1.8 "Closing" has the meaning set forth in Section 2.2 below.
1.9 "Closing Date" has the meaning set forth in Section 2.2 below.
1.10 "Confidential Information" means any information concerning the
businesses and affairs of Kupper or Greenstone that is not already generally
available to the public.
1.11 "Conversion Ratio" has the meaning set forth in Section 2.4.5 below.
A-1
<PAGE> 98
1.12 "Deferred Compensation" has the meaning set forth in Section 3.23
below.
1.13 "Definitive Greenstone Proxy Materials" means the definitive proxy
materials relating to the Special Greenstone Meeting.
1.14 "Disclosure Schedule" has the meaning set forth in Section 3 below.
1.15 "Dissenting Share" means any Kupper Share with respect to which any
stockholder has exercised its appraisal rights under the Missouri
Corporation Law.
1.16 "Effective Time" has the meaning set forth in Section 2.4.1 below.
1.17 "Exchange Agent" has the meaning set forth in Section 2.5.1 below.
1.18 "Form S-4" has the meaning set forth in Section 5.3.1 below.
1.19 "GAAP" means United States generally accepted accounting principles
as in effect on the date that any such principle shall have been
applied to the subject financial matter.
1.20 "Governmental Bodies" has the meaning set forth in Section 3.19
below.
1.21 "Greenstone" has the meaning set forth in the preface above.
1.22 "Greenstone Benefit Plans" has the meaning set forth in Section 4.17
below.
1.23 "Greenstone Contracts" has the meaning set forth in Section 4.14
below.
1.24 "Greenstone Most Recent Fiscal Quarter End" has the meaning set
forth in Section 4.7 below.
1.25 "Greenstone Real Property" has the meaning set forth in Section 4.25
below.
1.26 "Greenstone Real Property Leases" has the meaning set forth in
Section 4.25 below.
1.27 "Greenstone Share" means any share of the Common Stock, $0.01 par
value per share, of Greenstone.
1.28 "Insurance Policies" has the meaning set forth in Section 3.18
below.
1.29 "IRS" means the Internal Revenue Service.
1.30 "Knowledge" means actual, knowledge after reasonable investigation,
of (a) in the case of Kupper, Mr. Bruce Kupper and (b) in the case
of Greenstone, Mr. Ronald Greenstone.
1.31 "Kupper" has the meaning set forth in the preface above.
1.32 "Kupper Benefit Plans" has the meaning set forth in Section 3.16
below.
1.33 "Kupper Contracts" has the meaning set forth in Section 3.13 below.
A-2
<PAGE> 99
1.34 "Kupper ESOP" means the Kupper Parker Communications, Incorporated
Employee Stock Ownership Plan and Trust, effective as of November 1,
1993, as amended.
1.35 "Kupper Most Recent Fiscal Quarter End" has the meaning set forth in
Section 3.6 below.
1.36 "Kupper Option" has the meaning set forth in Section 2.4.7 below.
1.37 "Kupper Option Plan" has the meaning set forth in Section 2.4.7
below.
1.38 "Kupper Financials" has the meaning set forth in Section 3.6 below.
1.39 "Kupper Real Property" has the meaning set forth in Section 3.24
below.
1.40 "Kupper Real Property Leases" has the meaning set forth in Section
3.24 below.
1.41 "Kupper Share" means any share of the Common Stock, $1.00 par value
per share, of Kupper.
1.42 "Kupper Stockholder" means any Person who or which holds any Kupper
Shares.
1.43 "Latest Balance Sheet" has the meaning set forth in Section 3.6
below.
1.44 "Laws" has the meaning set forth in Section 3.19 below.
1.45 "Merger" has the meaning set forth in Section 2.1 below.
1.46 "Missouri Corporation Law" means The General and Business
Corporation Law of Missouri, as amended.
1.47 "New York Business Corporation Law" means the Business Corporation
Law of the State of New York, as amended.
1.48 "Orders" has the meaning set forth in Section 3.19 below.
1.49 "Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency).
1.50 "Party" has the meaning set forth in the preface above.
1.51 "Permits" has the meaning set forth in Section 3.20 below.
1.52 "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an
unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
1.53 "Proceeding" means any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal,
administrative, investigative, or informal) commenced, brought,
conducted, or heard by or before, or otherwise involving, any
governmental body or arbitrator.
A-3
<PAGE> 100
1.54 "Proxy Statement" has the meaning set forth in Section 5.3.1 below.
1.55 "Public Report" has the meaning set forth in Section 4.6 below.
1.56 "Repurchase" has the meaning set forth in Section 2.7 below.
1.57 "Requisite Greenstone Stockholder Approval" means the affirmative
vote of the holders of two- thirds of Greenstone Shares in favor of
this Agreement and the Merger.
1.58 "Requisite Kupper Stockholder Approval" means the affirmative vote
of the holders of two-thirds of Kupper Shares in favor of this
Agreement and the Merger.
1.59 "SEC" means the Securities and Exchange Commission.
1.60 "Securities Act" means the Securities Act of 1933, as amended.
1.61 "Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
1.62 "Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's,
materialmen's, and similar liens, (b) liens for taxes not yet due
and payable or for taxes that the taxpayer is contesting in good
faith through appropriate proceedings, (c) purchase money liens and
liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not
incurred in connection with the borrowing of money.
1.63 "Special Greenstone Meeting" has the meaning set forth in Section
5.3.2 below.
1.64 "Special Kupper Meeting" has the meaning set forth in Section 5.3.2
below.
1.65 "Stockholder Agreements" has the meaning set forth in Section 5.9
below.
1.66 "Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
1.67 "Surviving Corporation" has the meaning set forth in Section 2.1
below.
2 BASIC TRANSACTION.
2.1 The Merger. On and subject to the terms and conditions of
this Agreement, Kupper will merge with and into Greenstone (the "Merger")
at the Effective Time. Greenstone shall be the corporation surviving the
Merger (the "Surviving Corporation").
2.2 The Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of
Forchelli, Curto, Schwartz, Mineo, Carlino & Cohn, LLP, in Mineola, New
York, commencing at 9:00 a.m. local time on the second business day
following the satisfaction or waiver of all conditions to the obligations
of the Parties to consummate
A-4
<PAGE> 101
the transactions contemplated hereby (other than conditions with respect
to actions the respective Parties will take at the Closing itself) or
such other date as the Parties may mutually determine (the "Closing
Date"); provided, however, that the Closing Date shall be no later than
October 31, 2000.
2.3 Actions at the Closing. At the Closing, (i) Kupper will
deliver to Greenstone the various certificates, instruments and documents
referred to in Section 6.1 below and the payment for the Repurchase as
provided in Section 2.7, (ii) Greenstone will deliver to Kupper the
various certificates, instruments, and documents referred to in Section
6.2 below, (iii) Greenstone and Kupper will file with the Secretary of
State of the State of New York a Certificate of Merger in substantially
the form attached hereto as Exhibit A (the "Certificate of Merger"); (iv)
Greenstone and Kupper will file with the Secretary of State of the State
of Missouri Articles of Merger in substantially the form attached hereto
as Exhibit B; and (v) Greenstone will deliver to the Exchange Agent in
the manner provided below in this Section 2 the certificate evidencing
Greenstone Shares issued in the Merger.
2.4 Effect of Merger.
2.4.1 General. The Merger shall become effective at the
time (the "Effective Time") Greenstone and Kupper file the Certificate of
Merger with the Secretary of State of the State of New York. The Merger
shall have the effect set forth in the New York Business Corporation Law.
The Surviving Corporation shall, at any time after the Effective Time,
take any action (including executing and delivering any document) in the
name and on behalf of either Greenstone or Kupper in order to carry out
and effectuate the transactions contemplated by this Agreement.
2.4.2 Certificate of Incorporation. The Certificate of
Incorporation of Greenstone as amended and restated in accord with
Exhibit C will constitute the Certificate of Incorporation of the
Surviving Corporation.
2.4.3 Bylaws. The Bylaws of Greenstone in effect at and as
of the Effective Time as amended and restated in accord with Exhibit D
will constitute the bylaws of the Surviving Corporation.
2.4.4 Directors and Officers. The directors and officers
listed on attached Exhibit E, will constitute the directors and officers
of the Surviving Corporation upon the consummation of the Merger. If the
Board is increased to nine or more, the Board is to be divided into three
staggered classes at the next annual shareholder meeting.
2.4.5 Conversion of Kupper Shares. At and as of the
Effective Time, (A) each Kupper Share (other than any Dissenting Share)
shall be converted into the right to receive 5,450 Greenstone Shares (the
ratio of calculated Greenstone Shares to one Kupper Share is referred to
herein as the "Conversion Ratio"), and (B) each Dissenting Share shall be
converted into the right to receive payment from the Surviving
Corporation with respect thereto in accordance with the provisions of the
Missouri Corporation Law. The total number of Greenstone Shares to be
issued pursuant to the above stated Conversion Ratio shall not exceed
5,073,950 shares. No Kupper Share shall be deemed to be outstanding other
than those listed in Part 3.2 of the Disclosure Schedule or to have any
rights other than those set forth above in this Section 2.4.5 after the
Effective Time.
A-5
<PAGE> 102
2.4.6 Greenstone Shares. Each Greenstone Share issued and
outstanding at and as of the Effective Time will remain issued and
outstanding, except for those Greenstone Shares subject to the provisions
of Section 2.7.
2.4.7 Options.
(i) At the Effective Time, automatically and
without any action on the part of the holder thereof, each
option (whether or not vested) to purchase Kupper Shares
granted under all Kupper stock option plans (each such
option a "Kupper Option" and such plan the "Kupper Option
Plan"), which remains as of such time unexercised in whole
or in part, shall be assumed by Greenstone and become an
option (an "Assumed Option") to purchase that number of
shares of Greenstone Shares obtained by multiplying the
number of Kupper Shares issuable upon the exercise of such
Kupper Option by the Exchange Ratio at an exercise price
per share equal to the per share exercise price of such
Kupper Option divided by the Exchange Ratio. If the
foregoing calculation results in an Assumed Kupper Option
being exercisable for a fraction of a Greenstone Share, the
number of Greenstone Shares subject to such Assumed Kupper
Option shall be rounded down to the nearest whole number of
shares. The Assumed Option (A) shall provide the optionee
with the same vesting and other rights, limitations and
obligations that the optionee had under the Kupper Option
before such assumption and (B) shall not give the optionee
additional vesting or other rights, limitations or
obligations that he did not have under the Kupper Option
before such assumption.
(ii) As soon as practicable after the Effective
Time, Greenstone shall deliver to the holders of the Kupper
Options appropriate agreements evidencing Greenstone's
assumption of such options.
(iii) At the Effective Time, Greenstone agrees
to assume the Kupper Option Plan with such amendments
thereto as may be required to reflect the Merger, including
the substitution of Greenstone Shares for Kupper Shares
thereunder.
(iv) The Board of Directors of Kupper (or a duly
appointed committee thereof responsible for the
administration of the Kupper Option Plan in accordance with
the terms of such plan) shall, prior to or as of the
Effective Time, take all necessary actions, pursuant to and
in accordance with the terms of the Kupper Option Plan and
the instruments evidencing the Kupper Options, to provide
for the conversion of the Kupper Options into the Assumed
Options in accordance with subparagraph (i) above.
(v) All Kupper Options shall, prior to and
subsequent to the Effective Time, continue to vest and be
exercisable under the terms of the respective Kupper Option
and the Kupper Option Plan.
2.5 Procedure for Payment.
A-6
<PAGE> 103
2.5.1 Immediately after the Effective Time, Surviving
Corporation (A) will furnish to American Stock Transfer (the "Exchange Agent") a
stock certificate (issued in the name of the Exchange Agent or its nominee)
representing that number of Greenstone Shares equal to the product of (I) the
Conversion Ratio times (II) the number of outstanding Kupper Shares (other than
any Dissenting Shares) set forth on Part 3.2 of the Disclosure Schedule and (B)
will cause the Exchange Agent to mail a letter of transmittal (with instructions
for its use) to each record holder of outstanding Kupper Shares for the holder
to use in surrendering the certificates which represented his/her or its Kupper
Shares in exchange for a certificate representing the number of Greenstone
Shares to which he or it is entitled.
2.5.2 Notwithstanding any other provision hereof, no fractional
Greenstone Shares shall be issued to Kupper Stockholders. In lieu thereof, each
such Kupper Stockholder entitled to a fraction of a Greenstone Share (after
taking into account all Kupper Shares held at the Effective Time by such Kupper
Stockholder) shall receive, at the time of surrender of the certificates
representing such Kupper Stockholder's Kupper Shares, an amount in cash equal to
the Average Closing Price, multiplied by the fraction of a Greenstone Share to
which such Kupper Stockholder would otherwise be entitled. No such Kupper
Stockholder shall be entitled to dividends, voting rights, interest on the value
of, or any other rights in respect of a fractional share.
2.5.3 Surviving Corporation will not pay any dividend or make any
distribution on Greenstone Shares (with a record date at or after the Effective
Time) to any record holder of outstanding Kupper Shares until the holder
surrenders for exchange his or its certificates which represented Kupper Shares.
Surviving Corporation instead will pay the dividend or make the distribution to
the Exchange Agent in trust for the benefit of the holder pending surrender and
exchange. Surviving Corporation may cause the Exchange Agent to invest any cash
the Exchange Agent receives from Surviving Corporation as a dividend or
distribution in one or more of the permitted investments set forth on Exhibit F
attached hereto; provided, however, that the terms and conditions of the
investments shall be such as to permit the Exchange Agent to make prompt
payments of cash to the holders of outstanding Kupper Shares as necessary.
Surviving Corporation may cause the Exchange Agent to pay over to Surviving
Corporation any net earnings with respect to the investments, and Surviving
Corporation will replace promptly any cash which the Exchange Agent loses
through investments. In no event, however, will any holder of outstanding Kupper
Shares be entitled to any interest or earnings on the dividend or distribution
pending receipt.
