SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-K
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended JANUARY 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ------------------------- to ------------------
Commission file number 1-6339
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UNIFLEX, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 11-2008652
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
383 West John Street, Hicksville, New York 11802
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (516) 932-2000
----------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title Of Each Class On Which Registered
------------------- -------------------
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of April 8, 1996, the aggregate market value of the Registrant's
outstanding voting Common Stock held by non-affiliates of the Registrant was
$11,557,908.
As of April 8, 1996, there were 2,756,382 shares outstanding of the
Registrant's Common Stock, $.10 par value.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III is incorporated by reference to a
definitive proxy statement to be filed by the Registrant not later than May 30,
1996 pursuant to Regulation 14A.
<PAGE>
PART I
Item 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS. Uniflex, Inc. (a Delaware
corporation organized in 1973) is the successor by merger to the business and
assets of Uniflex, Inc. (a New York corporation organized in 1963). Uniflex,
Inc., its predecessor and subsidiaries are hereinafter collectively referred to
as the Registrant. The Registrant designs, manufactures and sells a variety of
plastic bags used in packaging, promotion and retailing and has been so engaged
for more than the last five years.
In January 1996, the Registrant formed Uniflex Southeast
L.L.C., a Delaware limited liability company ("Southeast") to market and
distribute health and safety products and services in the southeastern United
States. Uniflex Southeast, Inc., a Delaware corporation and wholly-owned
subsidiary of the Registrant, is the Manager of Southeast and owns 80% of its
equity. In March 1996, Southeast commenced operations in Roswell, Georgia.
In January 1995, the Registrant formed Uniflex Southwest
L.L.C., a Delaware limited liability company ("Southwest") to manufacture and
distribute plastic packaging material in the southwestern United States. The
Registrant is the Manager of Southwest and owns 80% of its equity. In April
1995, Southwest commenced operations in Albuquerque, New Mexico.
In July 1993, the Registrant acquired certain of the assets of
Haran Packaging Co., Inc., a New York corporation engaged in the business of
manufacturing, distributing and selling packaging materials ("Haran").
The Registrant through Hantico, Inc. (a Delaware corporation
organized in December 1992) ("Hantico"), a wholly-owned subsidiary, produced
buttons, button products,
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<PAGE>
badges, ribbons, mirrors and magnets for the advertising specialty marketplace
from December 1992 until January 1995. Celluloid political and advertising
buttons comprised Hantico's major product line. In January 1995, Hantico sold
substantially all of its assets to an unaffiliated third party.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. Not
applicable.
(c) (1) NARRATIVE DESCRIPTION OF BUSINESS. The information
specified in paragraphs (i)-(xiii) below is included in accordance with Item
101(c)(1) of Regulation S-K.
(i) The Registrant's principal product is a flexible
plastic bag with an attached plastic handle or other closure or carrying device,
known as a "specialty bag." The bag is made of polyethylene and comes in various
sizes. The bag is printed from artwork (e.g., the user's product and logo)
prepared either by the Registrant's in-house art and production department or
supplied to the Registrant by the user or its advertising agency. Injection
molded rigid polyethylene handles, in various sizes and shapes, with reusable
snap-closures, are affixed to the bags by a heat-sealing process. Other
specialty bags produced and marketed by the Registrant include die-cut bags,
drawstring bags and litter bags. The Registrant's specialty bags are used
primarily for promotional purposes including, for example, at trade shows and
exhibitions. The Registrant's specialty bags are sold and marketed primarily to
a network of promotional products distributors.
The Registrant also manufactures a line of specialized bags used in
various segments of the healthcare industry including hospitals, clinical
laboratories and radiology departments. For this industry the Registrant
manufactures a clear bag used as a secondary container for the safe transport of
clinical laboratory specimens, under the trademark "Speci-Gard(R)." The
Registrant
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markets this product primarily to healthcare and laboratory supply companies.
The Registrant believes that the bag meets or exceeds OSHA standards. The bag is
a liquid-tight, disposable specimen transport bag with a patented one step
sealing system that is approved as a secondary container for specimen transport.
The registrant also manufactures and markets a clear, radiolucent, disposable,
protective cover for X-Ray cassettes under the trademark "Protex-Ray(TM)" to the
healthcare market.
The Registrant also manufactures and markets a variety of conventional
polyethylene bags without carrying attachments, many of which are also printed
from artwork, for use in packaging principally by various apparel and soft goods
manufacturers. The Registrant also manufactures and markets flexible plastic
envelopes with pressure sensitive adhesive closures for use in the air courier
industry as a document handling pouch. The Registrant also sells molded plastic
handles for plastic bags to other manufacturers.
The Registrant also manufactures and markets a highly tamper-evident
cash handling bag under the trademarks "Ultravault(TM) and Univault(TM)." The
disposable bags are constructed of high strength polymer film, provide thermal
protection from tampering, and are constructed with the Registrant's patented
one step Press and Close(R) sealing system. The Registrant markets the products
to cash intensive businesses including financial institutions, retail
establishments and fast food chains, for the safe transport of cash and other
valuables.
The Registrant, through Southwest, produces and markets a soft loop
handle bag with applications ranging from retail shopping bags to functional
"pick it yourself" produce bags. Other products include a double drawstring bag,
which is marketed primarily to cosmetic related
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firms and a reclosable, resealable, Trac-Log bag, which is marketed to
healthcare and laboratory supply companies, food packaging firms and promotional
products distributors.
The Registrant, through Southeast, produces and markets infection
control products for the dental industry, including a transport bag for dental
impressions, antimicrobial soaps, and disinfectants.
The Registrant continues to develop new products. After more
than a year of research, development and testing, the Registrant, in November
1994, began shipping its Ultravault(TM) "tamper evident" security bags which
provide the user with visual evidence of tampering with the bag's contents. The
Ultravault(TM) "tamper evident" security bags are being introduced into markets,
such as banks, retailers, casino operators, stockbrokers and courier firms,
which have security concerns for cash and other valuables.
The following table sets forth the amount and percentage of sales
contributed by each class of similar products for the last three fiscal years
which contributed fifteen percent or more of total sales in any of such fiscal
years.
<TABLE>
<CAPTION>
Fiscal Years ended January 31,
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1996 1995 1994
---- ---- ----
$ in thousands
<S> <C> <C> <C>
Plastic Specialty Bags (including
handle, drawstring, cut-out and litter $17,931 $16,937 $15,929
bags)........................................... 57% 60% 65%
</TABLE>
The Registrant distributes approximately 44% of its products
to advertising specialty distributors as part of its bag, button and ribbon
advertising program. The Registrant distributes approximately 21% of its
products, namely Speci-Gard(TM) and other hospital related
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products, to hospital supply houses and directly to hospitals. The Registrant
also sells its products to various distributors for resale. Less than 10% of the
Registrant's sales are directly with major retailers, chain stores, industrial
concerns and other large end-users. The Registrant's products are sold through
eighteen salespeople which include thirteen salespeople and five of the
Registrant's officers. During the fiscal year ended January 31, 1996, the
Registrant's sales staff accounted for approximately ninety-eight percent (98%)
of sales while approximately two percent (2%) of sales were made through
manufacturer's representatives.
The Registrant's sales office, including its showroom, is
located at its principal executive offices in Hicksville, New York (see Item 2
below). During the fiscal year ended January 31, 1996, the Registrant incurred
advertising expenditures of approximately $300,000. The Registrant mails a
complete catalogue of its merchandise, updated annually. For the year ended
January 31, 1996, the Registrant mailed approximately 90,000 catalogues. This
program develops substantial leads for the Registrant. In addition, the
Registrant receives unsolicited inquiries, referrals and leads from existing
customers, which are actively pursued by the Registrant's salespersons. The
Registrant also displays its merchandise at various trade shows, such as premium
shows and soft-goods shows. Additionally, the Registrant mails a catalogue
designed specifically for hospital supply houses and hospitals to promote its
Speci-Gard(TM) products and other hospital products.
(ii) Not applicable.
(iii) The raw materials essential to the business of
the Registrant (primarily polyethylene plastic) are readily available. The
Registrant's products are manufactured principally at the plant it leases in
Westbury, New York (see Item 2 below). The Registrant owns
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the molds used in producing its handles, and, in addition, owns [seven (7)]
injection molding machines which produce all of its requirements for such
plastic handles.
(iv) The Registrant has registered trademarks
protecting its logo and the names "Uniflex(TM)", "Texture-Flex(TM)", "Jet
Pouch(TM)", "Tri-Flex(TM)", "Speci-Gard(TM)", "Hand-L-Bag(TM), Protex-Ray(TM),
"Slip-Free(TM)", "Press and Close(TM)", "Special Air Tuff(TM)", "Uni-Box(TM)",
"Micro-Tex(TM)", "Opti-Pouch(TM)", "UF(TM)", "Econovault(TM)", "Univault(TM)",
"Ultravault(TM)", "Univault and Logo Design(TM)", "Bagvertising(TM)", "UF
Line(TM)" and "The Bagvertising Company(TM)." The name "Uniflex(TM)" and the
Uniflex logo trademark are also registered with the U.S. Patent and Trademark
Office. The Registrant markets certain of its products utilizing its trademarks.
The Registrant believes that the loss of one or more of its trademarks would not
materially adversely affect its business.
(v) The Registrant's business is not affected by
seasonal trends, however, approximately fifty percent to sixty percent of sales
are traditionally made during the second half of the fiscal year. This is due to
slightly higher demand during the late summer and fall seasons.
(vi) The Registrant's inventory consists primarily of
raw materials. The Registrant maintains sufficient material on hand to expedite
orders and properly service its customers.
(vii) The Registrant has approximately 8,500
customers, none of which accounted for more than ten percent (10%) of sales
during the fiscal year ended January 31, 1996.
(viii) As of January 31, 1996, the Registrant had a
$5,108,000 backlog of firm orders, all of which the Registrant expects to fill.
As of January 31, 1995, the Registrant had a $4,659,000 backlog of firm orders,
substantially all of which have been filled.
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(ix) Not applicable.
(x) The plastic bag industry is highly competitive
and is comprised of many concerns making products similar to those of the
Registrant. A number of these concerns are larger than the Registrant in terms
of total assets, personnel, sales and financial resources. The Registrant
believes that competition in the industry is based upon price, service and
quality of product.
(xi) The Registrant did not expend material amounts
on Registrant sponsored research and development during the last three fiscal
years.
(xii) In addition to the disposal of waste solvents
through an authorized waste disposer, the Registrant monitors its approaches to
the disposal of waste solvents in order to comply with the Federal Clean Air
Act, the provisions of which restrict the emission of V.O.C. (Volatile Organic
Compounds).
The Registrant, with the assistance of independent
consultants, constantly monitors compliance with Federal, state and local
environmental provisions. During fiscal 1996, the Registrant spent approximately
$25,000 on such compliance and estimates that $25,000 will be expended in the
current fiscal year. The Registrant believes that such capital expenditures are
not material to the operations of the Registrant.
(xiii) The Registrant has approximately 380
employees, including thirteen salespersons and fourteen officers. The
Registrant's factory personnel are employed under contracts with Amalgamated
Union Local 5 expiring on January 31, 1998.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
OPERATIONS AND EXPORT SALES. Not applicable.
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<PAGE>
Item 2. PROPERTIES.
The Registrant owns a 44,255 square foot building at 383 West
John Street, Hicksville, New York 11802, which serves as the Registrant's
principal executive offices. The Registrant uses approximately 9,900 square feet
at this property for executive offices, sales, accounting, computers and
showroom space. Approximately 34,400 square feet is used as warehouse space and
approximately 3,000 square feet has been rented to a tenant. The property is
encumbered by a mortgage in the principal amount outstanding at January 31, 1996
of $1,547,000.
The Registrant leases a building at 474 Grand Boulevard,
Westbury, New York 11590, containing approximately 72,000 square feet of space,
of which approximately 32,000 square feet are used for warehousing,
approximately 24,000 square feet for manufacturing, approximately 10,000 square
feet for shipping and receiving and approximately 6,000 square feet for
executive and clerical offices. The expiration date of the Registrant's lease is
April 30, 2003. During the fiscal year ended January 31, 1996, the Registrant
paid approximately $132,500 for the base annual rental of said premises. In
addition, the Registrant pays the cost of real estate taxes, insurance and other
expenses of maintaining the building, which expenses amounted to approximately
$458,000 during the fiscal year ended January 31, 1996.
Item 3. LEGAL PROCEEDINGS.
The Registrant is not a party to any material legal
proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
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<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS.
(a) Market Information.
Since June 8, 1994, the Registrant's Common Stock, $.10 par
value, has traded on the American Stock Exchange (the "AMEX") under the symbol
"UFX". From August 5, 1993 to June 8, 1994, the Registrant's Common Stock, $.10
par value, was traded on the Nasdaq National Market. Prior thereto, the
Registrant's Common Stock traded on the Nasdaq Stock Market.
The following table sets forth high and low bid prices for the
Company's Common Stock on Nasdaq and the high and low closing sales prices of
the Common Stock on the AMEX for the periods indicated. With respect to Nasdaq
prices, the prices reported reflect inter-dealer quotations and may not
represent actual transactions and do not include retail mark-ups, mark-downs or
commissions.
HIGH LOW
---- ---
Year Ended
January 31, 1996
First Quarter 7-1/2 5-3/4
Second Quarter 9-3/4 5-5/8
Third Quarter 8-3/4 7
Fourth Quarter 10-1/2 7
HIGH LOW
Year Ended
January 31, 1995
First Quarter 5-3/4 4-3/4
Second Quarter (through June 8, 1994) 5-3/4 4-3/8
(June 8 - August 31) 6-1/4 5-1/4
Third Quarter 6 4-5/8
Fourth Quarter 7 4-5/8
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(b) Holders.
Title Of Class Approximate Number of Record Holders
-------------- (as of April 8, 1996
------------------------------------
Common Stock, Par Value $.10 Per Share 288
(c) Dividends.
The Registrant has not declared any cash dividends on its
Common Stock during the two most recent fiscal years.
Payment of cash dividends is within the discretion of the
Registrant's Board of Directors and will depend on, among other factors,
earnings, capital requirements and the operating and financial condition of the
Registrant.
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<PAGE>
Item 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
For the Years Ended January 31,
---------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED INCOME
STATEMENT DATA:
Net Sales $31,510,000 $30,133,000 $25,660,000 $22,591,000 $20,574,000
Gross Profit $11,882,000 $11,830,000 $10,159,000 $ 9,058,000 $ 7,717,000
Before Depre-
ciation
Net Income $ 1,459,000 $ 1,166,000 $ 941,000 $ 654,000 $ 95,000
Earnings $ .53 $ .43 $ .35 $ .25 $ .04
Per Share: Note(1)
SELECTED BALANCE
SHEET DATA:
Working Capital $ 6,699,000 $ 5,822,000 $ 5,136,000 $ 3,510,000 $ 1,506,000
Total Assets $16,283,000 $15,318,000 $13,394,000 $12,014,000 $11,213,000
Long-Term Debt(2) $ 2,170,000 $ 3,847,000 $ 3,968,000 $ 3,869,000 $ 2,922,000
Stockholders' Equity $10,245,000 $ 7,285,000 $ 6,186,000 $ 4,961,000 $ 4,254,000
</TABLE>
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(1) Computation of earnings per share is based on the weighted average
number of shares actually outstanding plus the shares that would be
outstanding assuming the exercise of dilutive stock options, all of
which are considered to be common stock equivalents. Common stock
equivalents were calculated by the use of the treasury stock method.
(2) Exclusive of current portion of long-term debt.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
SUMMARY:
The following table, which should be read together with the
Financial Statements and Notes to Financial Statements appearing elsewhere in
this Report, sets forth for the periods indicated (i) percentages which certain
items reflected in the financial data bear to net sales of the Registrant and
(ii) the percentage increase (decrease) of such items as compared to the
indicated prior period:
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<PAGE>
<TABLE>
<CAPTION>
Relationship To Total Revenues For the Period to Period Increase
Years Ended January 31, (Decrease) Years Ended
-------------------------------------- --------------------------
1996 1995 1994 1995-1996 1994-1995
---- ---- ---- --------- ---------
<S> <C> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 4.6% 17.4%
Cost of Sales Before
Depreciation 62.2 60.7 60.4 7.2 18.0
Gross Profit Before
Depreciation 37.8 39.3 39.6 .4 16.5
Depreciation 2.2 2.3 2.7 2.3 (1.5)
Gross Profit 35.6 37.0 36.9 .3 17.8
Operating Expenses:
Shipping, Selling, General
and Administrative Expenses
Before Depreciation 26.4 28.8 28.0 (3.9) 20.7
Compensation - Stock Options -- -- .3 -- (100.0)
Interest 1.3 1.3 1.5 .8 9.2
Gain on Sale of Equipment -- (.3) -- (100.0) 100.0
Deferred Compensation and
Postretirement Benefits -- .3 .7 (100.0) (51.3)
Depreciation and Amortization .5 .4 .5 4.4 14.6
Total 28.2 30.5 31.0 (3.7) 15.8
Income Before
Provision For
Income Taxes 7.4 6.5 5.9 19.2 27.9
Provision For
Income Taxes 2.8 2.6 2.1 10.4 43.6
Cumulative Effect on Prior
Years of Adopting SFAS 106 -- -- .1 -- (100.0)
Net Income 4.6% 3.9% 3.7% 25.1% 23.9%
</TABLE>
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<PAGE>
RESULTS OF OPERATIONS:
SALES:
Sales for the years ended January 31, 1996, January 31, 1995
and January 31, 1994, were $31,510,000, $30,133,000 and $25,660,000
respectively. Sales for the year ended January 31, 1996 increased $1,377,000, or
4.6%, compared to the prior year as a result of increased sales in all
divisions, primarily from the Medical Packaging Division. These results were
achieved without the contribution of sales from the Registrant's Hantico
subsidiary which was sold in January 1995 and which contributed approximately
$1,500,000 to sales during the fiscal year ended January 31, 1995. Sales for the
year ended January 31, 1995, increased $4,473,000, or 17.4%, compared to the
prior year, as a result of increased sales in all divisions, primarily the
Medical Packaging and Haran Divisions.
The Registrant's continued efforts to market the Medical Packaging
Division's products to the healthcare industry resulted in the Medical Packing
Division accounting for 23% of the Registrant's total sales, or $7,261,000, for
the fiscal year ended January 31, 1996. During the year ended January 31, 1995,
the Registrant also began shipping its Ultravault(TM) tamper evident security
bag, which provides the user with visual evidence of tampering with the bag's
contents.
COST AND EXPENSES:
JANUARY 31, 1996
Cost of sales before depreciation, as a percentage of sales,
increased to 62.2% for the year ended January 31, 1996, compared to 60.7% for
the prior year. This increase was due primarily to continued increases in the
cost of raw materials, some of which could not immediately be reflected in
increased product prices. Raw material prices during the year ended January 31,
1996 stabilized by the Registrant's fiscal third quarter ended October 31, 1995.
The
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Registrant's Central Purchasing Department, however, continued to enable the
Registrant to efficiently manage the flow of raw materials and long-range
purchasing commitments enabled the Registrant to anticipate certain increases.
Shipping, selling, general and administrative expenses for the
year ended January 31, 1996, decreased approximately $350,000, or 3.9%, compared
to the prior year. This decrease was due primarily to decreases in insurance,
freight out and environmental expenses. For the year ended January 31, 1996,
other expenses increased from $401,000 to $413,000, or 3%, a nominal increase.
Interest expense for the year ended January 31, 1996 increased
$3,000, or less than 1%, compared to the year ended January 31, 1995. This
increase was attributable to a nominal increase in borrowings at the start of
the Registrant's 1996 fiscal year due to the start up of Southwest.
JANUARY 31, 1995
Cost of sales before depreciation, as a percentage of sales,
increased to 60.7% for the year ended January 31, 1995, compared to 60.4% for
the prior year. This nominal increase was due to large increases in the cost of
raw materials, some of which could not immediately be reflected in increased
product prices until the Registrant's new catalog was prepared and mailed. Raw
material prices during the year ended January 31, 1995 increased approximately
50% compared to the prior fiscal year. The Registrant's Central Purchasing
Department, however, enabled the Registrant to efficiently manage the flow of
raw materials and long-range purchasing commitments enabled the Registrant to
anticipate certain increases. In addition, prompt payment by the Registrant, for
raw materials, at a discount, aided in moderating the effect of these increases.
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<PAGE>
Shipping, selling, general and administrative expenses for the
year ended January 31, 1995, increased approximately $1,504,000, or 20.6%,
compared to the prior year. This increase was due to increases in commissions
and selling expenses directly related to the increase in sales. For the year
ended January 31, 1995, other expenses decreased from $648,000 to $401,000, or
38%, as a direct result of the gain from the sale of the Registrant's Hantico
Division and a reduction in deferred compensation expense as a result of changes
in actuarial assumptions.
Interest expense for the year ended January 31, 1995 increased
$35,000, or 9.2%, compared to the year ended January 31, 1994. This increase was
attributable to increases in the interest rate charged by the Registrant's
lender and a nominal increase in borrowings.
INCOME BEFORE PROVISION FOR INCOME TAXES:
Income before provision for income taxes for the year ended
January 31, 1996, increased approximately $374,000, or 19.2%, to approximately
$2,317,000 compared to approximately $1,943,000 for year ended January 31, 1995.
This increase was primarily attributable to increased sales, continued
improvements in manufacturing operations and a reduction in shipping, selling,
general and administrative expenses. Income before provision for income taxes
for the year ended January 31, 1996 would have been $150,000 greater without the
start up costs associated with Southwest.
Income before provision for income taxes for the year ended
January 31, 1995, increased approximately $424,000, or 28%, to approximately
$1,943,000 compared to approximately $1,519,000 for the year ended January 31,
1994. This increase was primarily attributable to the 17.4% increase in sales
without a corresponding increase in operating expenses.
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<PAGE>
PROVISION FOR INCOME TAXES:
Provision for income taxes for the year ended January 31,
1996, was $858,000 compared to $777,000 for the prior year primarily due to the
increase of $374,000 in income before provision for income taxes.
Provision for income taxes for the year ended January 31,
1995, was $777,000 compared to $541,000 for the prior year. Utilizing standard
federal and state tax rates, $183,000 of the increase was directly attributable
to the increase of $424,000 in income before provision for income taxes. In
addition, during the year ended January 31, 1994, the Registrant recognized an
$84,000 credit to the provision for income taxes as a result of a decrease in
the valuation allowance against its deferred tax assets.
LIQUIDITY AND CAPITAL COMMITMENTS:
Working capital for the fiscal year ended January 31, 1996,
increased to $6,699,000 from $5,822,000 for the year ended January 31, 1995.
This increase of $877,000, or 15.1%, was directly attributable to operating
activities during fiscal 1996. This increase resulted in a working capital ratio
of 3.9 to 1 as January 31, 1996.
On April 24, 1995, the Registrant entered into a new revolving credit
facility establishing a three-year $4,000,000 facility. Proceeds of the credit
facility were used for the repayment of indebtedness, permitted acquisitions and
working capital. The credit agreement contains financial covenants relating to,
among other things, capital expenditures, minimum debt service coverage, minimum
working capital, minimum tangible net worth, the ratio of current assets to
current liabilities and the ratio of total liabilities to tangible net worth.
Borrowings under the credit facility will bear interest, at the Registrant's
option, either at the bank's prime rate or at a rate 1-1/2% per annum in excess
of LIBOR (London Interbank Offered Rate). During the course of the fiscal year
ended January 31, 1996, the Registrant periodically reduced its debt and on
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February 13, 1996 repaid its indebtedness under the credit facility. The
Registrant has unused lines of credit under its revolving credit facility of
$4,000,000. The Registrant believes that it has sufficient working capital and
unused lines of credit to meet its expected liquidity and capital resource
requirements for the foreseeable future and to fund potential acquisitions. The
Registrant currently has budgeted $500,000 for capital improvements in fiscal
1996.
In December 1990, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions" ("SFAS 106"). SFAS
106 requires that a company recognize costs currently that will be incurred in
the future relating to medical and other benefits to be provided after
retirement. SFAS 106 was implemented for the Registrant's fiscal year ending
January 31, 1994, and in the opinion of management, the adoption of SFAS 106 was
not material to the financial condition of the Registrant.