2.5.4 Surviving Corporation may cause the Exchange Agent to
return any Greenstone Shares and dividends and distributions thereon remaining
unclaimed 180 days after the Effective Time, and thereafter each remaining
record holder of outstanding Kupper Shares shall be entitled to look to
Surviving Corporation (subject to abandoned property, escheat, and other similar
laws) as a general creditor thereof with respect to Greenstone Shares and
dividends and distributions thereon to which he or it is entitled upon surrender
of his or its certificates.
2.5.5 Surviving Corporation shall pay all charges and expenses
of the Exchange Agent.
A-7
<PAGE> 104
2.6 Closing of Transfer Records. After the close of business on the
Closing Date, transfers of Kupper Shares outstanding prior to the Effective Time
shall not be made on the stock transfer books of the Surviving Corporation.
2.7 Purchase of Shares. At the time of Closing, the Surviving Entity
will purchase 300,000 Greenstone Shares (the "Repurchase") in exchange for an
aggregate consideration of One Million Three Hundred Fifty Thousand and No/100
Dollars ($1,350,000.00). The funds for such Repurchase will be provided by
Kupper. Only those holders of Greenstone Shares, who are record holders of
Greenstone Shares as of the record date of the Special Greenstone Meeting shall
be entitled to participate in the Repurchase. Holders of Greenstone Shares who
desire to participate in the Repurchase shall so indicate on their proxy for the
Greenstone Special Meeting setting forth the number of Greenstone Shares they
desire to have repurchased. If the Repurchase offer is oversubscribed, the offer
will be prorated.
3 REPRESENTATIONS AND WARRANTIES OF KUPPER.
Kupper represents and warrants to Greenstone that the statements
contained in this Section 3 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then, except for representations and warranties made as of a certain date),
and except as set forth in the disclosure schedule accompanying this Agreement
and initialed by the Parties (the "Disclosure Schedule"). The Disclosure
Schedule will be arranged in paragraphs corresponding to the numbered paragraphs
contained in this Section 3.
3.1 Organization, Qualification, and Corporate Power. Except as set forth
on Part 3.1 of the Disclosure Schedule, each of Kupper and its Subsidiaries is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. Except as set forth on Part 3.1
of the Disclosure Schedule, each of Kupper and its Subsidiaries is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required except where the lack of such
qualification would not have a material adverse effect on the financial
condition of Kupper and its Subsidiaries taken as a whole or on the ability of
the Parties to consummate the transactions contemplated by this Agreement.
Except as set forth on Part 3.1 of the Disclosure Schedule, each of Kupper and
its Subsidiaries has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. Part 3.1 of the Disclosure Schedule sets forth the names of all
Subsidiaries of Kupper and Kupper's ownership interest therein. Except as set
forth on Part 3.1 of the Disclosure Schedule neither Kupper nor any of its
Subsidiaries have any interest in any other Subsidiaries or affiliates. None of
Kupper's Subsidiaries are currently engaged in any business activity.
3.2 Capitalization. Kupper currently has and will have at the time of
Closing the following capitalization: 30,000 shares of common stock authorized;
1,264 shares of common stock issued; 931.0805 shares of common stock
outstanding; 332.9195 shares of common treasury stock; 34 options for shares
authorized; 34 options for shares issued; and 34 shares reserved for such
options. All of the issued and outstanding Kupper Shares have been duly
authorized and are validly issued, fully paid, and nonassessable and are held by
those persons as set forth on Part 3.2 of the Disclosure
A-8
<PAGE> 105
Schedule. Except as shown in Part 3.2 of the Disclosure Schedule, there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require Kupper to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to Kupper.
3.3 Charter Documents and Corporate Records. Kupper and each of its
Subsidiaries have heretofore delivered to Greenstone certified copies of their
respective Certificates of Incorporation and By-laws, as in effect on the date
hereof. Kupper has heretofore delivered or made available to Greenstone true and
complete copies of the minutes of meetings (or written consents in lieu of
meetings) of its directors and shareholders.
3.4 Authorization of Transaction. Kupper has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder; provided, however, that
Kupper cannot consummate the Merger unless and until it receives the Requisite
Kupper Stockholder Approval. The Kupper Board of Directors has approved the
Merger and will recommend the Merger to Kupper Stockholders. This Agreement
constitutes the valid and legally binding obligation of Kupper, enforceable in
accordance with its terms and conditions.
3.5 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of Kupper and its Subsidiaries is
subject or any provision of the charter or bylaws of any of Kupper and its
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument or other arrangement to which
any of Kupper and its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets) except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, or Security Interest would not have a material adverse effect on the
financial condition of Kupper and its Subsidiaries taken as a whole or on the
ability of the Parties to consummate the transactions contemplated by this
Agreement. To the Knowledge of any director or officer of Kupper, and other than
in connection with the provisions Missouri Corporation Law, none of Kupper and
its Subsidiaries needs to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order for the Parties to consummate the transactions contemplated by this
Agreement except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a material adverse effect on
Kupper and its Subsidiaries taken as a whole or on the ability of the Parties to
consummate the transactions contemplated by this Agreement.
3.6 Financial Statements. Kupper has delivered to Greenstone: (a) audited
balance sheets of Kupper and its Subsidiaries as at October 31 in each of the
years 1998 through 1999, and the related audited statements of income, changes
in stockholders' equity, and cash flow for each of the fiscal years then ended
("Audited Balance Sheets") (b) a balance sheet of Kupper and its Subsidiaries as
at October 31, 1999, and the related statements of income, changes in
stockholders' equity, and cash
A-9
<PAGE> 106
flow for the fiscal year then ended ("Latest Balance Sheet"), and (c) an
unaudited balance sheet of Kupper and its Subsidiaries as at April 30, 2000 (the
"Kupper Most Recent Fiscal Quarter End") and the related unaudited statements of
income, changes in stockholders' equity, and cash flow for the six months then
ended, including in each case the notes thereto (the "Audited Balance Sheets"
and "Kupper Most Recent Fiscal Quarter End" may hereinafter be referred to
collectively as "Kupper Financials"). Such Kupper Financials and notes fairly
present the financial condition and the results of operations, changes in
stockholders' equity, and cash flow of Kupper and its Subsidiaries as at the
respective dates of and for the periods referred to in such financial
statements, all in accordance with GAAP, subject, in the case of interim
financial statements, to normal recurring year-end adjustments (the effect of
which will not, individually or in the aggregate, be materially adverse) and the
absence of notes (that, if presented, would not differ materially from those
included in the Balance Sheet); the financial statements referred to in this
Section 3.6 reflect the consistent application of such accounting principles
throughout the periods involved. No financial statements of any Person other
than Kupper and its Subsidiaries are required by GAAP to be included in the
Kupper Financials.
3.7 Events Subsequent to Kupper Most Recent Fiscal Quarter End. Since the
Kupper Most Recent Fiscal Quarter End, there has not been any material adverse
change in the business, financial condition, operations, results of operations,
or future prospects of Kupper and its Subsidiaries taken as a whole.
3.8 Undisclosed Liabilities. None of Kupper and its Subsidiaries has any
liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
taxes, except for (i) liabilities set forth on the balance sheet dated as of the
Kupper Most Recent Fiscal Quarter End and (ii) liabilities which have arisen
after the Kupper Most Recent Fiscal Quarter End in the Ordinary Course of
Business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law).
3.9 Brokers' Fees. None of Kupper and its Subsidiaries has any liability
or obligation to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated by this Agreement.
3.10 Continuity of Business Enterprise. Kupper operates at least one
significant historic business line, or owns at least a significant portion of
its historic business assets, in each case within the meaning of Reg. Section
1.368-1(d).
3.11 Company Receivables; Inventories. Except to the extent of the
amount of the reserve for doubtful accounts reflected in the Kupper Most Recent
Fiscal Quarter End or as set forth in Part 3.11 of the Disclosure Schedule, all
such receivables shown on the Kupper Most Recent Fiscal Quarter End (except
receivables that have been collected since such date) are valid and enforceable
claims, and constitute bona fide receivables resulting from the sale of goods
and services in the Ordinary Course of Business. To the knowledge of Kupper, the
Receivables are not subject to any defense, offsets, returns, rebates,
allowances or credits of any kind, and are fully collectible at the full amount
thereof, except to the extent of the amount of the reserve for doubtful accounts
reflected in the Kupper Most Recent Fiscal Quarter End or as otherwise provided
in Part
A-10
<PAGE> 107
3.11 of the Disclosure Schedule. All work-in-progress has been performed in a
manner consistent with prior practices.
3.12 Absence of Certain Changes. Since the Date of the Kupper Most
Recent Fiscal Quarter End and through the date hereof, except as set forth in or
contemplated by this Agreement or disclosed on Part 3.12 of the Disclosure
Schedule, Kupper has conducted business in the Ordinary Course of Business, and
except for matters which are not likely to have a material adverse effect, there
has not been:
(i) any transaction or contract with respect to the
purchase, acquisition, lease, disposition or transfer of any
assets or to any capital expenditure (in each case, other than in
the ordinary course of business in accordance with past practice)
of Kupper;
(ii) any material damage, destruction or other casualty
loss (whether or not covered by insurance), condemnation or other
taking affecting the assets of Kupper;
(iii) any change in any method of accounting or accounting
practice by Kupper;
(iv) other than in the ordinary course of business with
respect to employees of Kupper whose base salary is less than
$50,000, any increase in the rate of compensation payable or to
become payable to any officer, shareholder, director or full-time
employee of the Companies, or any material alteration in the
benefits payable to any thereof;
(v) except in the ordinary course of business and except
for repayment of Kupper ESOP loans, any payment, directly or
indirectly, of any liability before it became due in accordance
with its terms;
(vi) any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions);
(vii) any note, bond or other debt security issued,
incurred or assumed, or guarantee of any indebtedness for borrowed
money or capitalized lease obligation or any security interest
imposed upon any of the assets, tangible or intangible except for
a loan to provide funds in connection with the Repurchase;
(viii) any license, sublicense, sale or pledge of any
rights granted under or with respect to any intellectual property
owned by Kupper;
(ix) other than as contemplated by this Agreement, any
loan to or any other transaction with, any Shareholder or any of
the Companies' directors, officers, and/or employees of the
Companies;
(x) any new collective bargaining agreement, written or
oral; or
A-11
<PAGE> 108
(xi) any agreement or commitment to do or perform any of
the above.
3.13 Contracts. Part 3.13 of the Disclosure Schedule sets forth a
complete and correct list of all written contracts and oral contracts by which
Kupper is obligated or otherwise bound as of the date hereof and which have a
value which exceeds $100,000 per annum or which are for a term in excess of one
year and cannot be terminated on less than 90 days notice, without penalty, and
all employment contracts (the "Kupper Contracts"). All such Kupper Contracts are
valid, in full force and effect and binding upon Kupper and, to Kupper's
knowledge, binding upon the other parties thereto in accordance with their
terms. Kupper is not in material default under any Kupper Contracts nor has
Kupper received any written notice alleging any default by Kupper nor, to
Kupper's Knowledge, is any, other party thereto in material default thereunder.
To Kupper's Knowledge no conditions exist that with notice or the lapse of time
or both would constitute a default (or give rise to a termination right)
thereunder by either party. Kupper has not received written notice of
cancellation or termination of any Kupper Contracts. Kupper has heretofore
delivered or made available to the Purchaser, correct and complete copies of all
written Kupper Contracts and summaries of the material provisions of all oral
Kupper Contracts.
3.14 Claims and Proceedings. Except as set forth in Part 3.14 of the
Disclosure Schedule, there are no outstanding Proceedings of any Governmental
Body against or naming Kupper or any of its key shareholders relating to Kupper
matters. Except as set forth in Part 3.14 of the Disclosure Schedule, there are
no actions, suits, claims or counterclaims or legal, administrative or arbitral
proceedings or investigations (collectively, "Claims") (whether or not the
defense thereof or liabilities in respect thereof are covered by insurance),
pending or to Kupper's Knowledge, threatened in writing on the date hereof,
against Kupper. There are no Claims pending or, to Kupper's Knowledge,
threatened in writing that would give rise to any right of indemnification on
the part of any shareholder, officer or director of Kupper.
3.15 Taxes. Except as set forth in Part 3.15 of the Disclosure
Schedule,
(i) all federal, state and other tax returns and
reports, domestic or foreign, with respect to the ownership or
operation or the conduct of Kupper's business which Kupper is
required to file have been duly filed, and all taxes and other
assessments and levies (including all interest and penalties) and
all installments of estimated taxes, domestic or foreign, required
to be paid by Kupper on or before the date hereof have been duly
paid. Kupper has not waived any statute of limitations with
respect to any tax or other assessment or levy, domestic or
foreign, applicable to its business and all such taxes and other
assessments and levies which Kupper is required by law to withhold
or to collect have been duly withheld and collected and have been
paid over to the proper governments or governmental agencies or
reserved for such payment and, if so reserved, shall be so paid by
Kupper as required by law.
(ii) no extension of time has been requested or granted
for Kupper to file any tax return that has not yet been filed or
to pay any tax that has not yet been paid;
A-12
<PAGE> 109
(iii) there are no tax liens on or pending against Kupper
or any of its respective properties;
(iv) Kupper has not received notice of a discrepancy, or
is subject to an audit or proceeding related to taxes, or to the
Kupper's Knowledge is any such audit or proceeding threatened.
(v) Kupper has collected and remitted (or will remit
when due) to the appropriate tax authority all sales and use or
similar taxes required to have been collected on or prior to the
Closing Date, including any interest and any penalty, addition to
tax or additional amount unpaid, and have been furnished properly
completed exemption certificates for all exempt transactions; and
has collected and remitted if due to the appropriate tax authority
all withholding, payroll, employment, property, customs duty, fee,
assessment or charge of any kind whatsoever (including but not
limited to taxes assessed to real property and water and sewer
rents relating thereto), including any interest and any penalty,
addition to tax or additional amount unpaid.
3.16 Benefit Plans.
(a) Except as set forth on Part 3.16 of the Disclosure Schedule, none
of Kupper, its Subsidiaries and no other member of the Controlled Group
(as defined herein) (x) has at any time maintained, contributed to or
participated in, (y) has or had at any time any obligation to maintain,
contribute to or participate in, or (z) has any liability or contingent
liability, direct or indirect, with respect to any Benefit Plan (within
the meaning of Section 3(3) of Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), oral or written retirement
or deferred compensation plan, incentive compensation plan, post
retirement medical or life insurance plan or arrangement (except for
health care continuation required by Part 6 of Title I of ERISA), stock
plan, stock option plan, consulting agreement, leased or temporary
employee agreement, unemployment compensation plan, vacation pay plan,
severance plan, bonus plan, stock compensation plan, cafeteria or
flexible spending account plan or any other type or form of
employee-related (or independent contractor- related) arrangement,
program, policy, plan or agreement covering any current or former
employee of any of Kupper, its Subsidiaries or a Controlled Group member.
For purposes of this Section 3.16, the term "Controlled Group" shall
refer to Kupper, its Subsidiaries and each other corporation or other
entity under common control with any of Kupper or its Subsidiaries
(pursuant to the provisions of Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended) (the "Code") at any time
during the sixty (60) month period ending on the Closing Date and
"Multiemployer Plan" shall mean Kupper Benefit Plan described in Section
3(37)(A) of Title I of ERISA.
(b) With respect to each plan, program, arrangement, agreement or
policy included, or required to be included, in Part 3.16 of the
Disclosure Schedule, (the "Kupper Benefit Plans"):
(i) there has been no violation of any applicable
provision of ERISA;
A-13
<PAGE> 110
(ii) each Kupper Benefit Plan intended to qualify under
Section 401(a) of the Code or for any other tax-exempt or
tax-favored status under the Code so qualifies in form and
operation and has received a favorable determination letter as to
its qualification under the Code, and no event has occurred that
will or could be expected to give rise to disqualification or loss
of tax-exempt status of any such Plan or related trust;
(iii) neither Kupper, its Subsidiaries nor any other
member of the Controlled Group is subject to any outstanding or
potential liability or obligation (other than routine, uncontested
benefit claims), direct or indirect, relating to any such Kupper
Benefit Plan;
(iv) there are no pending legal Proceedings which have
been asserted or instituted against any Kupper Benefit Plan; the
assets of any such Plan; Kupper, its Subsidiaries or any member of
the Controlled Group, the Plan administrator or fiduciary of any
Kupper Benefit Plan with respect to the operation of any such Plan
(other than routine, uncontested benefit claims), and there are no
facts or circumstances which could form the basis for any such
legal proceeding. Neither Kupper, its Subsidiaries or any member
of the Controlled Group nor any fiduciary of any Kupper Benefit
Plan, which is not a Multiemployer Plan, has engaged in a
nonexempt prohibited transaction described in Sections 406 Title I
of ERISA or 4975 of the Code.
(v) Kupper, its Subsidiaries, and no member of the
Controlled Group has not (a) failed to make any required
contribution or payment to a Multiemployer Plan, or (b) made a
complete or partial withdrawal under Section 4201 of Title IV of
ERISA. Neither Kupper, its Subsidiaries nor any member of the
Controlled Group would have any withdrawal or other liability
(contingent or otherwise) under such Section 4201 if it ceased
contributions to and withdrew from such Plans as of the date
hereof. Neither Kupper, its Subsidiaries nor any member of the
Controlled Group has any liability (contingent or otherwise)
under Title IV of ERISA;
(vi) all contributions and premiums required by law or by
the terms of each Kupper Benefit Plan or any agreement relating
thereto have been timely made (without regard to any waivers
granted with respect thereto), and no accumulated funding
deficiency exists in any of the Kupper Benefit Plans subject to
Section 412 of the Code.
(vii) there has been no "reportable event", as that term
is defined in Section 4043 of Title IV of ERISA and the
regulations thereunder, with respect to any of the Kupper Benefit
Plans which would require the giving of notice, or any event
requiring notice to be provided, under Section 4063(a) of Title IV
of ERISA.
(viii) true, correct and complete copies of the following
documents, with respect to each of the Kupper Benefit Plans (as
applicable) have been delivered by Kupper to Greenstone: (i) all
Kupper Benefit Plans and related trust documents, and
A-14
<PAGE> 111
all amendments thereto, (ii) the three most recent Forms 5500 and
schedules thereto, (iii) the most recent Internal Revenue Service
determination letter, (iv) the most recent summary plan
description, (v) written descriptions of all non-written
agreements relating to the Kupper Benefit Plans, (vi) all
contracts with third party administrators, actuaries, investment
managers and other independent contractors which relate to Kupper
Benefit Plans; (viii) the three most recent PBGC-1s, and (ix) the
three most recent actuarial valuations. Since the date of each
such Form 5500 filing, there has been no material adverse change
in the funding status or financial condition of the Kupper Benefit
Plan relating to such Form 5500.
(ix) each of the Kupper Benefit Plans has been maintained
and administered, in all material respects, in accordance with its
terms and all provisions of applicable law. All amendments and
actions required to bring each of the Kupper Benefit Plans into
conformity with all of the applications provisions of ERISA and
other applicable laws have been made except to the extent that
such amendments or actions are not required by law to be made
until a date after the Closing Date and are disclosed on Part 3.16
of the Disclosure Schedule; and
(x) except as disclosed in Part 3.16 of the Disclosure
Schedule, neither Kupper nor any of its Subsidiaries have, by
reason of the transactions contemplated by this Agreement, any
obligation to make any payment to any employee pursuant to any
Kupper Benefit Plan.
(xi) all Kupper Benefit Plans subject to Part 6 of Title
I of ERISA and 4980B of the Code have been and are in compliance
in operation and form with such statutes and regulations
thereunder.
(xii) to the knowledge of Kupper and its Subsidiaries no
event has occurred or circumstances exist which could result in a
material increase in premium costs of Kupper Benefit Plans that
are insured or a material increase in benefit costs of such plans
and obligations that are self-insured.
(xiii) Kupper, its Subsidiaries and any member of the
Controlled Group have no plans or obligations to increase benefits
under any Kupper Benefit Plan or established new Kupper Benefit
Plans.
(xiv) The consummation of the transaction pursuant to this
Agreement will not result in the payment, vesting or acceleration
of any benefit under any Kupper Benefit Plan.
3.17 Employees-Related Matters. Part 3.17 of the Disclosure Schedule
contains a complete and correct list of any written employment agreements
relating to any Kupper employee. Except as set forth on Part 3.17 of the
Disclosure Schedule, no employee of Kupper is a party to, participant in, or
bound by, any collective bargaining agreement, union contract, employment,
independent contractor, or similar personnel arrangement, or any employee
termination or severance arrangement, and the employment by Kupper of any such
person can be terminated for any reason whatsoever not inconsistent with current
law, without penalty or liability of any kind other than
A-15
<PAGE> 112
accrued vacation pay and sick pay. There are no active, pending or to Kupper's
Knowledge threatened administrative or judicial Proceedings under any foreign,
federal, state or local law (including common law) relating to the Kupper
employees. Kupper has accrued in the Kupper Most Recent Fiscal Quarter End for
all employee bonuses, commissions and other incentive compensation due through
the end of said quarter.
3.18 Insurance. Part 3.18 of the Disclosure Schedule sets forth a
complete and correct list of all insurance policies, fidelity and surety bonds
and fiduciary liability policies ("Insurance Policies") which are currently in
effect covering the assets, the business, operations, employees, officers and
managers of Kupper and complete and correct copies of all such Insurance
Policies have been delivered or made available to Greenstone. Part 3.18 of the
Disclosure Schedule also sets forth a true and complete list of claims made in
respect of such Insurance Policies during the two (2) years prior to the date
hereof. Except as set forth Part 3.18 of the Disclosure Schedule, there is no
claim pending under any of such Insurance Policies. All premiums due under all
such Insurance Policies have been paid and, to Kupper's knowledge, Kupper is
otherwise in compliance with the terms and conditions of all such Insurance
Policies.
3.19 Compliance with Laws. To Kupper's knowledge, Kupper is not in
violation of any order, judgment, injunction, award, citation, decree, consent
decree or writ (collectively, "Orders"), or any law, statute, code, ordinance,
rule, regulation or other requirement (collectively, "Laws"), of any government
or political subdivision thereof, whether federal, state, local or foreign, or
any agency or instrumentality of any such government or political subdivision,
or any court or arbitrator (collectively, "Governmental Bodies") materially and
adversely affecting Kupper's assets or its business.
3.20 Permits. To Kupper's knowledge, Kupper has obtained all licenses,
permits, certificates, certificates of occupancy, orders, authorizations and
approvals (collectively, "Permits") and has made all required material
registrations and filings with, any governmental body that are required for the
conduct of its business, except where the failure to do so could not reasonably
be expected to have a material adverse effect on Kupper. All Permits that are
required for the conduct of the Business are listed in Part 3.20 of the
Disclosure Schedule and except as could not reasonably be expected to have a
material adverse effect on Kupper are in full force and effect and there are; no
material violations of any Permit; and no proceeding is pending or to Kupper's
knowledge threatened to revoke or limit any Permit.
3.21 Potential Conflicts of Interest. Except as set forth in Part 3.21
of the Disclosure Schedule, no officer or director, of Kupper:
(a) owns, directly or indirectly, any interest in (excepting less than
1% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee or consultant
of, any Person that carries on business in competition with Kupper
anywhere in the world;
(b) owns, directly or indirectly, in whole or in part, any material
asset that Kupper uses in the conduct of its business or any interest in
any business with which Kupper has a business relationship;
A-16
<PAGE> 113
(c) has entered into a sale and leaseback or similar transaction with
Kupper.
3.22 Intangible Property. Part 3.22 of the Disclosure Schedule sets
forth a true, correct and complete list of all trademarks, registered
copyrights, service marks or trade names, patents (and all applications for any
of the foregoing), permits, grants and licenses and all other intangible assets,
properties and rights running to or from, or used by, Kupper and there are no
other trademarks, copyrights, service marks, trade names or other intangible
assets, properties or rights that are material to Kupper.
3.23 Deferred Compensation. Except as set forth in Part 3.23 of the
Disclosure Schedule, as of June 1, 2000, Kupper does not owe any deferred
compensation (including, but not limited to, incentive compensation) to any
employees or directors, (the "Deferred Compensation"), or has accrued or is
obligated to pay or accrue any distribution to its shareholders. Any amounts
incurred or expensed since June 1, 2000 for deferred compensation were in the
ordinary course of business in accordance with prior practices.
3.24 Properties; Title. Part 3.24 of the Disclosure Schedule sets forth
a complete list of all real property leased by Kupper (the "Kupper Real
Property"). Kupper does not own any real property. True and correct copies of
leases relating to the Kupper Real Property (the "Kupper Real Property Leases")
have been delivered to Greenstone. The Kupper Real Property Leases are in full
force and effect and to Kupper's Knowledge neither party to any such Kupper Real
Property Leases is in material default.
3.25 Tangible Personal Property. All tangible personal property used by
Kupper which is necessary for the operation of its business, is in good
condition and repair (subject to normal wear and tear) and is adequate in
quantity and quality for the operation of the business as presently conducted.
There are no outstanding options, warrants, commitments, agreements or any other
rights of any character, entitling any Person other than Greenstone to acquire
any interest in all, or any part of, such tangible property. Kupper has good and
marketable title to all such tangible property free and clear of all mortgages,
pledges, liens and other encumbrances, except those described in Part 3.25 of
the Disclosure Schedule.
3.26 Customers and Suppliers. Kupper has disclosed to Greenstone the
names of its ten largest customers based on revenue received by Kupper during
the six months ended April 30, 2000 (collectively, the "Major Customers"). None
of the Major Customers within the last six months has overtly threatened in
writing to cancel, or otherwise terminate, the relationship of such person with
Kupper.
3.27 Depositaries; Powers of Attorney, Etc. Part 3.27 of the Disclosure
Schedule sets forth (i) the name of each bank or similar entity in which Kupper
has an account, lock box or safe deposit box and the names of all persons
authorized to draw thereon or to have access thereto, and (ii) the name of each
person holding a general or special power of attorney from Kupper and a
description of the terms thereof.
3.28 Stock Ownership. Part 3.28 of the Disclosure Schedule contains a
true and accurate list of the names and residence addresses of all the
Shareholders of Kupper.
A-17
<PAGE> 114
3.29 Consents. Except as set forth in Part 3.29 of the Disclosure
Schedule, no approval or consent of any person, firm, entity or other body is
required to be obtained by Kupper, for the authorization, execution and delivery
of this Agreement and/or the transactions contemplated hereby.
3.30 Disclosure. The representations in this Section 3 do not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they will be made, not misleading. None of the
information that Kupper will supply in writing specifically for use in the
Definitive Greenstone Proxy Materials will contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they will
be made, not misleading.
4 REPRESENTATIONS AND WARRANTIES OF GREENSTONE.
Greenstone represents and warrants to Kupper that the statements
contained in this Section 4 are correct and complete as of the date of this
Agreement and will be correct and complete as of the Closing Date (as though
made then, except for representations and warranties made as of a certain date),
and except as set forth in the Disclosure Schedule. The Disclosure Schedule will
be arranged in paragraphs corresponding to the numbered paragraphs contained in
this Section 4.