In February 1992, FASB issued Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
Companies are required to adopt SFAS 109 for years beginning after December 15,
1992. SFAS 109 requires that deferred income taxes be recorded using the
liability method and restricts the conditions under which a deferred asset may
be recorded. The Registrant is given the choice of reflecting the adoption of
SFAS 109 in the year of change or restating any number of prior years. The
Registrant adopted SFAS 109 as of February 1, 1993, and, in the opinion of
management, its adoption had no material effect on the financial condition of
the Registrant. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data are included
under Item 14 of this Report.
-18-
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
The information required by Items 10, 11, 12 and 13 of this
Part III is incorporated by reference from the Registrant's definitive proxy
statement to be filed not later than May 30, 1996 pursuant to Regulation 14A.
-19-
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
The following financial statements of Uniflex, Inc., otherwise includable under
Item 8, are included in this Item 14:
INDEX PAGE
Reports of Independent Auditors F-1
Balance Sheets at January 31,
1996 and 1995 F-3
Statements of Income for the
years ended January 31, 1996,
1995 and 1994 F-4
Statements of Cash Flows for the
years ended January 31, 1996,
1995 and 1994 F-5
Statements of Changes in
Stockholders' Equity for the years
ended January 31, 1996, 1995 and 1994 F-6
Notes to Financial Statements F-7
(2) FINANCIAL STATEMENT SCHEDULES
SCHEDULE II Valuation and Qualifying Accounts
and Reserves F-21
Other schedules are omitted because of the absence of
conditions under which they are required or because the required information is
given in the financial statements or notes thereto.
Separate financial statements and supplemental schedules of
the Registrant are omitted since the Registrant is primarily an operating
company and its subsidiaries, included in the financial statements being filed,
do not have a minority equity interest or indebtedness to any
-20-
<PAGE>
person other than the Registrant in an amount which exceeds five percent of the
total assets as shown by the financial statements as filed herein.
(3) EXHIBITS
NO. REFERENCE
- --- ---------
3. (a) Articles of Incorporation (as filed with the Secretary
of State of Delaware on April 16, 1973) and By-laws (1)
(b) Certificate of Amendment of Certificate of Incorporation
as filed with the Secretary of State of the State of
Delaware on June 29, 1987 (2)
(c) Amended and Restated By-Laws adopted on June 29, 1989 (3)
4. See Articles of Incorporation included herein as Exhibit 3 (1)
10.(a) Stock Option Agreement of Warner J. Heuman dated
February 1, 1987 (2)
(b) Stock Option Agreement of Manfred M. Heuman dated
February 1, 1987 (2)
(c) Stock Option Agreement of Erich Vetter dated February 1, 1987 (2)
(d) Lease dated August 12, 1977 between the Registrant, as
Tenant, and Harold R. Abrams, Rosalie Abrams Katz, Ira
Parris and Annette Parris, as Landlord, for the
Registrant's manufacturing facility in Westbury, New
York (1)
(e) Registrant's Profit Sharing Plan and Trust dated January
22, 1976, as amended (1)
(f) Stock Option Agreement of Robert K. Semel dated
December 21, 1990 (4)
(g) Deferred Compensation and Consulting and Non-Competition
Agreements of Erich Vetter dated as of April 28, 1991 (4)
(h) Deferred Compensation and Consulting and Non-Competition
Agreements of Manfred M. Heuman dated as of April 28,
1991 (4)
(i) Deferred Compensation and Consulting and Non-Competition
Agreements of Warner J. Heuman dated as of April 28,
1991 (4)
(j) Amended Stock Option Agreement of Erich Vetter dated
August 29, 1990 (4)
(k) Amended Stock Option Agreement of Manfred M. Heuman dated
August 29, 1990 (4)
(l) Amended Stock Option Agreement of Warner J. Heuman dated
August 29, 1990 (4)
-21-
<PAGE>
(m) Profit Sharing 401(k) Plan of the Registrant (5)
(n) Lease Extension and Modification Agreement dated
December 5, 1992 between the Registrant, as Tenant, and
Ira Parris, Annette Parris, Rosalie Abrams Katz, and
David S. Rhine and Howard M. Abrams, Trustees of Trust B
under the Last Will and Testament of Samuel Abrams, as
Landlord, for the Registrant's manufacturing facility in
Westbury, New York (6)
(o) Asset Purchase Agreement dated as of July 1, 1993, by
and among the Registrant, Haran Packaging Co., Inc. and
Neil Sklar (7)
(p) Credit Agreement dated as of April 24, 1995 between the
Registrant and The Chase Manhattan Bank, N.A. (8)
(r) Promissory Note in the maximum principal amount of
$3,500,000 between the Registrant and The Chase
Manhattan Bank, N.A. (8)
(s) Guaranty of Uniflex Southwest L.L.C. in favor of The
Chase Manhattan Bank, N.A. (8)
(t) Guaranty of Hantico, Inc. in favor of The Chase Manhattan
B0nk, N.A. (8)
(u) Employment Agreement of Herbert Barry dated as of
February 1, 1996
(v) Second Amended and Restated Employment of Robert K. Semel
dated as of February 1, 1996
(w) Employment Agreement of Martin Brownstein dated as of
February 1, 1996
23.1 Consent of Patrusky Mintz & Semel to the incorporation by
reference to the Registrant's Registration Statement on Form
S-8 of the independent auditors' report included herein.
23.2 Consent of Miller, Ellin & Company to the Incorporation by
reference to the Registrant's Registration Statement on Form
S-8 of the independent auditors' report herein.
27. Financial Data Schedule.
(b) REPORTS ON FORM 8-K
None.
-22-
<PAGE>
- -------------------------
(1) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1981.
(2) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1987.
(3) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1988.
(4) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1991.
(5) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1992.
(6) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1993.
(7) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1994.
(8) Incorporated by reference to the Registrant's Annual Report on Form 10-K
for its fiscal year ended January 31, 1995.
-23-
<PAGE>
POWER OF ATTORNEY
Uniflex, Inc. and each of the undersigned do hereby appoint Herbert
Barry and Robert K. Semel, and each of them severally, its or his true and
lawful attorneys to execute on behalf of Uniflex, Inc. and the undersigned any
and all amendments to this Report and to file same with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission. Each of such attorneys shall have the power to act hereunder with or
without the other.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized on the 19th day of
April, 1996.
UNIFLEX, INC.
(Registrant)
By:/S/ Herbert Barry
-----------------
Herbert Barry, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/S/ Warner J. Heuman Director April 19, 1996
- ---------------------
Warner J. Heuman
/S/ Herbert Barry Chairman Of The Board And Director April 19, 1996
- ---------------------
Herbert Barry
/S/ Erich Vetter Director April 19, 1996
- ---------------------
Erich Vetter
/S/ Robert K. Semel President, Secretary And Director April 19, 1996
- ---------------------
Robert K. Semel
/S/ Kurt Vetter First Vice President-Engineering And April 19, 1996
- --------------------- Director
Kurt Vetter
/S/ Manfred M. Heuman Director April 19, 1996
- ---------------------
Manfred M. Heuman
/S/ Robert Gugliotta Vice President-finance, Treasurer And April 19, 1996
- --------------------- Controller
Robert Gugliotta
/S/ Martin Brownstein Senior Vice President And Director April 19, 1996
- ---------------------
Martin Brownstein
/S/ Martin Gelerman Director April 19, 1996
- ---------------------
Martin Gelerman
/S/ Steven Wolosky Director April 19, 1996
- ---------------------
Steven Wolosky
</TABLE>
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
JANUARY 31, 1996
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
UNIFLEX, INC.
We have audited the accompanying consolidated balance sheet of Uniflex, Inc. and
Subsidiaries as of January 31, 1996 and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the year then ended.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Uniflex, Inc. and
Subsidiaries as of January 31, 1996, and the results of their operations and
their cash flows for the year ended January 31, 1996, in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in Item
14(a)(2) are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly state, in all material respects, the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
PATRUSKY, MINTZ & SEMEL
CERTIFIED PUBLIC ACCOUNTS
New York, New York
April 8, 1996
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
UNIFLEX, INC.
HICKSVILLE, N.Y.
We have audited the accompanying consolidated balance sheets of Uniflex, Inc.
and Subsidiaries as of January 31, 1995, and the related consolidated statements
of income, changes in stockholders' equity and cash flows for each of the two
years in the period ended January 31, 1995. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Uniflex, Inc. and
Subsidiaries as of January 31, 1995, and the results of their operations and
their cash flows for each of the two years in the period ended January 31, 1995,
in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules listed in Item
14(a)(2) are presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic consolidated financial
statements. These schedules have been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly state, in all material respects, the financial data required to
be set forth therein in relation to the basic consolidated financial statements
taken as a whole.
/s/ MILLER, ELLIN & COMPANY
---------------------------
MILLER, ELLIN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
New York, New York
March 21, 1995
F-2
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
- ------ ---- ----
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents (Note 1) $ 1,196,593 $ 527,725
Accounts receivable (net of
allowances of $174,500 in 1996
and $184,327 in 1995) 3,364,989 4,187,963
Inventory (Notes 1 and 3) 2,699,948 3,081,291
Refundable and prepaid income taxes 898,610 --
Prepaid expenses and other current
assets 606,943 710,227
Deferred tax asset (Notes 1 and 7) 269,900 301,000
------------ ------------
Total current assets 9,036,983 8,808,206
PROPERTY AND EQUIPMENT(Notes 1,4 and 5) 6,427,427 5,641,333
INTANGIBLE ASSETS (Notes 1 and 2) 156,404 138,588
OTHER ASSETS 661,798 730,330
------------ ------------
Total assets $ 16,282,612 $ 15,318,457
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term
debt (Note 5) $ 151,646 $ 110,940
Accounts payable 1,234,487 1,658,650
Acquisition note payable (Note 2) -- 60,000
Accrued liabilities (Note 6) 952,018 865,290
Income taxes payable -- 291,155
------------ ------------
Total current liabilities 2,338,151 2,986,035
------------ ------------
LONG-TERM DEBT (Note 5) 2,169,506 3,847,077
------------ ------------
DEFERRED RENT (Note 1) 122,496 88,746
------------ ------------
DEFERRED COMPENSATION AND POSTRETIREMENT
BENEFITS (Note 13) 1,215,124 1,111,478
------------ ------------
COMMITMENTS (Note 14)
MINORITY INTEREST (Note 9) 192,500 --
------------ ------------
STOCKHOLDERS' EQUITY (Notes 8, 9 and 10)
Common stock - par value $.10 per share
10,000,000 shares authorized; issued and
outstanding 2,666,384 in 1996 and
2,240,334 in 1995 266,638 224,033
Additional paid-in capital 1,854,723 424,695
Retained earnings 8,179,402 6,720,821
------------ ------------
10,300,763 7,369,549
Less Note receivable - stock
purchase (Note 8) (55,928) (84,428)
------------ ------------
10,244,835 7,285,121
Total liabilities and stockholders'
equity $ 16,282,612 $ 15,318,457
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
Net sales $ 31,509,963 $ 30,133,067 $ 25,660,000
Cost of sales 20,322,952 18,981,930 16,190,509
------------ ------------ ------------
Gross profit 11,187,011 11,151,137 9,469,491
Shipping, selling, general
and administrative expenses 8,457,319 8,807,390 7,302,487
------------ ------------ ------------
Income before other expenses 2,729,692 2,343,747 2,167,004
------------ ------------ ------------
Other (income) expenses:
Deferred compensation and
postretirement benefits -- 84,931 174,322
Compensation - stock options -- -- 98,000
Interest - net (Note 12) 413,111 410,016 375,408
Gain on sale of equipment
and inventory (Note 2) -- (94,140) --
------------ ------------ ------------
413,111 400,807 647,730
------------ ------------ ------------
Income before provision
for income taxes and
2cumulative effect of a change
in accounting principle 2,316,581 1,942,940 1,519,274
Provision for income taxes
(Notes 1 and 7) 858,000 777,000 541,000
------------ ------------ ------------
Income before cumulative
effect of change in
accounting principle 1,458,581 1,165,940 978,274
Cumulative effect on prior
years of adopting SFAS 106-
net of tax benefit of $26,000 -- -- (36,895)
------------ ------------ ------------
Net income $ 1,458,581 $ 1,165,940 $ 941,379
============ ============ ============
Earnings per common share and
common share equivalents:
Income before cumulative
effect of a change in
accounting principle $ .53 $ .43 $ .36
Cumulative effect on prior
years of adopting SFAS 106-
net of tax benefit -- -- (.01)
------------ ------------ ------------
Net income $ .53 $ .43 $ .35
============ ============ ============
Proforma amounts assuming
SFAS 106 is applied
retroactively:
Net income $ -- $ -- $ 978,274
============ ============ ============
Earnings per common share
and common share equivalents $ -- $ -- $ .36
============ ============ ============
Weighted average number of
common shares and common
share equivalents outstanding 2,745,868 2,719,114 2,695,154
============ ============ ============
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,458,581 $ 1,165,940 $ 941,379
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Cumulative effect on prior
years of adopting SFAS 106 -- -- 36,895
Gain on sale of equipment
and inventory -- (94,140) --
Deferred compensation,
postretirement medical
benefits and
related interest 103,646 179,777 255,903
Depreciation and amorti-
zation 852,956 816,911 812,708
Equity issued as
compensation 17,815 50,250 4,950
Compensation - stock options -- -- 98,000
Amortization of note
receivable 28,500 28,500 28,500
Deferred rent 33,750 47,499 41,247
Deferred income taxes (85,260) (190,000) (258,000)
Changes in assets and
liabilities net of effects
of acquisition of assets
of subsidiary:
Accounts receivable 822,974 (993,809) (555,131)
Inventory 381,343 (596,366) 85,241
Prepaid expenses and
other current assets 103,284 (145,572) (219,258)
Other assets 81,748 (300,093) (70,484)
Accounts payable (424,163) 476,987 205,940
Accrued liabilities 86,726 146,485 (225,839)
Income taxes - receivable
and prepaid 3,235 167,858 (179,702)
----------- ----------- -----------
Net cash provided by
operating activities 3,465,135 760,227 1,002,349
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and
equipment (1,109,829) (910,367) (473,443)
Proceeds from sale of
equipment and inventory -- 255,900 --
Acquisition of assets from
Haran Packaging, Inc. -- -- (78,000)
Purchase of intangible
assets (83,077) (24,083) --
----------- ----------- -----------
Net cash used in
investing activities (1,192,906) (678,550) (551,443)
----------- ----------- -----------
</TABLE>
F-5
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D.)
FOR THE YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from minority
contribution $ 27,500 $ -- $ --
Proceeds of long-term debt 7,500 50,000 400,000
Payment of long-term debt (1,900,181) (110,940) (360,939)
Payment for retirement of
common stock -- (145,208) --
Proceeds from exercise of
stock options 261,820 -- 29,250
Payment of notes payable -- (40,000) (150,000)
----------- ----------- -----------
Net cash used in
financing activities (1,603,361) (246,148) (81,689)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 668,868 (164,471) 369,217
Cash and cash equivalents -
beginning of year 527,725 692,196 322,979
----------- ----------- -----------
2
Cash and cash equivalents -
end of year $ 1,196,593 $ 527,725 $ 692,196
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5 (Cont'd)
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Common Stock Additional
------------ Paid-in Retained Note Receivable
Amount Shares Capital Earnings Stock Purchase Total
------ ------ ------- -------- -------------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1993 $ 111,134 $ 1,111,342 $ 377,327 $ 4,613,502 $ (141,428) $ 4,960,535
Issuance of common stock as
partial payment for covenant
not to compete (Note 2) 1,250 12,500 89,375 -- -- 90,625
Exercise of stock options (Note 9) 900 9,000 28,350 -- -- 29,250
Tax benefit from exercise of
stock options (Note 10) -- -- 32,400 -- -- 32,400
Compensation recognized upon
reissuance of stock options
with an exercise price less
than market (Note 10) -- -- 98,000 -- -- 98,000
Two for one stock split (Note 8) 113,284 1,132,842 (113,284) -- -- --
Issuance of common stock as
compensation 90 900 4,860 -- -- 4,950
Amortization of note receivable
(Note 8) -- -- -- -- 28,500 28,500
Net income -- -- -- 941,379 -- 941,379
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 31, 1994 226,658 2,266,584 517,028 5,554,881 (112,928) 6,185,639
Retirement of common stock (3,630) (36,300) (141,578) -- -- (145,208
Issuance of common stock as
compensation 1,005 10,050 49,245 -- -- 50,250
Amortization of note receivable
(Note 8) -- -- -- -- 28,500 28,500
Net income -- -- -- 1,165,940 -- 1,165,940
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 31, 1995 224,033 2,240,334 424,695 6,720,821 (84,428) 7,285,121
Exercise of stock options (Note 9) 42,400 424,000 219,420 -- -- 261,820
Tax benefit from exercise of stock
options (Note 10) -- -- 1,193,000 -- -- 1,193,000
Issuance of common stock as
compensation 205 2,050 17,608 -- -- 17,813
Amortization of note receivable
(Note 8) -- -- -- -- 28,500 28,500
Net income -- -- -- 1,458,581 -- 1,458,581
----------- ----------- ----------- ----------- ----------- -----------
Balance at January 31, 1996 $ 266,638 $ 2,666,384 $ 1,854,723 $ 8,179,402 $ (55,928) $10,244,835
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF BUSINESS AND CONCENTRATION OF CREDIT RISK:
Uniflex, Inc. (the "Company") designs, manufactures and sells a variety of
plastic bags, used in packaging, promotion and retailing, primarily to
advertising specialty distributors, hospitals or hospital supply houses and
major retailers. One of its subsidiaries (which was disposed of as discussed in
Note 2) also produced buttons, button products, badges, ribbons, mirrors and
magnets for the advertising specialty marketplace, which did not constitute a
reportable business segment. The Company extends credit to its customers and
historically has not experienced significant losses related to receivables from
individual customers or groups of customers in any particular industry or
geographic area.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary Hantico, Inc. (currently inactive - Note 2)
organized in December 1992, an 80% interest in Uniflex Southwest L.L.C.,
organized in January 1995, and an 80% interest in Uniflex Southeast L.L.C.,
organized in January 1996 and inactive until March 1996. All intercompany
accounts and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS:
The Company considers cash and cash equivalents to include highly liquid debt
instruments purchased with a maturity of three months or less. At times, such
investments may be in excess of federal insurance limits.
INVENTORY:
Inventory is valued at the lower of cost or market. Cost is determined by the
first-in, first-out method.
PROPERTY AND EQUIPMENT:
Property and equipment is stated at cost. Depreciation and amortization is
provided on the straight-line method over the estimated useful lives of the
assets or, in the case of leasehold improvements, over the life of the lease, if
shorter.
The Company constructs certain machinery and equipment for its own use. When
completed, the material, labor and other costs related to construction are
capitalized and depreciated over the estimated useful life of the asset.
F-7
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.):
INTANGIBLE ASSETS:
Intangible assets consist primarily of patent costs, a covenant not to compete,
deferred loan acquisition costs, and a customer list. The values are being
amortized, on a straight-line basis over the period of expected benefit ranging
from four to five years. Accumulated amortization at January 31, 1996 and 1995
was $160,872 and $95,610, respectively.
DEFERRED RENT:
Deferred rent payable represents the excess of recognized rent expense over
scheduled lease payments, which will be credited to future operations.
DEFERRED INCOME TAXES:
Effective February 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109 (SFAS 109), "Accounting for Income Taxes," which
requires the use of the liability method of accounting for income taxes. The
liability method measures deferred income taxes by applying enacted statutory
rates in effect at the balance sheet date to the differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements. The resulting deferred tax asset or liability is adjusted to reflect
changes in tax laws as they occur. The Company's adoption of SFAS 109 had no
material effect on the consolidated financial statements.
EARNINGS PER SHARE:
Computation of earnings per share is based on the weighted average number of
shares actually outstanding plus the shares that would be outstanding assuming
the exercise of dilutive stock options, all of which are considered to be common
stock equivalents. Common stock equivalents were calculated by use of the
treasury stock method. The number of shares used in the computations of earnings
per share were 2,745,868; 2,719,114; and 2,695,154 in 1996, 1995 and 1994,
respectively, after giving effect to stock splits (Note 8).
REVENUE RECOGNITION:
Revenue is recognized when orders are shipped.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenue and expenses. Actual
results could differ from those estimates.
F-8
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D.):
ADVERTISING COSTS:
Advertising costs are charged to operations as incurred. Catalog costs are
accounted for as a prepaid expense and are amortized over a twelve month period.
Advertising expenses inclusive of catalog costs charged to operations for the
year ended January 31, 1996, 1995 and 1994 were approximately $294,000, $357,000
and $315,000, respectively.
NOTE 2. ACQUISITIONS/DISPOSALS:
Effective December 11, 1992, the Company's wholly-owned subsidiary, Hantico,
Inc., purchased the inventory, fixed assets and accounts receivable of Hand Tip
and Novelty Co., Inc. for $301,155 of which $199,155 was paid in cash and the
balance of $102,000 was evidenced by a note payable without interest. The note
was paid in June 1993.
On January 12, 1995, Hantico, Inc. sold its existing inventory, machinery,
equipment, furniture and its customer lists, trademarks and tradenames for a
purchase price of $221,000, resulting in a gain of $59,240.
On July 16, 1993, the Company purchased the customer list and certain machinery
and equipment of Haran Packaging, Inc. for $158,000. The Company paid $33,000
cash and issued notes, bearing interest at the rate of 4% per annum, for the
remaining balance of $125,000. The notes were paid in full as of January 31,
1996.
Concurrently, the stockholder of Haran Packaging, Inc. entered into a $158,625
four year covenant not to compete agreement with the Company. The Company paid
$45,000 in cash, issued a note payable for $23,000 and issued 12,500 shares of
restricted common stock at fair market value for the balance. The note and
interest, payable at 4% per annum, were paid December 31, 1993.
The customer list and covenant not to compete are being amortized on a
straight-line basis over two and four years, respectively. Amortization expense
for the years ended January 31, 1996, 1995 and 1994 approximated $52,000,
$63,000 and $31,000, respectively.
NOTE 3. INVENTORY:
A summary of inventory follows:
January 31,
1996 1995
---- ----
Raw materials and supplies $ 1,755,374 $ 2,101,460
Work-in-process 227,715 356,888
Finished products 716,859 622,943
----------- -----------
Total $ 2,699,948 $ 3,081,291
=========== ===========
F-9
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
January 31, Estimated Useful
1996 1995 LIFE IN YEARS
---- ---- ---------------
Land $ 860,000 $ 860,000 -
Building and
improvements 2,743,024 2,728,447 31.5
Machinery and equipment 8,466,354 7,453,336 10
Leasehold improvements 594,672 413,509 Various
Plates and engravings 549,159 645,567 5
Furniture and fixtures 575,378 405,216 5-10
Delivery equipment 34,462 34,012 4
Machinery under
construction 300,787 235,307 -
----------- -----------
14,123,836 12,775,394
Less accumulated
depreciation and
amortization 7,696,409 7,134,061
----------- -----------
Total $ 6,427,427 $ 5,641,333
=========== ===========
Included in the above is property and equipment under capital leases as follows:
January 31,
1996 1995
---- ----
Machinery and Equipment $ 69,054 -
Furniture and Fixtures 126,762 $ -
-------- ------
195,816 -
Accumulated depreciation 13,243
$182,573 $ -
======== ======
Depreciation and amortization expense charged to operations for the years ended
January 31, 1996, 1995 and 1994 amounted to $770,930, $753,167, and $764,139,
respectively.
NOTE 5. LONG-TERM DEBT:
Long-term debt consists of the following:
January 31,
1996 1995
---- ----
Bank loan (A) $ 600,000 $ -
Revolving credit agreement (B) - 2,300,000
Mortgage payable - bank - payable in
monthly installments of $9,245 plus
interest at prime plus 1/4% to 2009 -
secured by land, building and certain
improvements (C) 1,547,077 1,658,017
Capital lease obligations (Note 14) 166,575 -
---------- ---------
Sub Total 2,313,652 3,958,017
F-10
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. LONG-TERM DEBT (CONT'D.):
January 31,
1996 1995
---- ----
Balance Forward $2,313,652 $3,958,017
Note payable - minority interest -
payable on January 1, 2000 with
interest at 7% per annum - unsecured 7,500 -
---------- ----------
2,321,152 3,958,017
Less current maturities 151,646 110,940
---------- ----------
Total $2,169,506 $3,847,077
========== ==========
Interest expense charged to operations for the years ended January 31, 1996,
1995 and 1994 amounted to $323,963, $314,528 and $296,511, respectively.