4.1 Organization, Qualification, and Corporate Power. Except as set forth
in Part 4.1 of the Disclosure Schedule, each of Greenstone and its Subsidiaries
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. Except as set forth in Part
4.1 of the Disclosure Schedule, each of Greenstone and its Subsidiaries is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required except where the lack of such
qualification would not have a material adverse effect on the financial
condition of Greenstone and its Subsidiaries taken as a whole or on the ability
of the Parties to consummate the transactions contemplated by this Agreement.
Except as set forth in Part 4.1 of the Disclosure Schedule, each of Greenstone
and its Subsidiaries has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. Part 4.1 of the Disclosure Schedule sets forth the names of all
Subsidiaries of Greenstone and Greenstone's ownership interest therein. Except
as set forth in Part 4.1 of the Disclosure Schedule neither Greenstone nor any
of its Subsidiaries have any interest in any other Subsidiaries or affiliates.
None of Greenstone's Subsidiaries are currently engaged in any business
activity.
4.2 Capitalization. Greenstone currently has and will have at the time of
Closing the following capitalization: 30,000,000 shares of common stock
authorized; 1,060,000 shares of common stock issued; 918,277 shares of common
stock outstanding; 141,723 shares of common treasury stock; 1,000,000 shares of
preferred stock authorized; 0 shares of preferred stock issued; 0 shares of
preferred stock outstanding; 0 shares of preferred treasury stock; 90,000
options for shares authorized; 90,000 options for shares issued; and 90,000
shares reserved for such options. All of the issued and outstanding Greenstone
Shares have been duly authorized and are validly issued, fully paid, and
nonassessable. Except as shown in Part 4.2 of the Disclosure Schedule there are
no
A-18
<PAGE> 115
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require Greenstone to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to Greenstone.
4.3 Charter Documents and Corporate Records. Greenstone and each of its
Subsidiaries have heretofore delivered to Kupper certified copies of their
respective Certificates of Incorporation and By-laws, as in effect on the date
hereof. Greenstone has heretofore delivered or made available to Kupper true and
complete copies of the minutes of meetings (or written consents in lieu of
meetings) of its directors and shareholders.
4.4 Authorization of Transaction. Greenstone has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and to perform its obligations hereunder; provided, however, that
Greenstone cannot consummate the Merger unless and until it receives the
Requisite Greenstone Stockholder Approval. The Greenstone Board of Directors has
approved the Merger and will recommend the Merger to Greenstone stockholders.
This Agreement constitutes the valid and legally binding obligation of
Greenstone, enforceable in accordance with its terms and conditions.
4.5 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which any of Greenstone and its Subsidiaries is
subject or any provision of the charter or bylaws of any of Greenstone and its
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument or other arrangement to which
any of Greenstone and its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets) except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, or Security Interest would not have a material adverse effect on the
financial condition of Greenstone and its Subsidiaries taken as a whole or on
the ability of the Parties to consummate the transactions contemplated by this
Agreement. To the knowledge of any director or officer of Greenstone, and other
than in connection with the provisions of the New York Business Corporation Law,
the Securities Exchange Act, the Securities Act, and the state securities laws,
none of Greenstone and its Subsidiaries needs to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement, except as contemplated by this Agreement or
where the failure to give notice, to file, or to obtain any authorization,
consent, or approval would not have a material adverse effect on Greenstone and
its Subsidiaries taken as a whole or on the ability of the Parties to consummate
the transactions contemplated by this Agreement.
4.6 Filings with the SEC. Greenstone has made all filings with the SEC
that it has been required to make under the Securities Act and the Securities
Exchange Act (collectively the "Public Reports"). Each of the Public Reports has
complied with the Securities Act and the Securities Exchange Act. None of the
Public Reports, as of their respective dates, contained any untrue
A-19
<PAGE> 116
statement of a material fact or omitted to state a material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. Greenstone has delivered to Kupper a
correct and complete copy of each Public Report filed within the last 3 years
(together with all exhibits and schedules thereto and as amended to date).
4.7 Financial Statements. Greenstone has filed Quarterly Reports on Form
10-Q for the fiscal quarter ended March 31, 2000 (the "Greenstone Most Recent
Fiscal Quarter End"), and an Annual Report on Form 10-K for the fiscal year
ended October 31, 1999. The financial statements included in or incorporated by
reference into these Public Reports (including the related notes and schedules)
have been prepared in accordance with GAAP applied on a consistent basis
throughout the periods covered thereby present fairly the financial condition of
Greenstone and its Subsidiaries as of the indicated dates and the results of
operations of Greenstone and its Subsidiaries for the indicated periods, are
correct and complete in all respects, and are consistent with the books and
records of Greenstone and its Subsidiaries; provided, however, that the interim
statements are subject to normal year-end adjustments and the absence of notes.
4.8 Events Subsequent to Greenstone Most Recent Fiscal Quarter End. Since
the Greenstone Most Recent Fiscal Quarter End, there has not been any material
adverse change in the business, financial condition, operations, results of
operations, or future prospects of Greenstone and its Subsidiaries taken as a
whole.
4.9 Undisclosed Liabilities. None of Greenstone and its Subsidiaries has
any liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due), including any liability for
taxes, except for (i) liabilities set forth on the face of the balance sheet
dated as of the Greenstone Most Recent Fiscal Quarter End (rather than in any
notes thereto) and (ii) liabilities which have arisen after the Greenstone Most
Recent Fiscal Quarter End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law).
4.10 Brokers' Fees. None of Greenstone and its Subsidiaries has any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
4.11 Continuity of Business Enterprise. It is the present intention of
Greenstone to continue at least one significant historic business line of
Kupper, or to use at least a significant portion of Kupper's historic business
assets in a business, in each case within the meaning of Reg. Section
1.368-1(d).
4.12 Company Receivables; Inventories. Except to the extent of the
amount of the reserve for doubtful accounts reflected in the Greenstone Most
Recent Fiscal Quarter End or as set forth in Part 4.12 of the Disclosure
Schedule, all such receivables shown on the Greenstone Most Recent Fiscal
Quarter End (except receivables that have been collected since such date) are
valid and enforceable claims, and constitute bona fide receivables resulting
from the sale of goods and services in the Ordinary Course of Business. To the
knowledge of Greenstone, the Receivables are not subject to any defense,
offsets, returns, rebates, allowances or credits of any kind, and are fully
collectible at the full amount thereof, except to the extent of the amount of
the reserve for doubtful
A-20
<PAGE> 117
accounts reflected in the Greenstone Most Recent Fiscal Quarter End or as
otherwise provided in Part 4.12 of the Disclosure Schedule. All work-in-progress
has been performed in a manner consistent with prior practices.
4.13 Absence of Certain Changes. Since the Date of the Greenstone Most
Recent Fiscal Quarter End and through the date hereof, except as set forth in or
contemplated by this Agreement or disclosed in Part 4.13 of the Disclosure
Schedule, Greenstone has conducted business in the Ordinary Course of Business,
and except for matters which are not likely to have a material adverse effect,
there has not been:
(i) any transaction or contract with respect to the
purchase, acquisition, lease, disposition or transfer of any
assets or to any capital expenditure (in each case, other than in
the ordinary course of business in accordance with past practice)
of Greenstone;
(ii) any material damage, destruction or other casualty
loss (whether or not covered by insurance), condemnation or other
taking affecting the assets of Greenstone;
(iii) any change in any method of accounting or accounting
practice by Greenstone;
(iv) other than in the ordinary course of business with
respect to employees of Greenstone whose base salary is less than
$50,000, any increase in the rate of compensation payable or to
become payable to any officer, shareholder, director or full-time
employee of the Companies, or any material alteration in the
benefits payable to any thereof;
(v) except in the ordinary course of business any
payment, directly or indirectly, of any liability before it became
due in accordance with its terms.
(vi) any capital investment in, any loan to, or any
acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions);
(vii) any security interest imposed upon any of the
assets, tangible or intangible;
(viii) any note, bond or other debt security issued,
incurred or assumed, or guarantee of any indebtedness for borrowed
money or capitalized lease obligation or except for a loan to
provide funds in connection with the Repurchase;
(ix) any license, sublicense, sale or pledge of any
rights granted under or with respect to any intellectual property
owned by Greenstone;
(x) other than as contemplated by this Agreement, any
loan to or any other transaction with, any Shareholder or any of
the Companies' directors, officers, and/or employees of the
Companies;
A-21
<PAGE> 118
(xi) any new collective bargaining agreement, written or
oral; or
(xii) any agreement or commitment to do or perform any of
the above.
4.14 Contracts. Part 4.14 of the Disclosure Schedule sets forth a
complete and correct list of all written contracts and oral contracts by which
Greenstone is obligated or otherwise bound as of the date hereof and which have
a value which exceeds $100,000 per annum or which are for a term in excess of
one year and cannot be terminated on less than 90 days notice without penalty,
and all employment contracts (the "Greenstone Contracts"). All such Greenstone
Contracts are valid, in full force and effect and binding upon Greenstone and,
to Greenstone's Knowledge, binding upon the other parties thereto in accordance
with their terms. Greenstone is not in material default under any Greenstone
Contracts nor has Greenstone received any written notice alleging any default by
Greenstone nor, to Greenstone's Knowledge, is any, other party thereto in
material default thereunder. To Greenstone's Knowledge no conditions exist that
with notice or the lapse of time or both would constitute a default (or give
rise to a termination right) thereunder by either party. Greenstone has not
received written notice of cancellation or termination of any Greenstone
Contracts. Greenstone has heretofore delivered or made available to the
Purchaser, correct and complete copies of all written Greenstone Contracts and
summaries of the material provisions of all oral Greenstone Contracts.
4.15 Claims and Proceedings. There are no outstanding Proceedings of
any Governmental Body against or naming Greenstone or any of its key
shareholders relating to Greenstone matters. Except as set forth in Part 4.15 of
the Disclosure Schedule, there are no Claims (whether or not the defense thereof
or liabilities in respect thereof are covered by insurance), pending or to
Greenstone's Knowledge, threatened in writing on the date hereof, against
Greenstone. There are no Claims pending or, to Greenstone's Knowledge,
threatened in writing that would give rise to any right of indemnification on
the part of any shareholder, officer or director of Greenstone.
4.16 Taxes. Except as set forth in Part 4.16 of the Disclosure
Schedule,
(i) all federal, state and other tax returns and
reports, domestic or foreign, with respect to the ownership or
operation or the conduct of Greenstone's business which Greenstone
is required to file have been duly filed, and all taxes and other
assessments and levies (including all interest and penalties) and
all installments of estimated taxes, domestic or foreign, required
to be paid by Greenstone on or before the date hereof have been
duly paid. Greenstone has not waived any statute of limitations
with respect to any tax or other assessment or levy, domestic or
foreign, applicable to its business and all such taxes and other
assessments and levies which Greenstone is required by law to
withhold or to collect have been duly withheld and collected and
have been paid over to the proper governments or governmental
agencies or reserved for such payment and, if so reserved, shall
be so paid by Greenstone as required by law.
A-22
<PAGE> 119
(ii) no extension of time has been requested or granted
for Greenstone to file any tax return that has not yet been filed
or to pay any tax that has not yet been paid;
(iii) there are no tax liens on or pending against
Greenstone or any of its respective properties;
(iv) Greenstone has not received notice of a discrepancy,
or is subject to an audit or proceeding related to taxes, or to
the Greenstone's Knowledge is any such audit or proceeding
threatened.
(v) Greenstone has collected and remitted (or will remit
when due) to the appropriate tax authority all sales and use or
similar taxes required to have been collected on or prior to the
Closing Date, including any interest and any penalty, addition to
tax or additional amount unpaid, and have been furnished properly
completed exemption certificates for all exempt transactions; and
has collected and remitted if due to the appropriate tax authority
all withholding, payroll, employment, property, customs duty, fee,
assessment or charge of any kind whatsoever (including but not
limited to taxes assessed to real property and water and sewer
rents relating thereto), including any interest and any penalty,
addition to tax or additional amount unpaid.
4.17 Benefit Plans.
(a) Except as set forth in Part 4.17 of the Disclosure Schedule, none
of Greenstone, its Subsidiaries and no other member of the Controlled
Group (as defined herein) (x) has at any time maintained, contributed to
or participated in, (y) has or had at any time any obligation to
maintain, contribute to or participate in, or (z) has any liability or
contingent liability, direct or indirect, with respect to any Benefit
Plan (within the meaning of Section 3(3) of Title I of the ERISA), oral
or written retirement or deferred compensation plan, incentive
compensation plan, post retirement medical or life insurance plan or
arrangement (except for health care continuation required by Part 6 of
Title I of ERISA), stock plan, stock option plan, consulting agreement,
leased or temporary employee agreement, unemployment compensation plan,
vacation pay plan, severance plan, bonus plan, stock compensation plan,
cafeteria or flexible spending account plan or any other type or form of
employee-related (or independent contractor-related) arrangement,
program, policy, plan or agreement covering any current or former
employee of any of Greenstone, its Subsidiaries or a Controlled Group
member. For purposes of this Section 4.17, the term "Controlled Group"
shall refer to Greenstone, its Subsidiaries and each other corporation or
other entity under common control with any of Greenstone or its
Subsidiaries (pursuant to the provisions of Sections 414(b), (c), (m) or
(o) of the Code) at any time during the sixty (60) month period ending on
the Closing Date and "Multiemployer Plan" shall mean a Greenstone Benefit
Plan described in Section 3(37)(A) of Title I of ERISA.