Following are the maturities of long-term debt as of January 31, 1996 and for
each of the next five years and in the aggregate:
1997 $ 151,646
1998 155,592
1999 744,934
2000 154,353
2001 122,249
Thereafter 992,378
----------
$2,321,152
(A) On April 24, 1995, the Company entered into a credit agreement with its
lending bank. The agreement provides for the Company to borrow up to $3,500,000,
payable interest only at the prime rate or LIBOR plus 1- 1/2% through April 24,
1998, at which time the balance outstanding is payable in full. The loan is
unsecured.
The loan is also subject to a 1/4% commitment fee on the average unused loan
portion. The agreement contains covenants and restrictions relating to net
worth, working capital, indebtedness, financial ratios, dividends, capital
expenditures, investments, acquisition, earnings and continuity of management.
The loan was paid in full as of February 13, 1996.
(B) On January 21, 1994, the Company entered into a revolving credit agreement
with its lending bank. The agreement provided for the Company to borrow up to
$2,750,000 payable interest only at the prime rate until January 1997. Quarterly
installments of $125,000 became due commencing May 1, 1997 with one installment
of the unpaid balance due on January 21, 2000.
F-11
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5. LONG-TERM DEBT (CONT'D.):
On February 14 1995, the revolving credit agreement with the bank was amended
providing for the Company to borrow an additional $600,000. In April 1995, the
balance was paid with the proceeds of the bank loan described in (A) above.
The loan was collateralized by all machinery and equipment, fixtures and the
cash in the account of that lending institution. The loan was also subject to a
1/4% commitment fee on the average unused loan portion. The agreement contained
covenants and restrictions relating to net worth, working capital, indebtedness,
financial ratios, dividends, capital expenditures, investments, acquisitions,
earnings and continuity of management.
(C) Effective April 1, 1994, the interest rate on the mortgage payable was
reduced from prime plus 3/4% to prime plus 1/4%. The mortgage contains certain
covenants regarding net worth and debt service.
There were no short-term borrowings outstanding as of January 31, 1996, 1995 and
1994.
NOTE 6. ACCRUED LIABILITIES:
Accrued liabilities consist of the following:
January 31,
1996 1995
Accrued commissions $ 365,711 $ 289,625
Accrued payroll 370,985 312,689
Accrued vacation 164,400 203,147
Accrued interest 7,664 11,115
Other 43,258 48,714
----------- -----------
Total $ 952,018 $ 865,290
=========== ===========
F-12
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. INCOME TAXES:
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
January 31,
------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ 859,000 $ 827,000 $ 673,000
State 84,000 140,000 126,000
--------- --------- ---------
943,000 967,000 799,000
--------- --------- ---------
Deferred:
Federal (69,000) (163,000) (155,000)
State (16,000) (45,000) (19,000)
Change in state tax
law -- (61,000) --
--------- --------- ---------
(85,000) (269,000) (174,000)
--------- --------- ---------
Change in valuation
allowance -- 79,000 (84,000)
--------- --------- ---------
(85,000) (190,000) (258,000)
--------- --------- ---------
Total $ 858,000 $ 777,000 $ 541,000
========= ========= =========
January 31,
------------------------------------------------
1996 1995 1994
--------- --------- ---------
At Federal statutory
rates $ 788,000 $ 660,000 $ 516,000
Effect of:
Permanent differences 22,000 12,000 12,000
Prior years' assessments
and over/underaccruals (25,000) 38,000 23,000
State income taxes, net
of federal benefit 92,000 72,000 107,000
State investment tax
credits, net of federal
benefit (19,000) (23,000) (33,000)
Change in state tax law -- (61,000) --
Change in valuation
allowance -- 79,000 (84,000)
--------- --------- ---------
Total $ 858,000 $ 777,000 $ 541,000
========= ========= =========
</TABLE>
At January 31, 1996, the Company has available for state income tax purposes
unused investment tax credits of approximately $331,000 expiring through the
year 2006.
The net current and non-current components of deferred income taxes recognized
in the balance sheet are as follows:
January 31,
1996 1995
---- ----
Net current assets $ 269,900 $ 301,000
Net non-current assets 186,400 70,040
Net non-current liabilities - -
----------- -----------
Total $ 456,300 $ 371,040
=========== ===========
F-13
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. INCOME TAXES (CONT'D.):
The components of the net deferred tax asset are as follows:
January 31,
1996 1995
---- ----
Deferred tax assets:
Accounts receivable allowances $ 74,000 $ 78,000
Inventory - uniform
capitalization 59,000 66,000
Vacation pay accrual 69,000 85,000
Deferred rent 52,000 37,000
Stock option compensation 41,000 41,000
Deferred compensation and
post-retirement medial
benefits 510,000 474,000
Investment tax credit
carryforwards 381,000 417,000
----------- -----------
1,186,000 1,198,000
Valuation allowance (189,000) (203,000)
----------- -----------
997,000 995,000
Deferred tax liability:
Depreciation 540,700 623,960
----------- -----------
Net deferred tax asset $ 456,300 $ 371,040
=========== ===========
NOTE 8. CAPITAL STOCK:
On October 30, 1992, and again on December 17, 1993, the Company effected a
two-for-one stock split recorded in the form of a stock dividend. As a result,
common stock was increased by $55,442 and $113,284 in the years ended January
31, 1993 and 1994, respectively, and additional paid-in capital was decreased by
the same amount. All references in the accompanying financial statements to the
number of common shares and per share amounts have been restated to reflect the
stock dividends.
On December 21, 1990, the Company entered into an agreement whereby it issued
180,000 shares of common stock to an officer of the Company for consideration of
$1.13 per share ($202,500). Payment for the stock consisted of $4,500 in cash
and the issuance of a note in the amount of $198,000 payable in seven equal
annual principal installments (plus interest at 8.66 percent) commencing
February 1991. Each annual installment, including interest, is to be forgiven by
the Company as additional compensation provided that the officer fulfills the
terms of his employment agreement through January 1997. The transaction has been
recorded as a sale of stock with the note receivable reflected as a reduction of
stockholders' equity. For each of the years ended January 31, 1996, 1995 and
1994, approximately $28,000, net of interest, was charged to compensation
expense to reflect the forgiveness of the annual installments.
F-14
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. MINORITY INTEREST:
In January 1995 the Company acquired an 80% interest in Uniflex Southwest,
L.L.C. ("Southwest") for $600,000 in cash. Additionally, a minority member
purchased a 20% interest in Southwest for $27,500 in cash, and equipment having
a fair market value of $165,000.
From inception to January 31, 1996 Southwest reported a net loss of $150,381.
Under the terms of the operating agreement of Southwest all losses are allocated
to Uniflex, Inc. until Southwest has net income for two consecutive fiscal
quarters. All net income reported by Southwest will be allocated to Uniflex,
Inc. until the cumulative net income allocated to Uniflex, Inc. equals the
cumulative net losses previously allocated to Uniflex, Inc. Afterwards, net
income and losses will be allocated 45% to Uniflex, Inc. and 55% to the minority
member. The minority member shall contribute 60% of its allocated net income to
Southwest, receiving an additional 1% ownership for each $7,500 it contributes.
When the minority member's ownership interest reaches 49%, net income losses and
will be allocated in relation to the members' ownership interest in Southwest.
NOTE 10. STOCK OPTIONS:
The Company adopted the 1993 Stock Option Plan (the Plan), which provides for
the granting of options to purchase up to 240,000 shares of the Company's common
stock to employees of the Company. A registration statement relating to the
issuance of common stock upon the exercise of options granted under the Plan was
filed by the Company with the Securities and Exchange Commission in October
1993. The exercise price for non-qualified options can be no less than 75% of
the fair market value of the Company's common stock at the date of grant. The
exercise price for incentive stock options can be no less than the fair market
value of the Company's common stock at the date of grant with the exception of
an employee who, prior to the granting of the option, owns stock representing
more than 10% of the voting rights for which the exercise price can be no less
than 110% of the fair market value of the Company's common stock at the date of
grant. The Plan is administered by the Stock Option Committee of the Board of
Directors. The Committee determines when the options are exercisable and the
term of the option, up to ten years. Options to purchase 66,800 shares have been
granted under the Plan at prices ranging from $2.13 to $7.25.
The Company has granted a third party the option to purchase 120,000 shares of
the Company's common stock at a price of $1.63 per share. The options are
exercisable up to 24,000 shares per year for five years, commencing on September
1, 1992. Each option expires five years from the commencement date with the last
option expiring on August 31, 2000. Options to purchase 18,000 shares at $1.63
per share were exercised October 25, 1993.
F-15
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. STOCK OPTIONS (CONT'D.):
Pursuant to separate stock option agreements, the Company has granted to
eighteen employees options to purchase a total of 748,000 shares of the
Company's common stock at prices ranging from $.50 to $1.38 per share. Such
options expire at various dates from August 31, 1995 to June 30, 1999. On May
31, 1993, the Company renewed options to purchase 40,000 shares at $.84 per
share and 16,000 shares at $.75 per share. The options were renewed at the
original option price. On May 31, 1993, the market value of the Company's common
stock was $2.56 per share. As a result, the Company recognized a non-cash charge
of $98,000 as compensation expense. Options to purchase 156,000 shares at $.595
per share were exercised August 15, 1995. Options to purchase 108,000 shares at
$.75 per share were exercised January 16, 1996. Options to purchase 160,000
shares at $.5625 per share were exercised January 30, 1996.
Option activity for the years ended January 31, 1996, 1995 and 1994, was as
follows:
1996 1995 1994
---- ---- ----
Outstanding - beginning of
year (exercisable at a
price of $.50 to $4.88
per share) 913,000 911,400 868,000
Granted 3,200 2,200 61,400
Forfeited (1,800) -- --
Exercised (424,000) -- (18,000)
-------- -------- --------
Outstanding - end of year
(exercisable at a price of
$.50 to $5.38 per share) 491,000 913,600 911,400
======== ======== ========
Exercisable - end of year 411,800 826,600 713,400
======== ======== ========
In October 1995 Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock Based Compensation" was issued. As of the date of this
report the Company has not made a decision regarding the adoption of the
statement or the continuation of accounting for stock options in accordance with
APB Opinion No. 25.
NOTE 11. PROFIT SHARING PLAN:
The Company maintains a profit sharing plan which covers all full time,
non-union employees. Contributions to the plan are made at the discretion of the
Board of Directors, but may not exceed 15% of participant's compensation.
Amounts charged to operations were $200,000, $200,000 and $200,000 for the years
ended January 31, 1996, 1995 and 1994, respectively.
F-16
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. INTEREST EXPENSE
Interest expense consists of the following:
Years Ended January 31,
--------------------------------------
1996 1995 1994
---- ---- ----
Interest costs $ 443,901 $ 418,923 $ 387,691
Interest income (30,790) (8,907) (12,283)
--------- --------- ---------
Total $ 413,111 $ 410,016 $ 375,408
========= ========= =========
NOTE 13. DEFERRED COMPENSATION PLANS AND POSTRETIREMENT MEDICAL
BENEFITS
DEFERRED COMPENSATION PLAN:
On August 31, 1990, the Company entered into deferred compensation agreements
with three key employees who retired on various dates through December 31, 1994.
These agreements provide for annual payments of $100,000 to each employee for
life and $75,000 annually to their beneficiary or estate for three years after
death, with payments to commence seven years after retirement. Each employee
simultaneously entered into seven year consulting and non-competition agreements
which will commence upon retirement and which will pay the employees annual
payments of $75,000 for non-competition and $25,000 for consulting. In the event
of the death of any of the employees after retirement but prior to the
commencement of the deferred compensation agreement, the Company's obligation to
make future payments under these agreements will terminate.
The present value of the deferred compensation agreements, calculated as of the
employees' retirement dates and based upon their respective life expectancies
totals approximately $960,000. For each employee, the Company is recording as
deferred expense an amount equal to an annuity deposit necessary to yield the
present values of the deferred compensation agreements as of the retirement
dates. Additionally, monthly charges of interest expense are being recorded such
that the deferred compensation payable will increase to the necessary level to
meet expected future payments.
The total deferred compensation charged to operations relating to the years
ended January 31, 1996, 1995 and 1994 approximated $-0-, $70,000, and $163,000,
respectively. Related interest expense charged to operations for the years ended
January 31, 1996, 1995 and 1994 approximated $110,000, $90,000 and $80,000,
respectively.