A-23
<PAGE> 120
(b) With respect to each plan, program, arrangement, agreement or
policy included, or required to be included, in Part 4.17 of the
Disclosure Schedule, (the "Greenstone Benefit Plans"):
(i) there has been no violation of any applicable
provision of ERISA;
(ii) each Greenstone Benefit Plan intended to qualify
under Section 401(a) of the Code or for any other tax-exempt or
tax-favored status under the Code so qualifies in form and
operation and has received a favorable determination letter as to
its qualification under the Code, and no event has occurred that
will or could be expected to give rise to disqualification or loss
of tax-exempt status of any such Plan or related trust;
(iii) neither Greenstone, its Subsidiaries nor any other
member of the Controlled Group is subject to any outstanding or
potential liability or obligation (other than routine, uncontested
benefit claims), direct or indirect, relating to any such
Greenstone Benefit Plan;
(iv) there are no pending legal Proceedings which have
been asserted or instituted against any Greenstone Benefit Plan;
the assets of any such Plan; Greenstone, its Subsidiaries or any
member of the Controlled Group, the Plan administrator or
fiduciary of any Greenstone Benefit Plan with respect to the
operation of any such Plan (other than routine, uncontested
benefit claims), and there are no facts or circumstances which
could form the basis for any such legal proceeding. Neither
Greenstone, its Subsidiaries or any member of the Controlled Group
nor any fiduciary of any Greenstone Benefit Plan which is not a
Multiemployer Plan has engaged in a nonexempt prohibited
transaction described in Sections 406 Title I of ERISA or 4975 of
the Code.
(v) Greenstone, its Subsidiaries, and no member of the
Controlled Group has not (a) failed to make any required
contribution or payment to a Multiemployer Plan, or (b) made a
complete or partial withdrawal under Section 4201 of Title IV of
ERISA. Neither Greenstone, its Subsidiaries nor any member of the
Controlled Group would have any withdrawal or other liability
(contingent or otherwise) under such Section 4201 if it ceased
contributions to and withdrew from such Plans as of the date
hereof. Neither Greenstone, its Subsidiaries nor any member of the
Controlled Group has any liability (contingent or otherwise) under
Title IV of ERISA;
(vi) all contributions and premiums required by law or by
the terms of each Greenstone Benefit Plan or any agreement
relating thereto have been timely made (without regard to any
waivers granted with respect thereto), and no accumulated funding
deficiency exists in any of the Greenstone Benefit Plans subject
to Section 412 of the Code.
(vii) there has been no "reportable event", as that term
is defined in Section 4043 of Title IV of ERISA and the
regulations thereunder, with respect to
A-24
<PAGE> 121
any of the Greenstone Benefit Plans which would require the giving
of notice, or any event requiring notice to be provided, under
Section 4063(a) of Title IV of ERISA.
(viii) true, correct and complete copies of the following
documents, with respect to each of the Greenstone Benefit Plans
(as applicable) have been delivered by Greenstone to Kupper: (i)
all Greenstone Benefit Plans and related trust documents, and all
amendments thereto, (ii) the three most recent Forms 5500 and
schedules thereto, (iii) the most recent Internal Revenue Service
determination letter, (iv) the most recent summary plan
description, (v) written descriptions of all non- written
agreements relating to the Greenstone Benefit Plans, (vi) all
contracts with third party administrators, actuaries, investment
managers and other independent contractors which relate to
Greenstone Benefit Plans; (viii) the three most recent PBGC-1s,
and (ix) the three most recent actuarial valuations. Since the
date of each such Form 5500 filing, there has been no material
adverse change in the funding status or financial condition of the
Greenstone Benefit Plan relating to such Form 5500.
(ix) each of the Greenstone Benefit Plans has been
maintained and administered, in all material respects, in
accordance with its terms and all provisions of applicable law.
All amendments and actions required to bring each of the
Greenstone Benefit Plans into conformity with all of the
applications provisions of ERISA and other applicable laws have
been made except to the extent that such amendments or actions are
not required by law to be made until a date after the Closing Date
and are disclosed in Part 4.17 of the Disclosure Schedule; and
(x) except as disclosed in Part 4.17 of the Disclosure
Schedule, neither Greenstone nor any of its Subsidiaries have, by
reason of the transactions contemplated by this Agreement, any
obligation to make any payment to any employee pursuant to any
Greenstone Benefit Plan.
(xi) all Greenstone Benefit Plans subject to Part 6 of
Title I of ERISA and 4980B of the Code have been and are in
compliance in operation and form with such statutes and
regulations thereunder.
(xii) to the knowledge of Greenstone and its Subsidiaries,
no event has occurred or circumstances exist which could result in
a material increase in premium costs of Greenstone Benefit Plans
that are insured or a material increase in benefit costs of such
plans and obligations that are self-insured.
(xiii) Greenstone, its Subsidiaries and any member of the
Controlled Group have no plans or obligations to increase benefits
under any Greenstone Benefit Plan or established new Benefit
Plans.
(xiv) The consummation of the transaction pursuant to this
Agreement will not result in the payment, vesting or acceleration
of any benefit under any Greenstone Benefit Plan.
A-25
<PAGE> 122
4.18 Employee-Related Matters. Part 4.18 of the Disclosure Schedule
contains a complete and correct list of any written employment agreements
relating to any Greenstone employee. Except as set forth in Part 4.18 of the
Disclosure Schedule, no employee of Greenstone is a party to, participant in, or
bound by, any collective bargaining agreement, union contract, employment,
independent contractor, or similar personnel arrangement, or any employee
termination or severance arrangement, and the employment by Greenstone of any
such person can be terminated for any reason whatsoever not inconsistent with
current law, without penalty or liability of any kind other than accrued
vacation pay and sick pay. There are no active, pending or to Greenstone's
Knowledge threatened administrative or judicial Proceedings under any foreign,
federal, state or local law (including common law) relating to the Greenstone
employees. Greenstone has accrued in the Greenstone Most Recent Fiscal Quarter
End for all employee bonuses, commissions and other incentive compensation due
through the end of said quarter.
4.19 Insurance. Part 4.19 of the Disclosure Schedule sets forth a
complete and correct list of all Insurance Policies, which are currently in
effect covering the assets, the business, operations, employees, officers and
managers of Greenstone and complete and correct copies of all such Insurance
Policies have been delivered or made available to Kupper. Part 4.19 of the
Disclosure Schedule also sets forth a true and complete list of claims made in
respect of such Insurance Policies during the two (2) years prior to the date
hereof. Except as set forth in Part 4.19 of the Disclosure Schedule, there is no
claim pending under any of such Insurance Policies. All premiums due under all
such Insurance Policies have been paid and, to Greenstone's Knowledge,
Greenstone is otherwise in compliance with the terms and conditions of all such
Insurance Policies.
4.20 Compliance with Laws. To Greenstone's knowledge, Greenstone is not
in violation of any Orders, or any Laws, of any Governmental Bodies materially
and adversely affecting Greenstone's assets or its business.
4.21 Permits. To Greenstone's knowledge, Greenstone has obtained all
Permits and has made all required material registrations and filings with, any
governmental body that are required for the conduct of its business, except
where the failure to do so could not reasonably be expected to have a material
adverse effect on Greenstone. All Permits that are required for the conduct of
the Business are listed in Part 4.21 of the Disclosure Schedule and except as
could not reasonably be expected to have a material adverse effect on Greenstone
are in full force and effect and there are; no material violations of any
Permit; and no proceeding is pending or to Greenstone's knowledge threatened to
revoke or limit any Permit.
4.22 Potential Conflicts of Interest. Except as set forth in Part 4.22
of the Disclosure Schedule, no officer or director, of Greenstone:
(a) owns, directly or indirectly, any interest in (excepting less than
1% stock holdings for investment purposes in securities of publicly held
and traded companies), or is an officer, director, employee or consultant
of, any Person that carries on business in competition with Greenstone
anywhere in the world;
A-26
<PAGE> 123
(b) owns, directly or indirectly, in whole or in part, any material
asset that Greenstone uses in the conduct of its business or any interest
in any business with which Greenstone has a business relationship;
(c) has entered into a sale and leaseback or similar transaction with
Greenstone.
4.23 Intangible Property. Part 4.23 of the Disclosure Schedule sets
forth a true, correct and complete list of all trademarks, registered
copyrights, service marks or trade names, patents (and all applications for any
of the foregoing), permits, grants and licenses and all other intangible assets,
properties and rights running to or from, or used by, Greenstone and there are
no other trademarks, copyrights, service marks, trade names or other intangible
assets, properties or rights that are material to Greenstone.
4.24 Deferred Compensation. Except as set forth in Part 4.24 of the
Disclosure Schedule, as of June 1, 2000, Greenstone does not owe any Deferred
Compensation, or has accrued or is obligated to pay or accrue any distribution
to its shareholders. Any amounts incurred or expensed since June 1, 2000 for
deferred compensation were in the ordinary course of business in accordance with
prior practices.
4.25 Properties; Title. Part 4.25 of the Disclosure Schedule sets forth
a complete list of all real property leased by Greenstone (the "Greenstone Real
Property"). Greenstone does not own any real property. True and correct copies
of leases relating to the Greenstoen Real Property (the "Greenstone Real
Property Leases") have been delivered to Kupper. The Greenstone Real Property
Leases are in full force and effect and to Greenstone's Knowledge neither party
to any such Greenstone Real Property Leases is in material default.
4.26 Tangible Personal Property. All tangible personal property used by
Greenstone which is necessary for the operation of its business, is in good
condition and repair (subject to normal wear and tear) and is adequate in
quantity and quality for the operation of the business as presently conducted.
There are no outstanding options, warrants, commitments, agreements or any other
rights of any character, entitling any Person other than Kupper to acquire any
interest in all, or any part of, such tangible property. Greenstone has good and
marketable title to all such tangible property free and clear of all mortgages,
pledges, liens and other encumbrances, except those described in Part 4.26 of
the Disclosure Schedule.
4.27 Customers and Suppliers. Greenstone has disclosed to Kupper the
names of its ten largest customers based on revenue received by Greenstone
during the six months ended April 30, 2000 (collectively, the "Major
Customers"). None of the Major Customers within the last six months has overtly
threatened in writing to cancel, or otherwise terminate, the relationship of
such person with Greenstone.
4.28 Depositaries; Powers of Attorney, Etc. Part 4.28 of the Disclosure
Schedule sets forth (i) the name of each bank or similar entity in which
Greenstone has an account, lock box or safe deposit box and the names of all
persons authorized to draw thereon or to have access thereto, and (ii) the name
of each person holding a general or special power of attorney from Greenstone
and a description of the terms thereof.
A-27
<PAGE> 124
4.29 Consents. Except as set forth in Part 4.29 of the Disclosure
Schedule, no approval or consent of any person, firm, entity or other body is
required to be obtained by Greenstone, for the authorization, execution and
delivery of this Agreement and/or the transactions contemplated hereby.
4.30 Disclosure. The Definitive Greenstone Proxy Materials will comply
with the Securities Exchange Act in all material respects. The Definitive
Greenstone Proxy Materials will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they will be made,
not misleading. None of the information that Greenstone will supply specifically
for use in the Definitive Greenstone Proxy Materials will contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made therein, in the light of the circumstances under
which they will be made, not misleading.
5 COVENANTS.
The Parties agree as follows with respect to the period from and after
the execution of this Agreement.
5.1 General. Each of the Parties will use its best efforts to take all
action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 6 below).
5.2 Notices and Consents. Each Party will give any notices (and will
cause each of its Subsidiaries to give any notices) to third parties, and will
use its reasonable best efforts to obtain (and will cause each of its
Subsidiaries to use its reasonable best efforts to obtain) any third party
consents, that the other reasonably may request.
5.3 Regulatory Matters and Approvals. Each of the Parties will (and Party
will cause each of its Subsidiaries to) give any notices to, make any filings
with, and use its reasonable best efforts to obtain any authorizations,
consents, and approvals of governments and governmental agencies in connection
with the matters referred to in Section 3.5 and Section 4.5 above. Without
limiting the generality of the foregoing:
5.3.1 Preparation of the Proxy Statement and Form S-4.
(a) Preparation. Greenstone shall prepare and file with the
SEC not later than August 31, 2000 in accordance with the
Securities Act, the registration statement on Form S-4 to be filed
with the SEC by Greenstone in connection with the issuance by
Greenstone of the Greenstone Shares in the Merger (the "Form S-
4"). Greenstone shall use reasonable best efforts to have the Form
S-4 declared effective under the Securities Act as promptly as
practicable after such filing. Greenstone shall keep Kupper
advised of the status of the filing and effectiveness of the Form
S-4 and offer Kupper reasonable opportunity to comment thereon.
A-28
<PAGE> 125
(b) Proxy Statement and Form S-4. Greenstone and, if
reasonably requested by Greenstone, Kupper, shall jointly prepare
for inclusion in the Form S-4 a prospectus/proxy statement (the
"Proxy Statement"), in accordance with the Securities Exchange Act
and the rules and regulations under the Securities Exchange Act,
with respect to the Merger. Greenstone and Kupper shall cooperate
with each other in the preparation of the Proxy Statement.
Greenstone and Kupper shall use reasonable best efforts to respond
promptly to any comments made by the SEC with respect to the Proxy
Statement, and to cause the Form S-4 to be declared effective
under the Securities Act as promptly as practicable after the
filing thereof with the SEC. Greenstone and Kupper shall use
reasonable best efforts to cause the Proxy Statement to be mailed
to the shareholders of Kupper (if applicable) and the shareholders
of Greenstone, as determined by Greenstone, at the earliest
practicable date after the Form S-4 is declared effective by the
SEC.
(c) Greenstone's Actions. Greenstone shall, as promptly as
practicable, take any action (other than qualifying to do business
in any jurisdiction in which it is not now so qualified) required
to be taken under any applicable state securities laws in
connection with the issuance of Greenstone Shares in connection
with the Merger, and Kupper shall furnish all information
concerning Kupper as may be reasonably requested in connection
with any such action. Greenstone shall keep Kupper advised of the
status of any actions taken under any applicable state securities
laws.