Deferred compensation payable at January 31, 1996 and 1995 was $1,086,463 and
$976,872, respectively.
F-17
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. DEFERRED COMPENSATION PLANS AND POSTRETIREMENT
MEDICAL BENEFITS (CONT'D)
POSTRETIREMENT MEDICAL BENEFITS:
The deferred compensation agreements require the Company to pay a portion of
each employee's health insurance premiums from the date of retirement to death.
Effective February 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106 (SFAS 106), Employer's Accounting for
Postretirement Benefits Other Than Pension," which requires the Company to
recognize the cost of providing postretirement benefits over the employees'
service periods.
The net periodic postretirement benefit cost for the years ended January 31,
1996, 1995 and 1994 was approximately $-0-, $22,000 and $22,000, respectively.
Related interest expense charged to operations for the years ended January 31,
1996, 1995 and 1994 was approximately $10,000, $11,000 and $11,000,
respectively.
The recorded liabilities for these postretirement benefits, none of which have
been funded, are as follows:
Years Ended January 31,
-----------------------
1996 1995
---- ----
Retirees $128,661 $134,606
Active participant - -
-------- --------
Actual postretirement
benefits $128,661 $134,606
======== ========
The weighted average discount rate used in determining the liability was 7.5%.
There is no annual increase in health costs since the participants will be
responsible for any additional payments.
The effect of adopting SFAS No. 106 on income before provision for income taxes
for the year ended January 31, 1994 was a decrease of $62,895.
Effective February 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 112, "Employer's
Accounting For Postemployment Benefits". The Company's adoption of SFAS
No. 112 had no effect on the consolidated financial statements.
F-18
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. COMMITMENTS
OPERATING LEASE COMMITMENTS:
The Company has the following lease commitments:
Premises Expiration Date Base Rental And Expenses
- -------- --------------- ------------------------
Plant, Westbury, NY April 30, 2003 Graduated from $91,000 to
$205,000 per annum plus
real estate taxes
Plant, Albuquerque, NM March 31, 2000 $37,500 per annum plus
real estate taxes
Future minimum lease payments are as follows:
Years Ending January 31,
------------------------
1997 $ 183,750
1998 198,750
1999 213,750
2000 225,000
2001 200,000
Thereafter 453,750
---------
Total $1,475,000
==========
Base rent and other occupancy costs charged to operations for the years ended
January 31, 1996, 1995 and 1994 amounted to approximately $389,000, $367,000 and
$324,000 respectively, including real estate taxes of $185,000, $201,000 and
$122,000, respectively.
CAPITAL LEASES:
The Company leases certain equipment under capital leases expiring through
September, 2000. Interest is imputed at rates ranging from 9% to 10%.
Future minimum lease payments under capital leases as of January 31, 1996 for
each of the next five years are as follows:
Years ending January 31,
1997 $ 54,652
1998 54,652
1999 40,218
2000 38,906
2001 11,739
-------
Total minimum lease payments $200,167
Less amounts representing interest 33,592
--------
Present value of net
minimum lease payments (Note 5) $166,575
========
F-19
<PAGE>
UNIFLEX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15. SUPPLEMENTAL CASH FLOW INFORMATION
Years Ended January 31,
-------------------------------
1996 1995 1994
---- ---- ----
Interest paid $327,049 $312,135 $316,337
======= ======= =======
Income taxes paid 934,000 631,500 981,225
======= ======= =======
NONCASH TRANSACTIONS FROM INVESTING AND FINANCING ACTIVITIES:
Year Ended January 31, 1996:
During the year, the Company incurred $195,816 of capital lease obligations in
connection with the acquisition of certain equipment.
In March 1995, a minority member of Uniflex Southwest, LLC contributed equipment
with a fair market value of $165,000 as capital.
Year Ended January 31, 1994
In July 1993, the Company issued notes payable of $125,000 to purchase certain
assets from Haran Packaging, Inc. (See Note 2).
In July 1993, the Company issued a note payable for $23,000 and common
stock with a market value of $90,625 for a covenant not to compete. (See
Note 2).
F-20
<PAGE>
SCHEDULE II
UNIFLEX, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND ALLOWANCES
FOR THE YEARS ENDED JANUARY 31, 1996, 1995 AND 1994
DESCRIPTION
Allowance for doubtful accounts.
Balance At Balance
Beginning Charged At
Of To End Of
Year Expense Deductions (1) Year
---- ------- -------------- ----
January 31,
1996 $184,327 $ 75,284 $ 85,111 $174,500
======== ======== ======== ========
January 31,
1995 $134,703 $ 74,400 $ 24,776 $184,327
======== ======== ======== ========
January 31,
1994 $153,782 $ 43,907 $ 62,986 $134,703
======== ======== ======== ========
(1) Write-off of uncollectible accounts.
F-21
EMPLOYMENT AGREEMENT
AGREEMENT entered into effective as of the 1st day of
February, 1996, by and between UNIFLEX, INC., a Delaware corporation having its
principal office at 383 West John Street, Hicksville, New York 11771
(hereinafter referred to as the "Corporation"), and HERBERT BARRY, residing at 1
Ripley Lane, Muttontown, New York 11711 (hereinafter referred to as the
"Employee")
W I T N E S S E T H:
WHEREAS, the Corporation has employed the Employee and the
Employee has been employed by the Corporation under an employment agreement
dated as of December 21, 1990 as amended by an extension letter dated July 26,
1995 (collectively the "Old Employment Agreement") and the Employee and the
Corporation desire to enter into a new employment agreement upon the terms and
conditions hereinafter set forth,
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and for other good and valuable consideration, it is agreed as
follows:
1. (a) The Corporation hereby employs the Employee and the
Employee agrees to work for the Corporation as Chairman of the Board and Chief
Executive Officer of the Corporation. The Employee shall serve as and perform
the duties of Chairman of the
<PAGE>
Board and Chief Executive Officer of the Corporation during the term of this
Agreement.
(b) During the term of this Agreement, the Corporation
shall use its best efforts to have the Employee elected as the Chairman of the
Board of Directors of the Corporation and shall include the Employee in the
slate of management nominees. So long as the Employee shall be Chairman of the
Board of Directors of the Corporation, the Employee shall serve as Chairman of
the Executive Committee.
(c) The Employee agrees to devote his full business time to
working for the Corporation and performing the aforesaid duties and such other
duties as shall from time to time be assigned to him by the Board of Directors
of the Corporation consistent with his position as Chairman of the Board and
Chief Executive Officer of the Corporation. During the term of his employment
hereunder, the Employee shall have no interest in, or perform any services for,
any other company whether or not such company is competitive with the
Corporation, except that this prohibition shall not be deemed to apply to
passive investments in businesses not competitive with the business of the
Corporation or to investments of 5% or less of the outstanding stock of public
companies whose stock is traded on a national securities exchange or is traded
in the over-the-counter market. For purposes of this paragraph 1(c), a "passive
investment" shall be deemed to mean the investment in a business which does not
require or result in the participation of the Employee in the
-2-
<PAGE>
management or operations of such business except during times other than regular
business hours and which does not interfere with his duties and responsibilities
to the Corporation. Nothing contained herein shall limit the right of the
Employee to make speeches, write articles or participate in public debate and
discussions in and by means of any medium of communication provided that such
activities are not inconsistent with the Employee's obligations hereunder.
(d) Consistent with the Employee's aforesaid duties, the
Employee shall, at all times during the term hereof, be subject to the
supervision and direction of the Board of Directors of the Corporation with
respect to his duties, responsibilities and the exercise of his powers.
(e) The services of the Employee hereunder shall be
rendered primarily in the metropolitan area of the City of New York primarily in
Nassau County at the Corporation's principal executive offices; provided,
however, that the Employee shall make such trips outside of the metropolitan
area of the City of New York as shall be reasonably necessary in connection with
the Employee's duties hereunder.
2. The Corporation shall pay to the Employee during the term
of his employment by the Corporation and the Employee shall accept as his
compensation for his services hereunder:
(a) (i) base salary ("Base Salary") of One Hundred Ten
Thousand Dollars ($110,000) annually subject to yearly increases of Twelve
Thousand Dollars ($12,000) per annum
-3-
<PAGE>
on February 1st of each year commencing February 1, 1997 and such additional
increases, as the discretion of the Board of Directors shall determine and (ii)
a sum equal to (A) one percent (1%) of all of the Corporation's sales (provided,
however that in the event that the Corporation shall complete an acquisition (a
"Material Acquisition") of another business whose annual revenues (measured as
of the 12 month period ending as of the last day of the month prior to the
closing of such acquisition) is equal to or greater than the Corporation's
annual revenues for such period, then the Employee shall be entitled to zero
percent of the Corporation's sales attributable to such Material Acquisition for
the first year after the closing of such Material Acquisition, 1/2% of the
Corporation's sales attributable to such Material Acquisition for the second
year after the closing of such Material Acquisition and 1% of the Corporation's
sales attributable to such Material Acquisition thereafter and (B) regular
commissions computed in accordance with the Corporation's usual practice on all
sales to the Corporation's customers by the Employee for all items invoiced by
the Corporation (whenever purchased or manufactured) exclusive of freight and
taxes.
(a) (ii) In addition to his Base Salary hereunder, the
Employee shall be entitled to a profit incentive cash bonus during each annual
period of the Term (as hereinafter defined) of this Agreement, commencing with
the annual period February 1, 1996 to January 31, 1997, based upon the
consolidated pre-tax profits of the Corporation and its subsidiaries
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<PAGE>
(corporations or partnerships in which the Corporation owns 50% or more of the
equity of such entity, including any entity which is consolidated for financial
reporting purposes under generally accepted accounting principles) whether now
existing or hereinafter created (the "Profit Incentive Bonus"), as determined by
the independent public accountants of the Corporation in their sole discretion,
as follows:
If Consolidated Pre-Tax Profits of
the Corporation and its
Subsidiaries Are: Profit Incentive Bonus Would Be:
- ------------------------------------ -------------------------------------
0 to $1,500,000 Discretion of Board of Directors
$1,500,000 to $2,300,000 6% of Pre-Tax Profits in excess of
$1,500,000
$2,300,000 to $2,700,000 6% of Pre-Tax Profits in excess of
$1,500,000 and 7% in excess of
$2,300,000
$2,700,000 to $3,000,000 6% of Pre-Tax Profits in excess of
$1,500,000, 7% in excess of $2,300,000
and 8% in excess of $2,700,000
Over $3,000,000 6% of Pre-Tax Profits in excess of
$1,500,000, 7% in excess of
$2,300,000, 8% in excess of $2,700,000
and 10% in excess of $3,000,000
The Profit Incentive Bonus shall be determined no later than
ninety (90) days after the end of each annual fiscal period and paid no later
than thirty (30) days thereafter.
(b) For any period during which the Employee is unable
fully to perform his usual and regular duties for the Corporation, such payments
of compensation shall be reduced by an amount equal to the aggregate of all
income disability benefits which he may receive. If the Employee shall receive
any such payment from the Corporation then, to the extent that he subsequently
receives any payment of disability benefits attributable to the period for which
he was paid by the Corporation, he shall promptly reimburse the Corporation.
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<PAGE>
(c) The Corporation will reimburse the Employee for his
necessary and reasonable out-of-pocket expenses incurred in the course of his
employment and in connection with his duties hereunder, upon presentation to the
Corporation of satisfactory evidence of such expenses.
(d) The Corporation shall pay the costs of mortgage
insurance for the Muttontown, New York home of the Employee.
(e) The Corporation will provide the Employee with medical
insurance coverage under the Corporation's group medical insurance policy and
the Employee shall be entitled to participate in all health, welfare,
retirement, disability and other benefit plans available to employees and senior
executives of the Corporation. In addition, the Corporation will reimburse the
Employee for medical and dental expenses of the Employee and his spouse not
covered by medical and dental insurance provided by the Corporation to the
Employee and his spouse, up to a maximum of Fifteen Thousand Dollars ($15,000)
per annum during the Term (and if not used in any fiscal year during the Term,
the unused portion shall be added to the annual limitation of the then current
fiscal year of the Term), upon presentation to the Corporation of satisfactory
evidence of such expenses, PROVIDED, HOWEVER, that the Fifteen Thousand Dollars
($15,000) annual limitation shall not be applicable if the benefits under the
Corporation's group medical and dental insurance are reduced in
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<PAGE>
any material respects from the coverage in effect on the date of the execution
of this Agreement.