5.3.2 Special Corporate Meetings. Kupper will call a special
meeting of its stockholders (the "Special Kupper Meeting") as soon as reasonably
practicable in order that the stockholders may consider and vote upon the
adoption of this Agreement and the approval of the Merger and Repurchase in
accordance with the Missouri Corporation Law. Greenstone will call a special
meeting of its stockholders (the "Special Greenstone Meeting") as soon as
reasonably practicable in order that the stockholders may consider and vote upon
the adoption of this Agreement and the approval of the Merger and Repurchase in
accordance with the New York Business Corporation Law.
5.3.3 Operation of Business. Each Party will not (and will not
cause or permit any of its Subsidiaries to) engage in any practice, take any
action, or enter into any transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing:
(i) except as contemplated by this Agreement none of
Kupper, Greenstone or their respective Subsidiaries will authorize
or effect any change in its charter or bylaws;
(ii) none of Kupper, Greenstone or their respective
Subsidiaries will grant any options, warrants, or other rights to
purchase or obtain any of its capital stock or issue, sell, or
otherwise dispose of any of its capital stock (except upon the
conversion or exercise of options, warrants, and other rights
currently outstanding) and except the grant of options to Ron
Greenstone by Greenstone as contemplated by the terms of his
Employment Agreement and further except for the conversion of
Kupper options to Greenstone options pursuant to Section 5.9;
A-29
<PAGE> 126
(iii) none of Kupper, Greenstone or their respective
Subsidiaries will declare, set aside, or pay any dividend or
distribution with respect to its capital stock (whether in cash or
in kind), or redeem, repurchase, or otherwise acquire any of its
capital stock;
(iv) none of Kupper, Greenstone or their respective
Subsidiaries, without written approval from each of the Parties,
will issue any note, bond, or other debt security or create,
incur, assume, or guarantee any indebtedness for borrowed money or
capitalized lease obligation outside the Ordinary Course of
Business except that Kupper may borrow funds for the Repurchase
and pledge the assets of Kupper as Collateral in connection
therewith;
(v) except as set forth in (iv) above, none of Kupper,
Greenstone or their respective Subsidiaries will impose any
Security Interest upon any of its assets outside the Ordinary
Course of Business;
(vi) none of Kupper, Greenstone or their respective
Subsidiaries will make any capital investment in, make any loan
to, or acquire the securities or assets of any other Person
outside the Ordinary Course of Business;
(vii) none of Kupper, Greenstone or their respective
Subsidiaries will make any change in employment terms for any of
its directors, officers, and employees outside the Ordinary Course
of Business; and
(viii) none of Kupper, Greenstone or their respective
Subsidiaries will commit to any of the foregoing.
5.4 Full Access. Each Party will (and will cause each of its Subsidiaries
to) permit representatives of the other Party to have full access at all
reasonable times, and in a manner so as not to interfere with the normal
business operations of the other Party and its Subsidiaries, to all premises,
properties, personnel, books, records (including tax records), contracts, and
documents of or pertaining to each of the other Party and its Subsidiaries. Each
Party will treat and hold as such any Confidential Information it receives from
any of the other Party and its Subsidiaries in the course of the reviews
contemplated by this Section 5.4, will not use any of the Confidential
Information except in connection with this Agreement, and, if this Agreement is
terminated for any reason whatsoever, agrees to return to the other Party all
tangible embodiments (and all copies) thereof which are in its possession.
5.5 Notice of Developments. Each Party will give prompt written notice to
the other of any material adverse development causing a breach of any of its own
representations and warranties in Section 3 and Section 4 above. No disclosure
by any Party pursuant to this Section 5.5, however, shall be deemed to amend or
supplement the Disclosure Schedule or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant.
5.6 Exclusivity. Each party will not (and will not cause or permit any of
its Subsidiaries to) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of all or
substantially all of the capital stock or assets of any of such party and its
A-30
<PAGE> 127
Subsidiaries (including any acquisition structured as a merger, consolidation,
or share exchange); provided, however, that each party, its Subsidiaries, and
their directors and officers will remain free to participate in any discussions
or negotiations regarding, furnish any information with respect to, assist or
participate in, or facilitate in any other manner any effort or attempt by any
Person to do or seek any of the foregoing to the extent their fiduciary duties
may require. Each party shall notify the other immediately if any Person makes
any proposal, offer, inquiry, or contact with respect to any of the foregoing.
5.7 Insurance and Indemnification.
5.7.1 From and after the Closing, Greenstone, as the Surviving
Corporation in the Merger, will (i) observe and continue to observe any
indemnification provisions now existing (or as same may be hereafter expanded to
the full extent of the law) in the certificates of incorporation or bylaws of
either Greenstone or Kupper or this Agreement; and (ii) shall provide director
and officer liability insurance which shall provide continuous and uninterrupted
coverage for the full statute of limitations for any potential claims in amounts
and extent of coverage equal to or better than that which is presently offered
by Greenstone, which indemnification benefits and which insurance coverage shall
be for the benefit of any individual who served as a director or officer of
Greenstone or Kupper at any time at or prior to the Effective Time.
5.7.2 Greenstone, as the surviving Corporation, will indemnify
each individual who served as a director or officer of Greenstone or Kupper at
any time at or prior to the Effective Time from and against any and all actions,
suits, Proceedings, hearings, investigations, charges, complaints, claims,
demands, injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement, liabilities, obligations,
taxes, liens, losses, expenses, and fees, including all court costs and
attorneys' fees and expenses, resulting from, arising out of, relating to, in
the nature of, or caused by this Agreement or any of the transactions
contemplated herein.
5.8 Continuity of Business Enterprise. From and after the Closing
Greenstone as the surviving corporation will continue at least one significant
historic business line of Kupper, or use at least a significant portion of
Kupper's historic business assets in a business, in each case within the meaning
of Reg. Section 1.368-1(d), except that Greenstone may transfer Kupper's
historic business assets (i) to a corporation that is a member of Greenstone's
"qualified group," within the meaning of Reg. Section 1.368-1(d)(4)(ii), or (ii)
to a partnership if (A) one or more members of Greenstone's "qualified group"
have active and substantial management functions as a partner with respect to
Kupper's historic business or (B) members of Greenstone's "qualified group" in
the aggregate own an interest in the partnership representing a significant
interest in Kupper's historic business, in each case within the meaning of Reg.
Section 1.368-1(d)(4)(iii).
5.9 Shareholders Agreements. At or prior to the Closing, Kupper shall
cause all Shareholders Agreements (a/k/a Stock Option Agreements or Restriction
Agreements) dated April 30, 1993, May 6, 1997, March 4, 1997, September 2, 1997,
October 30, 1998 and February 8, 2000 ("Stockholder Agreements") all of which
are set forth in Part 5.9 of the Disclosure Schedule to be terminated.
Notwithstanding the foregoing, Greenstone shall grant replacement options as
provided in Section 2.4.7.
A-31
<PAGE> 128
6 CONDITIONS TO OBLIGATION TO CLOSE.
6.1 Conditions to Obligation of Greenstone. The obligation of Greenstone
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
6.1.1 this Agreement and the Merger shall have received the
Requisite Kupper Stockholder Approval;
6.1.2 the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as of the
Closing Date;
6.1.3 Kupper shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
6.1.4 this Agreement and the Merger shall have received the
Requisite Greenstone Stockholder Approval;
6.1.5 the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies referred to
in Section 3.5 and Section 4.5 above;
6.1.6 Greenstone shall have received from counsel to Kupper an
opinion in form and substance as set forth in Exhibit G attached hereto,
addressed to Greenstone, and Dated as of the Closing Date;
6.1.7 all actions to be taken by Kupper in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to Greenstone.
6.1.8 Since the Kupper Most Recent Fiscal Quarter End, there
shall not have been any material adverse change in the in the business,
properties, prospects, assets, liabilities, condition (financial or otherwise)
or results of operations of Kupper, and no event shall have occurred or
circumstance exist that could, individually or in the aggregate, reasonably be
expected to result in such a material adverse change.
6.1.9 Since the date of this Agreement, there must not have been
commenced or threatened against Greenstone, or against any Person affiliated
with Greenstone, any Proceeding (a) involving any challenge to, or seeking
damages or other relief in connection with the Merger or the transactions
contemplated in this Agreement, or (b) that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with the Merger or the
transactions contemplated in this Agreement.
6.1.10 Each of Ronald M. Greenstone and Gary C. Roberts shall have
received Employment Agreements in the form of Exhibit H and Exhibit I,
respectively, duly executed by Greenstone as the Surviving Entity.
A-32
<PAGE> 129
6.1.11 Greenstone may waive any condition specified in this
Section 6.1 if it executes a writing so stating at or prior to the Closing.
6.2 Conditions to Obligation of Kupper. The obligation of Kupper to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
6.2.1 this Agreement and the Merger shall have received the
Requisite Greenstone Stockholder Approval;
6.2.2 Each of Ronald M Greenstone and Gary C. Roberts shall have
delivered executed employment agreements in the form required under Section
6.1.10, which agreements become effective at the Effective Time;
6.2.3 the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of the
Closing Date;
6.2.4 Greenstone shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
6.2.5 this Agreement and the Merger shall have received the
Requisite Kupper Stockholder Approval;
6.2.6 the Parties shall have received all other authorizations,
consents, and approvals of governments and governmental agencies referred to
in Section 3.5 and Section 4.5 above;
6.2.7 Kupper shall have received from counsel to Greenstone an
opinion in form and substance as set forth in Exhibit J attached hereto,
addressed to Kupper, and dated as of the Closing Date;
6.2.8 all actions to be taken by Greenstone in connection with
consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to Kupper.
6.2.9 Since the Greenstone Most Recent Fiscal Quarter End, there
shall not have been any material adverse change in the in the business,
properties, prospects, assets, liabilities, condition (financial or otherwise)
or results of operations of Greenstone, and no event shall have occurred or
circumstance exist that could, individually or in the aggregate, reasonably be
expected to result in such a material adverse change.
6.2.10 Since the date of this Agreement, there must not have been
commenced or threatened against Kupper, or against any Person affiliated with
Kupper, any Proceeding (a) involving any challenge to, or seeking damages or
other relief in connection with the Merger or the transactions contemplated in
this Agreement, or (b) that may have the effect of preventing, delaying, making
illegal, or otherwise interfering with the Merger or the transactions
contemplated in this Agreement.
A-33
<PAGE> 130
6.2.11 Kupper may waive any condition specified in this Section
6.2 if it executes a writing so stating at or prior to the Closing.
6.3 Conditions to Obligations of Both Parties. The respective obligations
of each party to consummate the transaction to be performed by it hereunder in
connection with the Closing are subject to satisfaction of the following
conditions:
6.3.1 The Form S-4 shall have become effective under the
Securities Act and no stop order suspending the effectiveness of the Form S-4
shall have been issued and no Proceedings for that purpose shall have been
initiated or threatened by the Securities and Exchange Commission.
7 TERMINATION.
7.1 Termination of Agreement. Either of the Parties may terminate this
Agreement with the prior authorization of its board of directors (whether before
or after stockholder approval) as provided below:
7.1.1 the Parties may terminate this Agreement by mutual written
consent at any time prior to the Effective Time;
7.1.2 Greenstone may terminate this Agreement by giving written
notice to Kupper at any time prior to the Effective Time (A) in the event Kupper
has breached any material representation, warranty, or covenant contained in
this Agreement in any material respect, Greenstone has notified Kupper of the
breach, and the breach has continued without cure for a period of 30 days after
the notice of breach or (B) if the Closing shall not have occurred on or before
October 31, 2000, by reason of the failure of any condition precedent under
Section 6.1 hereof (unless the failure results primarily from Greenstone
breaching any representation, warranty, or covenant contained in this
Agreement);
7.1.3 Kupper may terminate this Agreement by giving written
notice to Greenstone at any time prior to the Effective Time (A) in the event
Greenstone has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Kupper has notified
Greenstone of the breach, and the breach has continued without cure for a period
of 30 days after the notice of breach or (B) if the Closing shall not have
occurred on or before October 31, 2000, by reason of the failure of any
condition precedent under Section 6.2 hereof (unless the failure results
primarily from Kupper breaching any representation, warranty, or covenant
contained in this Agreement); or
7.1.4 any Party may terminate this Agreement by giving written
notice to the other Party at any time after the Special Greenstone Meeting or
the Special Kupper Meeting in the event this Agreement and the Merger fail to
receive the Requisite Greenstone Stockholder Approval or the Requisite Kupper
Stockholder Approval respectively.
7.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 7.1 above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, however, that
the
A-34
<PAGE> 131
confidentiality provisions contained in Section 5.4 above shall survive any such
termination and further provided that within fifteen (15) days after written
demand therefor reimburse Greenstone for one half (50%) of all legal and
accounting fees incurred by it in connection with the preparation, distribution
and filing of any and all documents with the SEC in connection with this
transaction provided that Greenstone is not in default under this Agreement.
8 MISCELLANEOUS.
8.1 Survival. All of the representations, warranties, and covenants of
the Parties (other than the provisions in Section 2 above concerning issuance of
Greenstone Shares, the provisions in Section 5.7 above concerning insurance and
indemnification, and the provisions in Section 5.8 above concerning certain
requirements for a tax-free reorganization) will survive the Effective Time for
a period of six (6) months.
8.2 Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Party; provided,
however, that any Party may make any public disclosure it believes in good faith
is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its best
efforts to advise the other Party prior to making the disclosure).
8.3 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns; provided, however, that (i) the provisions in
Section 2 above concerning issuance of Greenstone Shares and the provisions in
Section 5.8 above concerning certain requirements for a tax-free reorganization
are intended for the benefit of Greenstone and Kupper Stockholders and (ii) the
provisions in Section 5.7 above concerning insurance and indemnification are
intended for the benefit of the individuals specified therein and their
respective legal representatives.
8.4 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement between the Parties and supersedes any
prior understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
8.5 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
8.6 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
8.7 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
A-35
<PAGE> 132
8.8 Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Greenstone: Greenstone Roberts Advertising, Inc.
401 Broadhollow Road
Melville, NY 11747
Attn: Mr. Ronald M. Greenstone
With copies to: Forchelli, Curto, Schwartz, Mineo, Carlino & Cohn, LLP
330 Old Country Road
Mineola, NY 11501
Attn: Anthony V. Curto, Esq.
If to Kupper: Kupper Parker Communications, Incoporated
8301 Maryland Avenue
Clayton, Missouri 63105
Attn: John Rezich
With a copy to: Armstrong Teasdale LLP
One Metropolitan Square
St. Louis, Missouri 63102
Attn.: A.J. Chivetta
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Party notice in the manner herein set forth.
8.9 Governing Law/Jurisdiction. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of New York without
giving effect to any choice or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of New York.
8.10 Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; provided, however,
that any amendment effected subsequent to stockholder approval will be subject
to the restrictions contained in the New York Business Corporation Law and the
Missouri Corporation Law. No amendment of any provision of this Agreement shall
be valid unless the same shall be in writing and signed by both of the Parties.
No waiver by any Party of any default, misrepresentation, or breach of warranty
or covenant hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of
A-36
<PAGE> 133
warranty or covenant hereunder or affect in any way any rights arising by virtue
of any prior or subsequent such occurrence.
8.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
8.12 Expenses. Except as otherwise provided herein, each of the Parties
will bear its own costs and expenses (including legal fees and expenses)
incurred in connection with this Agreement and the transactions contemplated
hereby.
8.13 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires. The
word "including" shall mean including without limitation.
8.14 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
[Signature Page Follows.]
A-37
<PAGE> 134
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
GREENSTONE KUPPER
Greenstone Roberts Advertising, Inc. Kupper Parker Communications,
Incorporated
By /s/ Bruce Kupper By /s/ Ronald Greenstone
Name Bruce Kupper Name Ronald Greenstone
Title Chief Executive Officer Title Chairman
A-38
<PAGE> 135
LIST OF EXHIBITS
Exhibit A - Certificate of Merger - New York
Exhibit B - Articles of Merger - Missouri
Exhibit C - Amended Certificate of Incorporation of Greenstone
Exhibit D - Amended Bylaws
Exhibit E - List of Directors and Officers
Exhibit F - Permitted Investments
Exhibit G - Form of Opinion of Counsel to Kupper
Exhibit H - Employment Agreement for Ronald M. Greenstone
Exhibit I - Employment Agreement for Gary C. Roberts
Exhibit J - Form of Opinion of Counsel to Greenstone
A-39
<PAGE> 136
ANNEX B
Amendment to Certificate of Incorporation of Greenstone
The certificate of incorporation shall be amended to change the name of
the Surviving Corporation to Kupper Parker Communications, Incorporated to
accomplish the foregoing amendment, paragraph FIRST of the certificate of
incorporation shall be and hereby is amended to read in its entirety as follows:
"FIRST: The name of the corporation is "Kupper Parker Communications,
Incorporated."
In addition, the first sentence of Article NINTH shall be amended to
delete the words "consisting of not less than six (6) persons"
A-40
<PAGE> 137
ANNEX C
Employment Agreement for Ronald M. Greenstone
AGREEMENT, made as of _________________, 2000, by and between Kupper Parker
Communications Inc., a New York corporation, with a business address of 8301
Maryland Avenue, Clayton, Missouri 63105 (the "Corporation"), and Ronald M.
Greenstone, an individual residing at 2467 N.W. 62nd Street, Boca Raton, Florida
33496 (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 as follows:
1. The Corporation employs the Executive, and the Executive agrees to serve
the Corporation, for a period (the "Period of Employment") of two (2)
years commencing on the date hereof, ending at 12:00 midnight on the
second anniversary thereof (the "Termination Date").
2. During the Period of Employment hereunder, the Executive shall be
employed by the Corporation as the Chief Executive Officer of the Long
Island operations of the Corporation, and, except as hereinafter
provided, shall devote eighty (80%) percent of a usual full-time Monday
through Friday work week to the business and affairs of the Corporation,
use his best efforts consistent with such time requirements 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 such duties are consistent with those currently
being performed by the Executive contemporaneously with the execution of
this Agreement. All such requests or instructions for services to be
performed by the Executive (consistent with the terms hereof) shall be
made solely by Bruce D. Kupper to whom Executive shall report. 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, provided however that the Executive shall
not be required to travel more than ten (10) consecutive days in any
calendar month throughout the term hereof. In addition, the Executive may
render such services from Executive's home in Boca Raton, Florida or from
the Corporation's office on Long Island, New York, provided, however,
that Executive shall not be required to render such services from any
location other than his home in Boca Raton, Florida for more than One
Hundred (100) days per year during the term hereof.
2.1. 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 and all
expenses so reimbursed shall be deemed to have been approved. Such
expenses shall be reimbursed either by the Corporation providing
the Executive a corporate credit card to use for such expenses or
upon presentation by the Executive of invoices, vouchers or other
documents evidencing such expenses. In addition, in the event that
the Executive is requested by the Corporation to perform services
in Long Island, New York, the Executive will be reimbursed for:
(i) all commuting expenses between his home in Boca Raton, Florida
and the Corporation's Long Island office, including without
limitation, airfare, car service, car rental, parking and other
similar expenses; and (ii) all expenses incident or relating to
the maintenance by Executive of an apartment on Long Island,
including, without limitation, rent, maintenance, telephone,
utilities, etc. all of which expenses shall be reimbursed promptly
upon presentation by the Executive of invoices/vouchers evidencing
such expenses. The Corporation shall pay 100% of the costs of
Executive's participation in the Corporation's medical and dental
insurance plans in existence on the execution of this Agreement.
The Executive shall be entitled to vacations in accordance with
the Corporation's existing vacation policy (provided,
A-41
<PAGE> 138
however, that his vacation time shall not be less than four (4)
weeks per year). The Corporation shall provide the Executive with
reasonable perquisites suitable to the office which he holds.
3. 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 Fifteen Thousand and No/100
Dollars ($215,000.00) per annum. 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, but no less frequently
than monthly.
4. In the event the Executive is terminated by the Corporation prior to the
Termination Date (a "Cessation of Employment") otherwise than for "cause"
(as hereinafter defined in Paragraph 8):
4.1. The Corporation shall within five (5) days of the Cessation of
Employment pay to the Executive a lump sum payment of Two Hundred
and Fifty Thousand and no/100 Dollars ($250,000.00), as a special
severance and termination payment which amount shall be paid in
addition to and not in lieu of any other amounts payable to the
Executive by the Corporation; and
4.2. 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 prior to the date of the
Cessation of Employment; and
4.3. 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. In addition, for the entire
remaining portion of the then current Period of Employment, the
Corporation shall pay 100% of the costs of the Executive's
participation in the Corporation's medical and dental insurance
plans.
4.4. If, by the Termination Date, 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 the fifth day following the
Termination Date, in one lump sum as a special severance and
termination payment, the amount of Two Hundred Fifty Thousand
no/100 Dollars ($250,000.00), which amount shall be in addition
to, and not in lieu of, any other amounts payable to the Executive
by the Corporation. Neither the Corporation nor the Executive
shall have any obligation to consider or 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 negotiate a Renewal Agreement and irrespective of
the reasons the parties do not enter into such a Renewal
Agreement.
5. In the event of the Executive's death during the term hereof, this
Agreement shall terminate on the date of death of the Executive.
6. During the term of the Executive's employment hereunder and for a period
of twelve (12) months following the end of the employment period (the
"Restricted Period"), 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
below) 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 (1%) percent of the amount of any such security
outstanding. The Executive may make investments, without restriction on
amount, in non- competitive private businesses. The term "in competition
with" as used in this Agreement shall mean a
A-42
<PAGE> 139
business which is conducted anywhere within the State of Florida or the
State of New York and is engaged in the business of providing advertising
or public relations services.
7. To induce the Corporation to execute and deliver this Agreement, and to
protect the trade secrets and the business of the Corporation, the
Executive hereby covenants and agrees that during the Restricted Period,
the Executive will not, whether for the Executive's own account or for
the account of any other person, solicit business in competition with the
business of the Corporation, from any person known by the Executive to be
a customer of the Corporation, whether or not the Executive had personal
contact with such person during and by reason of the Executive's
employment with the Corporation.
8. For the purposes of this Agreement, the term "for cause" shall mean, and
be limited exclusively to, the following actions by the Executive: fraud;
misappropriation of funds or property of the Corporation for his own use;
embezzlement of the Corporation's property; or a willful, deliberate and
intentional material breach by Executive of the obligations to be
performed by him of Paragraphs 2, 6, 7, 9, 10 or 11 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 judgement as a senior executive of the Corporation or a member
of the Board of Directors of the Corporation.
It is further specifically agreed that a termination of this Agreement by
virtue of Employee's inability to perform his duties because of total or
partial disability shall not be a termination "for cause", it being
specifically understood and agreed that the Executive (or his estate)
shall be paid the special severance and termination payment provided for
in paragraph 4.1 and the Executive shall have the rights provided for
under paragraph 4.3 (but not the right to continued salary under
paragraph 4.2) if the Executive's employment is terminated for such
reasons.
It is further specifically agreed that the Corporation shall be
conclusively precluded from contending that the Executive committed a
willful, deliberate and intentional breach of his obligations under
Paragraph 2 of this Agreement unless the Corporation has given the
Executive written notice of the claimed breach, specifying the conduct
alleged to comprise willful, deliberate and intentional material breach,
at least thirty (30) days prior to the termination and the conduct
continues or is repeated after the Executive's receipt of such notice.
If the Corporation withholds the special severance payment to Executive,
or any other payment which would be due to the Executive absent
termination "for cause", and the Corporation does not prevail on its
contention that Executive's employment was terminated for cause or any
other defense to payment, then the Corporation shall be liable for all
legal expenses, including reasonable attorney's fees, incurred by the
Executive to enforce the payment obligation.
9. 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 Employment Period
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 the Period of 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.
10. 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 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
A-43
<PAGE> 140
that all costs and expenses, including, but not limited to, reasonable
attorney's fees, incurred at the request of the Corporation in connection
with any action taken by the Executive pursuant to this Paragraph 10,
shall be borne by the Corporation.
11. The Executive agrees that, during or after the termination of this
Agreement, he shall not divulge, use, 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.
12. 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. Notwithstanding the foregoing, the Executive shall receive
health insurance benefits equal to or better than those presently being
provided to the Executive.
13. 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.
14. 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.
15. 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.
Nothing contained herein shall prevent the Corporation from waiving any
requirement that the Executive perform the services required hereunder;
provided, however, that any such waiver shall be in writing.
16. 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.
17. 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.
18. 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.
19. 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.
A-44
<PAGE> 141
20. 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.
KUPPER PARKER COMMUNICATIONS, INCOPORATED
By:
Name: Bruce D. Kupper Ronald M. Greenstone
Title: Chief Executive Office
A-45
<PAGE> 142
Employment Agreement for Gary C. Roberts
AGREEMENT, made as of _________________, 2000, by and between Kupper Parker
Communications Inc., a New York corporation, with a business address of 8301
Maryland Avenue, Clayton, Missouri 63105 (the "Corporation"), and Gary Roberts,
an individual residing at 22 Schoolhouse Lane, Roslyn Heights, NY 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 promises and the mutual covenants herein
contained, the parties agree as follows:
The Corporation employs the Executive, and the Executive agrees to serve the
Corporation, for a period (the "Period of Employment") of two (2) years
commencing on the date hereof, ending at 12:00 midnight on the second
anniversary thereof (the "Termination Date").
1. During the Period of Employment hereunder, the Executive shall be
employed by the Corporation as the President of the Long Island
operations of the Corporation, and, except as hereinafter provided, shall
devote his full time and attention to the business and affairs of the
Corporation, use his best efforts consistent with such time requirements
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 such duties are
consistent with those currently being performed by the Executive
contemporaneously with the execution of this Agreement. All such requests
or instructions for services to be performed by the Executive (consistent
with the terms hereof) shall be made solely by Ronald M. Greenstone to
whom Executive shall report or if Ronald M. Greenstone shall have
terminated his employment then in that event the Executive shall report
to Bruce D. Kupper. 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, provided however
that the Executive shall not be required to travel more than ten (10)
consecutive days in any calendar month throughout the term hereof.
1.1. 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 and all
expenses so reimbursed shall be deemed to have been approved. Such
expenses shall be reimbursed either by the Corporation providing
the Executive a corporate credit card to use for such expenses or
upon presentation by the Executive of invoices, vouchers or other
documents evidencing such expenses. The Corporation shall pay 100%
of the costs of the Executive's participation in the Corporation's
medical and dental insurance plans in existence on the execution
date of this Agreement. The Executive shall be entitled to
vacations in accordance with the Corporation's existing vacation
policy (provided, however, that his vacation time shall not be
less than four (4) weeks per year). The
A-46
<PAGE> 143
Corporation shall provide the Executive with reasonable
perquisites suitable to the office which he holds.
2. 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 Forty Thousand and No/100
Dollars ($240,000.00) per annum. 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, but no less frequently
than monthly
3. In the event the Executive is terminated by the Corporation prior to the
Termination Date (a "Cessation of Employment) otherwise than for "cause"
(as hereinafter defined in Paragraph 8):
3.1. The Corporation shall within five (5) days of the Cessation of
Employment pay to the Executive a lump sum payment of Two Hundred
and Twenty-five Thousand and no/100 Dollars ($225,000.00), as a
special severance and termination payment which amount shall be
paid in addition to and not in lieu of any other amounts payable
to the Executive by the Corporation; and
3.2. 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 prior to the date of the
Cessation of Employment; and
3.3. 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. In addition, for the entire
remaining portion of the then current Period of Employment, the
Corporation shall pay 100% of the costs of the Executive's
participation in the Corporation's medical and dental insurance
plans.