(f) The Employee shall be entitled to paid vacations and/or
sick days during each twelve (12) month period during the term of this Agreement
of sixty (60) days per annum, to be taken at such times as the Employee shall
determine.
(g) The Corporation will provide the Employee with the use
of a luxury automobile and shall pay for, or reimburse the Employee for the
payment of, all customary expenses relating to the use and operation of such
automobile, including insurance, maintenance, gas and car phone with any lease
payments only not to exceed $2,000 per month during the fiscal year February 1,
1996 to January 31, 1997 subject to yearly increases of $200 per month in
February of each fiscal year during the Term of this Agreement commencing
February 1,1997. In the event the Corporation shall lease an automobile for the
Employee, the lease term shall be no greater than three (3) years.
3. (a) The term of the Employee's employment hereunder shall
be deemed to commence effective as of February 1, 1996 and shall continue
through January 31, 2001. The Old Employment Agreement shall be deemed
terminated and of no further force or effect as of January 31, 1996.
(b) The Employee, at his option, shall have the right to
extend the Term of this Agreement for two (2) additional two-year periods (the
"First Option" and "Second Option," respectively) by written notice to the
Corporation no more than
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<PAGE>
one hundred twenty (120) days and no less than ninety (90) days prior to the
expiration of this Term of this Agreement (or the term of the First Option), as
the case may be. All of the terms and conditions of this Agreement shall be
applicable during the period of the First Option and Second Option.
4. (a) This Agreement (except as otherwise provided herein)
and the employment of the Employee hereunder shall terminate:
(i) automatically upon the death of the Employee;
(ii) at the option of the Corporation, upon written
notice thereof to the Employee, in the event that the Employee shall become
permanently incapacitated (as hereinafter defined); and
(iii) at the option of the Corporation, upon 30 days'
prior written notice thereof to the Employee specifying the basis thereof, in
the event of a material breach by the Employee of any of the provisions of this
Agreement which are not cured by the Employee within thirty (30) days after the
Employee is provided with such written notice, or in the event that the Employee
shall, during the Term of this Agreement, engage in any criminal conduct
constituting a felony and criminal charges are brought against the Employee by a
governmental authority, or, in the determination of the Board of Directors of
the Corporation, be guilty of willful malfeasance or gross negligence which
would
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<PAGE>
tend to materially and adversely affect the business of the Corporation.
(b) For purposes of this Agreement, the Employee shall be
deemed permanently incapacitated in the event that the Employee shall, by reason
of his physical or mental disability, fail to fully perform his usual and
regular duties for the Corporation for a consecutive period of twelve (12)
months or for twelve (12) months in the aggregate in any eighteen (18) month
period; provided, however, that the Employee shall not be deemed permanently
incapacitated unless and until a physician, duly licensed to practice medicine
and reasonably acceptable to the Corporation and the Employee, shall certify in
writing to the Corporation that the nature of the Employee's disability is such
that it will continue as a substantial impediment to the Employee's ability to
perform his duties hereunder.
5. Notwithstanding anything to the contrary contained herein:
(a) In the event that the Employee shall die during the
term of this Agreement, the Corporation shall, in lieu of any other compensation
payable hereunder, pay (i) to the beneficiaries theretofore designated in
writing by the Employee (or to the Employee's estate if no such beneficiaries
have been designated), a sum equal to (A) $250,000 of the proceeds of the life
insurance policy number 1073579 with Security Mutual Life Insurance of New York
maintained by the Corporation on the Employee's life, to be paid within ten (10)
days of the receipt
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<PAGE>
of the insurance proceeds and (B) the total compensation of any kind paid to the
Employee pursuant to paragraph 2(a) during the Corporation's last fiscal year
prior to the death of the Employee in sixty (60) equal monthly installments with
the first such installment to be paid on the first day of the second month
following the date of death and the remaining installments to be paid on each of
the following fifty-nine (59) monthly anniversary dates of such first payment;
and (ii) to the Employee's estate, all sums payable to the Employee as of the
date of death (and not theretofore paid) and any and all other sums owed by the
Corporation to the Employee as of the date of death and not theretofore paid.
(b) In the event that the Employee shall become
incapacitated, then for the period prior to any termination of his employment in
accordance with paragraph 4(a)(iii) above, as a result of the Employee becoming
permanently incapacitated, the Employee shall continue to receive one hundred
percent (100%) of his regular compensation herein provided in Paragraph 2
attributable to such period prior to any termination of his employment.
(c) In the event that the employment of the Employee shall
be terminated by reason of his permanent incapacity, then, as additional
consideration for his past services to the Corporation, he shall receive a sum
equal to the total compensation of any kind paid to the Employee pursuant to
paragraph 2(a) during the Corporation's last fiscal year prior to
-10-
<PAGE>
the termination of employment of the Employee, in equal monthly installments,
for a period of twenty-four (24) months from the date of such termination.
(d) In the event of a termination of the Employee's
employment pursuant to paragraph 4(a)(iii) above, the Employee shall not be
entitled to any payments other than such compensation as shall have been earned
by him prior to the occurrence of the event giving rise to the termination and
not paid as of the date of such termination.
(e) In the event that the Corporation shall desire to fund
the death benefits payable under paragraph 5(a) above with a policy or policies
of insurance on the life of the Employee or the disability benefits payable
under paragraphs 5(b) and 5(c) above with a disability policy, the Employee
shall cooperate with the Corporation in obtaining such insurance policy(ies) and
shall submit to such medical examinations and execute such documents as may be
required in connection with the obtaining of such insurance.
(f) The Employee may terminate this Agreement for "Good
Reason." For purposes of this Agreement, "Good Reason" shall mean, that if a
Change in Control (as hereinafter defined) has occurred, a determination is made
by the Employee, in writing (which written notice shall specify in detail the
full facts and circumstances thereof), that as a result of the Change in Control
and a change in circumstances thereafter affecting his position, the Employee,
in his sole discretion (exercised in good faith),
-11-
<PAGE>
determines that (x) he is unable to exercise the authorities, functions, duties
or responsibilities of the positions for which he is hereby employed or (y)
there is otherwise a material change in the nature or scope of the authorities,
functions, duties or responsibilities of the positions in which the Employee is
hereby employed, either of which situation is not remedied within thirty (30)
days after receipt by the Corporation of written notice from the Employee of
such determination.
In the event the Employee exercises his rights under this
paragraph 5(f), he shall be entitled to a lump sum amount (the "Severance
Payment") equal to the product of 2.99 times the average total annual
compensation of any kind paid to the Employee by the Corporation during the
Corporation's last five full fiscal years prior to the date of termination of
employment. The Severance Payment earned in accordance with this paragraph 5(f)
shall be paid to Employee within five (5) days after the date of termination of
Employee's employment (hereinafter referred to as the "Termination Date") and
all other amounts, if any, to be paid to Employee pursuant to a Change of
Control shall also be paid by the Corporation within five (5) days of the
Termination Date (hereinafter referred to as the "Payment Date"), unless the
applicable plan or document governing the other amounts, if any, states
otherwise. In addition, all stock options the Employee holds shall vest upon a
Change of Control and the provisions of paragraph 7 of this Agreement shall be
null and void as of the date of termination of employment.
-12-
<PAGE>
(g) For the purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred upon the occurrence of any of the
following: (i) the acquisition of the "beneficial ownership," as such term is
defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934 (as
amended, the "1934 Act"), from and after the date of this Agreement, directly or
indirectly, of 20% or more of the outstanding voting stock of the Corporation or
any parent corporation of the Corporation by one or more "persons" (as such term
is used in Sections 13(d) and 14(d)(2) of the 1934 Act), whether or not any such
persons are affiliated or acting individually or as a group and whether or not
any such acquisition occurs as a result of one or more transactions (which may
or may not occur at the same time), by any person who did not own, directly or
indirectly, 20% of more of the outstanding voting stock of the Corporation as of
the date of this Agreement, (ii) if all or substantially all of the business of
the Corporation is disposed of pursuant to a transfer of the Corporation's
assets to any person, (iii) a merger, consolidation or other transaction in
which the Corporation is not the surviving corporation, (iv) if the Corporation
is materially or completely liquidated, or (v) a change in the composition of a
majority of the Board within twelve (12) months after any "person" is or becomes
the beneficial owner, directly or indirectly, of 20% or more of the voting power
of the then outstanding securities of the Corporation.
-13-
<PAGE>
(h) For purposes of this Agreement, any good faith
determination of "Good Reason" made by the Employee under Paragraph 5(f) shall
be conclusive.
(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Corporation to Employee or for his benefit (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise) (a "Payment"), would be nondeductible by the Corporation for
Federal income tax purposes because of Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), then the aggregate present value of amounts
payable or distributable to Employee or for his benefit pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced to the
"Reduced Amount". The "Reduced Amount" shall be an amount expressed in present
value which maximizes the aggregate present value of Agreement Payments without
causing any Payment to be nondeductible by the Corporation because of Section
280G of the Code. For purposes of paragraph 5(i), present value shall be
determined in accordance with Section 280G(d)(4) of the Code.
(i) All determinations required to be made under
subparagraph 5(i) shall be made by the Corporation's then independent certified
accountants, which shall provide detailed supporting calculations both to the
Corporation and Employee within fifteen (15) business days of the Termination
Date, or
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<PAGE>
such earlier time as is requested by the Corporation, and a written opinion to
Employee at the Corporation's cost that Employee has substantial authority not
to report any Excise Tax on Employee's federal income tax return with respect to
the Payments. Any such determination by the Corporation's then independent
certified accountants shall be binding upon the Corporation and the Employee.
Employee shall determine which and how much of the Payments shall be eliminated
or reduced consistent with the requirements of subparagraph 5(i), provided that,
if Employee does not make such determination within ten business days of the
receipt of the calculations made by the Corporation's then independent certified
accountants, the Corporation shall elect which and how much of the Payments
shall be eliminated or reduced consistent with the requirements of paragraph (i)
and shall notify Employee promptly of such election. Within five business days
thereafter, the Corporation shall pay to or distribute to Employee or for
Employee's benefit such amounts as are then due to Employee under this
Agreement. For purposes of paragraph (i), "Excise Tax" shall mean the excise tax
imposed by Section 4999 of the Code or any interest or penalties with respect to
such excise tax.
(ii) As a result of the uncertainty in the application
of Section 280G of the Code at the time of the initial determination by the
Corporation's then certified independent accountants hereunder, it is possible
that Payments will have been made by the Corporation which should not have been
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<PAGE>
made ("Overpayment") or that Additional Payments which will not have been made
by the Corporation could have been made ("Underpayment"), in each case,
consistent with the calculations required to be made hereunder. In the event
that the Corporation's then certified independent accountants, based upon the
assertion of a deficiency by the Internal Revenue Service against Employee which
the Corporation's then certified independent accountants believes has a high
probability of success determines that an Overpayment has been made, any such
Overpayment paid or distributed by the Corporation to Employee or for Employee's
benefit shall be treated for all purposes as a loan ab initio to Employee which
Employee shall repay to the Corporation together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code; provided, however,
that no such loan shall be deemed to have been made and no amount shall be
payable by Employee to the Corporation if and to the extent such deemed loan and
payment would not either reduce the amount on which Employee is subject to tax
under Section 1 and Section 4999 of the Code or generate a refund of such taxes.
In the event that the Corporation's then certified independent accountants,
based upon controlling precedent or other substantial authority, determines that
an Underpayment has occurred, any such Underpayment shall be promptly paid by
the Corporation to the Employee or for the Employee's benefit together with
interest at the applicable federal rate provided for in Section 7872(f)(2) of
the Code.
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<PAGE>
(j) The Employee shall not be required to mitigate the
amount of any Payment provided for in paragraph 5(i) by seeking other employment
or otherwise, nor shall the amount of any Payment provided for in paragraph 5(i)
be reduced by any compensation earned by the Employee as the result of
employment by another employer after the Termination Date, or otherwise. The
Corporation's obligation to make the Payments provided for in paragraph 5(i) and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
it may have against Employee or others.
(k) The failure by Employee to set forth in any notice of
termination of employment any fact or circumstances which contributes to a
showing of Good Reason shall not waive any of Employee's rights hereunder or
preclude the Employee from asserting such fact or circumstance in enforcing
Employee's rights hereunder.
(l) If a Change of Control occurs, the terms and provisions
of paragraph 5(i) of this Agreement governing the payments to be made shall
control in lieu of any provisions elsewhere in this Agreement.