3.4. If by the Termination Date, 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 the fifth day following the Termination
Date, in one lump sum as a special severance and termination
payment, the amount of Two Hundred Twenty-five Thousand and no/100
Dollars ($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. Neither the Corporation nor the Executive shall have
any obligation to consider or 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
negotiate a Renewal Agreement and irrespective of the reasons the
parties do not enter into such a Renewal Agreement.
A-47
<PAGE> 144
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. During the term of the Executive's employment hereunder and for a period
of twelve (12) months following the end of the employment period (the
"Restricted Period"), 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
below) 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 (1%) percent of the amount of any such security
outstanding. The Executive may make investments, without restriction on
amount, in non- competitive private businesses. The term "in competition
with" as used in this Agreement shall mean a business which is conducted
anywhere within the State of Florida or the State of New York and is
engaged in the business of providing advertising or public relations
services.
6. To induce the Corporation to execute and deliver this Agreement, and to
protect the trade secrets and the business of the Corporation, the
Executive hereby covenants and agrees that during the Restricted Period,
the Executive will not, whether for the Executive's own account or for
the account of any other person, solicit business in competition with the
business of the Corporation, from any person known by the Executive to be
a customer of the Corporation, whether or not the Executive had personal
contact with such person during and by reason of the Executive's
employment with the Corporation.
7. For the purposes of this Agreement, the term "for cause" shall mean, and
be limited exclusively to, the following actions by the Executive: fraud;
misappropriation of funds or property of the Corporation for his own use;
embezzlement of the Corporation's property; or a willful, deliberate and
intentional material breach by Executive of the obligations to be
performed by him of Paragraphs 2, 6, 7, 9, 10 or 11 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 judgement as a senior executive of the Corporation or a member
of the Board of Directors of the Corporation.
It is further specifically agreed that a termination of this Agreement by
virtue of Employee's inability to perform his duties because of total or
partial disability shall not be a termination "for cause", it being
specifically understood and agreed that the Executive (or his estate)
shall be paid the special severance and termination payment provided for
in paragraph 4.1 and the Executive shall have the rights provided for
under paragraph 4.3 (but
A-48
<PAGE> 145
not the right to continued salary under paragraph 4.2) if the Executive's
employment is terminated for such reasons.
It is further specifically agreed that the Corporation shall be
conclusively precluded from contending that the Executive committed a
willful, deliberate and intentional breach of his obligations under
Paragraph 2 of this Agreement unless the Corporation has given the
Executive written notice of the claimed breach, specifying the conduct
alleged to comprise willful, deliberate and intentional material breach,
at least thirty (30) days prior to the termination and the conduct
continues or is repeated after the Executive's receipt of such notice.
If the Corporation withholds the special severance payment to Executive,
or any other payment which would be due to the Executive absent
termination "for cause", and the Corporation does not prevail on its
contention that Executive's employment was terminated for cause or any
other defense to payment, then the Corporation shall be liable for all
legal expenses, including reasonable attorney's fees, incurred by the
Executive to enforce the payment obligation.
8. 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 Employment Period
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 the Period of 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.
9. 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 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
attorney's fees, incurred at the request of the Corporation in connection
with any action taken by the Executive pursuant to this Paragraph 10,
shall be borne by the Corporation.
A-49
<PAGE> 146
10. The Executive agrees that, during or after the termination of this
Agreement, he shall not divulge, use, 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.
11. 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. Notwithstanding the foregoing, the Executive shall receive
health insurance benefits equal to or better than those presently being
provided to the Executive.
12. 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.
13. 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.
14. 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.
Nothing contained herein shall prevent the Corporation from waiving any
requirement that the Executive perform the services required hereunder;
provided, however, that any such waiver shall be in writing.
15. 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.
16. 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
A-50
<PAGE> 147
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.
17. 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.
18. 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.
19. 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.
KUPPER PARKER COMMUNICATIONS, INCOPORATED
By:
-------------------------------- ----------------------------
Name: Bruce D. Kupper Gary Roberts
Title: Chief Executive Officer
A-51
<PAGE> 148
ANNEX D
AMENDMENT NO. 2 TO 1998 STOCK OPTION PLAN
THIS INSTRUMENT, dated ____________, 2000, is an amendment to that
certain 1998 Stock Option Plan of Greenstone Roberts Advertising, Inc.
WHEREAS, Section 17 of the 1998 Stock Option Plan of Greenstone Roberts
Advertising, Inc. ("Plan") permits the amendment of the Plan;
NOW THEREFORE, in consideration of the above premises, the Plan is hereby
amended as follows effective as of January 1, 1998:
1. Section 5 of the Plan is amended by the deletion of the first sentence
thereof and the insertion in lieu thereof of the following:
"The Committee may, but shall not be required to, grant, in accordance
with this Plan, Options to purchase an aggregate of up to 250,000 shares,
which may be either Treasury Shares or authorized but unissued Shares."
2. Section 6 of the Plan is amended to read as follows:
"Price. (a) The exercise price per Share of the Shares to be
purchased pursuant to any Option shall be fixed by the Committee at the
time an Option is granted, but in no event shall it be less than the Fair
Market Value of a Share on the day on which the Option is granted.
"(b) Notwithstanding anything herein to the contrary, upon the
merger of Kupper Parker Communications, Inc. ("KPCI") into the
Corporation, the Committee shall convert the existing KPCI options to
purchase 34 shares of KPCI shares into stock options to purchase 136,484
shares of Corporation, exercisable at any time up to December 31, 2007 at
a price of $1.00 per 4,014 shares of the Corporation. "
3. Except as specifically amended hereby, the Plan shall remain in full
force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Amendment as of the
day and year first above written upon the consent of the Board of Directors.
GREENSTONE ROBERTS ADVERTISING, INC.
By:
Ronald M. Greenstone, Chairman
A-52
<PAGE> 149
ANNEX E
SECTION 351.455 OF THE GENERAL AND BUSINESS CORPORATION LAW OF MISSOURI
351.455 Shareholder who objects to merger may demand value of shares, when.--
1. If a shareholder of a corporation which is a party to a merger or
consolidation shall file with such corporation, prior to or at the meeting of
shareholders at which the plan of merger or consolidation is submitted to a
vote, a written objection to such plan of merger or consolidation, and shall not
vote in favor thereof, and such shareholder, within twenty days after the merger
or consolidation is effected, shall make written demand on the surviving or new
corporation for payment of the fair value of his shares as of the day prior to
the date on which the vote was taken approving the merger or consolidation, the
surviving or new corporation shall pay to such shareholder, upon surrender of
his certificate or certificates representing said shares, the fair value
thereof. Such demand shall state the number and class of the shares owned by
such dissenting shareholder. Any shareholder failing to make demand within the
twenty day period shall be conclusively presumed to have consented to the merger
or consolidation and shall be bound by the terms thereof.
2. If within thirty days after the date on which such merger or
consolidation was effected the value of such shares is agreed upon between the
dissenting shareholder and the surviving or new corporation, payment therefor
shall be made within ninety days after the date on which such merger or
consolidation was effected, upon the surrender of his certificate or
certificates representing said shares. Upon payment of the agreed value the
dissenting shareholder shall cease to have any interest in such shares or in the
corporation.
3. If within such period of thirty days the shareholder and the surviving
or new corporation do not so agree, then the dissenting shareholder may, within
sixty days after the expiration of the thirty day period, file a petition in any
court of competent jurisdiction within the county in which the registered office
of the surviving or new corporation is situated, asking for a finding and
determination of the fair value of such shares, and shall be entitled to
judgment against the surviving or new corporation for the amount of such fair
value as of the day prior to the date on which such vote was taken approving
such merger or consolidation, together with interest thereon to the date of such
judgment. The judgment shall be payable only upon and simultaneously with the
surrender to the surviving or new corporation of the certificate or certificates
representing said shares. Upon the payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares, or in the surviving
or new corporation. Such shares may be held and disposed of by the surviving or
new corporation as it may see fit. Unless the dissenting shareholder shall file
such petition within the time herein limited, such shareholder and all persons
claiming under him shall be conclusively presumed to have approved and ratified
the merger or consolidation, and shall be bound by the terms thereof.
4. The right of a dissenting shareholder to be paid the fair value of his
shares as herein provided shall cease if and when the corporation shall abandon
the merger or consolidation.
A-53
<PAGE> 150
PART II
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(i) Limitation of Liability of Directors and Officers. Section 722 of
New York Business Corporation Law ("BCL") permits a corporation to indemnify a
director or officer, made a party to an action by reason of the fact that he was
a director or officer of the corporation, against judgments, fines, amounts paid
in settlement and reasonable expenses, including attorneys' fees, if such
director or officer acted in good faith, for a purpose which he reasonably
believed to be in the best interests of the corporation.
(ii) Indemnification of Directors and Officers. GRAI's Certificate of
Incorporation includes limitations on the liability of officers and directors,
except for liability pursuant to a judgment or other final adjudication adverse
to such director which establishes that his acts or omissions were in bad faith
or involved intentional misconduct or a knowing violation of law or that he
gained personally in fact a financial profit or other advantage to which he was
not entitled or his acts violated Section 719 of the BCL. GRAI's Board of
Directors has authorized the Company to provide a general indemnification of its
officers, directors and employees regarding any claims or liabilities incurred
in the course of their employment, subject to the foregoing provisions (see
Article II, Section 11 of the By-Laws of GRAI).
(iii) Insurance. The Company has in effect under a policy effective
August 21, 2000 and expiring on August 20,2001, insurance covering all of its
directors and officers against certain liabilities and reimbursing the Company
for obligations for which it occurs as a result of its indemnification of such
directors, officers and employees.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
1. (A) Pro Forma Financial Information
Condensed Balance Sheets as of April 30, 2000
(unaudited) and December 31, 1999
Condensed Statements of Operations for the Six
Months Ended April 30, 2000 and April 30, 1999
(unaudited)
Condensed Statements of Cash Flows for the Six
Months Ended April 30, 2000 and April 30, 1999
(unaudited)
Notes to Interim Condensed Financial Statements
(unaudited)
(B) Report of Independent Auditors of GRAI
Consolidated Balance Sheets as of October 31, 1999
and 1998
II-1
<PAGE> 151
Consolidated Statements of Operations for the Two
Years in the Period ended October 31, 1999
Consolidated Statements of Changes in Stockholders'
Equity for the Two Years in the Period ended October
31, 1999
Consolidated Statements of Cash Flows for the Two
Years in the Period ended December 31, 1999
Notes to Consolidated Financial Statements
2.
*2.1 -- Agreement and Plan of Merger Agreement dated as of
August 23, 2000 between GRAI and KPCI
3.1 -- Certificate of Incorporation, as amended (1)
3.2 -- Amended and Restated By-laws (1)
3.3 -- Amendment to the Certificate of Incorporation (2)
3.4 -- Amendment to By-laws
5.1 -- Forchelli, Curto, Schwartz, Mineo, Carlino & Cohn,
LLP Legal Opinion
8.1 -- Armstrong Teasdale LLP Tax Opinion
10.1 -- 1988 Stock Option Plan (1)
10.2 -- Amendment No. 1 to the 1988 Stock Option Plan dated
February 7, 1990 (1)
23.1 -- Consent of Independent Auditors (BDO Seidman, LLP)
23.2 -- Consent of Independent Auditors (Arthur Andersen)
99.1 -- Form of Proxy of GRAI
(b) Financial Statement Schedules.
All schedules have been omitted because the required
information is included in the financial statements or notes
thereto or because they are not required.
(c) Not applicable.
-----------
* filed as Annex A; schedules to this exhibit have been omitted and will be
furnished to the Commission upon request.
(1) Filed as an exhibit to GRAI's Registration Statement on Form S-18 (File No.
33-26372NY) and incorporated by reference herein.
(2) Filed as an exhibit to GRAI's Form 8-K on July 29, 1997.
II-2
<PAGE> 152
ITEM 22. UNDERTAKINGS
(A) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(B) The undersigned Registrant hereby undertakes:
(1) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item 4,
10(b), 11, 13 of this Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained
in documents filed subsequent to the effective date of the Registration
Statement through the date of responding to the request.
(2) To supply by means of a post-effective amendment all
information concerning a transaction, and GRAI being acquired involved
therein, that was not the subject of and included in the Registration
Statement when it became effective.
II-3
<PAGE> 153
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this amendment to the Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on September 6, 2000.
GREENSTONE ROBERTS ADVERTISING, INC.
By: /S/ RONALD M. GREENSTONE
........................................
RONALD M. GREENSTONE
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to the registration statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ RONALD M. GREENSTONE Chairman of the Board, Chief September 6, 2000
............................ Executive Officer
Ronald M. Greenstone
/S/ GARY ROBERTS Director, President September 6, 2000
............................
Gary Roberts
/S/ HERMAN FIALKOV Director September 6, 2000
............................
Herman Fialkov
</TABLE>
II-4
<PAGE> 154
EXHIBIT INDEX
Exhibits:
<TABLE>
<S> <C>
3.4 -- Amendment to By-Laws..................................... E-2
5.1 -- Forchelli, Curto, Schwartz, Mineo,
Carlino & Cohn, LLP Legal Opinion .................... E-4
8.1 -- Armstrong Teasdale LLP Tax Opinion ...................... E-5
23.1 -- Consent of Independent Auditors (BDO Seidman, LLP) ...... E-7
23.2 -- Consent of Independent Auditors (Arthur Andersen LLP) ... E-8
99.1 -- Form of Proxy of GRAI ................................... E-9
</TABLE>
E-1