(m) The Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to expressly
assume and agree to perform according to paragraph 5 in the same manner and to
the
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<PAGE>
same extent that the Corporation would be required to perform it if no such
succession had taken place. As used in this paragraph 5, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
6. The Employee acknowledges that, because of his duties and
his position of trust under this Agreement, he will become familiar with trade
secrets and other confidential information (including, but not limited to,
operating methods and procedures, secret lists of actual and potential sources
of supply, customers and employees, costs, profits, markets, sales and plans for
future developments) which are valuable assets and property rights of the
Corporation and not publicly known. Except in connection with the performance of
his duties for the Corporation the Employee agrees that he will not, during or
at any time after the term of this Agreement, either directly or indirectly,
disclose to any person, firm or corporation such trade secrets or other
confidential information, including, but not limited to, any facts concerning
the systems, methods, procedures or plans developed or used by the Corporation.
The Employee agrees to retain all such trade secrets and other confidential
information in a fiduciary capacity for the sole benefit of the Corporation, its
successors and assigns. Upon termination of his employment by the Corporation or
at any time that the Corporation may so request, the Employee will surrender
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<PAGE>
to the Corporation all non-public papers, notes, reports and other documents
(and all copies thereof) relating to the business of the Corporation which he
may then possess or have under his control.
7. For a period of two (2) years following the expiration or
earlier termination of this Agreement and within a two hundred fifty (250) mile
radius of the New York City the Employee shall not, without the prior written
consent of the Corporation, directly or indirectly:
(a) solicit any business for or from, or become associated
with, as principal, agent, employee, consultant, or in any other capacity, any
person who, or entity which, at the time of, or during the twelve (12) months
immediately preceding such expiration or termination was in direct competition
with the Corporation;
(b) become a principal, agent, employee, consultant, or
otherwise become associated with any person who, or entity which, has taken
affirmative action which would permit such entity or person to actually engage
in direct competition with the Corporation during a period of two (2) years
following the expiration or earlier termination of this Agreement.
8. The provisions of Paragraphs 6 and 7 of this Agreement are
of a unique nature and of extraordinary value and of such a character that a
material breach of the provisions of either Paragraphs 6 or 7 of this Agreement
by the Employee will result in irreparable damage and injury to the Corporation
for
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<PAGE>
which the Corporation will not have any adequate remedy at law. Therefore, in
the event that the Employee commits or threatens to commit any such breach, the
Corporation will have (a) the right and remedy to have the provisions of
Paragraphs 6 and 7 of this Agreement specifically enforced by any court having
equity jurisdiction, it being agreed that in any proceeding for an injunction,
and upon any motion for a temporary or permanent injunction, the Employee's
ability to answer in damages shall not be a bar or interposed as a defense to
the granting of such injunction and (b) the right and remedy to require the
Employee to account for and to pay over to the Corporation all compensation,
profits, monies, accruals, increments and other benefits (hereinafter referred
to collectively as the "Benefits") derived or received by him as a result of any
transactions constituting a breach of any of the provisions of Paragraphs 6 and
7 of this Agreement, and the Employee hereby agrees to account for and pay over
such Benefits to the Corporation. Each of the rights and remedies enumerated in
(a) and (b) above shall be independent of the other, and shall be severally
enforceable, and all of such rights and remedies shall be in addition to, and
not in lieu of, any other rights and remedies available to the Corporation under
law or in equity.
9. In the event that any provision, or any portion of any
provision, of this Agreement shall be held to be void or unenforceable, the
remaining provisions of this Agreement, and the remaining portion of any
provision found void or
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<PAGE>
unenforceable in part only, shall continue in full force and effect.
10. The Employee represents and warrants that he has made no
commitment of any kind whatsoever inconsistent with the provisions of this
Agreement and that he is under no disability of any kind to enter into this
Agreement and to perform all of his obligations hereunder.
11. This Agreement shall inure to the benefit of and shall be
binding upon the parties hereto and their respective successors and permitted
assigns. This Agreement being personal to the Employee, cannot be assigned by
him. This Agreement may be assigned by the Corporation in the event and in
connection with a merger, consolidation or sale of all or substantially all of
the assets of the Corporation provided that the assignee agrees in writing to
assume all of the obligations of the Corporation under this Agreement. Prompt
written notice of such assignment shall be provided by the Corporation to the
Employee.
12. Any dispute or controversy between the parties relating to
or arising out of this Agreement or any amendment or modification hereof shall
be determined by the Supreme Court, County of Nassau, State of New York. The
service of any notice, process, motion or other document in connection with an
action under this Agreement may be effectuated by either personal service upon a
party or by certified mail duly addressed to him at his address set forth on
page 1 hereof.
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<PAGE>
13. Unless otherwise required by law, the Corporation shall
not recognize any assignment, transfer, pledge, hypothecation, execution or
attachment of any amount or part thereof which becomes payable hereunder.
14. Any notice or communication required or permitted to be
given hereunder shall be deemed duly given if delivered personally or sent by
registered or certified mail, return receipt requested, to the address of the
intended recipient as herein set forth or to such other address as a party may
theretofore have specified in writing to the other. Any notice or communication
intended for the Corporation shall be addressed to the attention of its Board of
Directors.
15. A waiver of any breach or violation of any term,
provision, agreement, covenant, or condition herein contained shall not be
deemed to be a continuing waiver or a waiver of any future or past breach or
violation.
16. This Agreement constitutes the entire agreement and
understanding between the Corporation and the Employee relating to the latter's
employment, supersedes any prior agreement between the parties relating to such
matter, shall be governed by and construed in accordance with the laws of the
State of New York and may not be changed, terminated or discharged orally.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands as of the day and year first above written.
UNIFLEX, INC.
By:/s/ Robert K. Semel
--------------------
Robert K. Semel, President
/s/ Herbert Barry
----------------------
Herbert Barry
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SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT entered into
as of the 1st day of February, 1996, by and between UNIFLEX, INC., a Delaware
corporation having its principal office at 383 West John Street, Hicksville, New
York 11802 (hereinafter referred to as the "Corporation"), and ROBERT K. SEMEL,
residing at 202 Northwood Court, The Hamlet, Jericho, New York 11753
(hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Corporation and the Employee entered into an
amended and restated employment agreement dated as of the 18th day of January,
1994 (the "Prior Amendment"); and
WHEREAS, the Corporation and the Employee desire to amend and
restate the terms of the Prior Amendment, upon and subject to the terms and
conditions of this amended and restated employment agreement (the "Agreement"),
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and for other good and valuable consideration, it is agreed as
follows:
1. (a) The Corporation hereby employs the Employee and the
Employee agrees to work for the Corporation as President of the Corporation. The
Employee shall serve as and perform the duties of President of the Corporation
during the term of this Agreement.
<PAGE>
(b) During the term of this Agreement, the Corporation
shall use its best efforts to have the Employee elected as a member of the Board
of Directors of the Corporation and shall include the Employee in the slate of
management nominees at the expiration of each term for which the Employee served
as a member of the Board of Directors of the Corporation. So long as he shall be
a director of the Corporation, the Employee shall serve as a member of the
Corporation's Executive Committee and Compensation Committee.
(c) The Employee agrees to devote his full business time
during regular business hours to working for the Corporation and performing the
aforesaid duties and such other duties as shall from time to time be assigned to
him by the Board of Directors of the Corporation consistent with his position as
President of the Corporation. During the term of his employment hereunder, the
Employee shall have no interest in, or perform any services during regular
business hours for any other company, whether or not such company is competitive
with the Corporation, except that this prohibition shall not be deemed to apply
to (i) passive investments in businesses not competitive with the business of
the Corporation or to investments of 5% or less of the outstanding stock of
public companies whose stock is traded on a national securities exchange or in
the over-the-counter market and (ii) service as a director of a corporation that
is not competitive with the business of the Corporation provided that the
Employee has obtained the prior written consent of the
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<PAGE>
Corporation, which consent may not be unreasonably withheld. For purposes of
this paragraph 1(c), a "passive investment" shall be deemed to mean investment
in a business which does not require or result in the participation of the
Employee in the management or operations of such business except during times
other than regular business hours and which does not interfere with his duties
and responsibilities to the Corporation. Nothing contained herein shall limit
the right of the Employee to make speeches, write articles or participate in
public debate and discussions in and by means of any medium of communication
provided that such activities are not inconsistent with the Employee's
obligations hereunder.
The foregoing to the contrary notwithstanding, the Employee
may perform such other activities as shall be required to wind down his
responsibilities to his prior accounting practice, Patrusky Mintz & Semel.
(d) Consistent with the Employee's aforesaid duties, the
Employee shall, at all times during the term hereof, be subject to the
supervision and direction of the Board of Directors of the Corporation with
respect to his duties, responsibilities and the exercise of his powers.
(e) The services of the Employee hereunder shall be
rendered primarily in the metropolitan area of the City of New York at the
Corporation's principal executive offices, currently located in Nassau County;
provided, however, that the Employee shall make such trips outside of the
metropolitan area of the
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<PAGE>
City of New York as shall be reasonably necessary in connection with the
Employee's duties hereunder.
2. The Corporation shall pay to the Employee during the Term
(as hereinafter defined) of his employment by the Corporation and the Employee
shall accept as his entire compensation for his services hereunder:
(a) a base salary ("Base Salary") as set forth below
payable in accordance with the Corporation's regular payment schedule for its
employees as follows:
(i) For the annual period commencing on February 1,
1996 and ending on January 31, 1997 - $275,000 per annum;
(ii) For the annual period commencing on February 1,
1997 and ending on January 31, 1998 - $300,000 per annum;
(iii) For the annual period commencing on February 1,
1998 and ending on January 31, 1999 - $325,000 per annum;
(iv) For the annual period commencing on February 1,
1999 and ending on January 31, 2000 - $350,000 per annum;
and
(v) For the annual period commencing on February 1,
2000 and ending on January 31, 2001 - $400,000 per annum.
(b) In addition to his Base Salary hereunder, the Employee
shall be entitled to a profit incentive cash bonus
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<PAGE>
during each annual period of the Term of this Agreement, commencing with the
annual period February 1, 1994 to January 31, 1995, based upon the consolidated
pre-tax profits of the Corporation and its subsidiaries (corporations or
partnerships in which the Corporation owns 50% or more of the equity of such
entity, including any entity which is consolidated for financial reporting
purposes under generally accepted accounting principles) whether now existing or
hereinafter created (the "Profit Incentive Bonus"), as determined by the
independent public accountants of the Corporation in their sole discretion, as
follows:
If Consolidated Pre-Tax Profits of
the Corporation and its
Subsidiaries Are: Profit Incentive Bonus Would Be:
- ------------------------------------ --------------------------------
0 to $500,000 Discretion of Board of Directors
$500,001 to $800,000 4%
$800,001 to $1,200,000 4% of 1st $800,000 and 5% in excess of
$800,000
$1,200,001 to $1,700,000 4% of 1st $800,000, 5% of next
$400,000 and 6% in excess of
$1,200,000
$1,700,001 to $2,300,000 4% of 1st $800,000, 5% of next
$400,000, 6% of next $500,000 and 7%
in excess of $1,700,000
$2,300,001 to $3,000,000 4% of 1st $800,000, 5% of next
$400,000, 6% of next $500,000, 7% of
next $600,000 and 8% in excess of
$2,300,000
Over $3,000,000 4% of 1st $800,000, 5% of next
$400,000, 6% of next $500,000, 7% of
next $600,000, 8% of next $700,000 and
10% in excess of $3,000,000
The Profit Incentive Bonus shall be determined no later than
ninety (90) days after the end of each annual fiscal period and paid no later
than thirty (30) days thereafter.
(c) In addition to his Base Salary and Profit Incentive Bonus,
the Employee shall be entitled to an additional
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<PAGE>
cash bonus during each annual period of the Term of this Agreement commencing
with the annual period February 1, 1994 to January 31, 1995, based upon the
consolidated net sales other than net sales on which Barry H. Barry, the Chief
Executive Officer of the Corporation, is not entitled to an override commission,
of the Corporation and its subsidiaries (corporations or partnerships in which
the Corporation owns 50% or more of the equity of such entity, including any
entity which is consolidated for financial reporting purposes under generally
accepted accounting principles), whether now existing or hereinafter created
(the "Sales Incentive Bonus"), as determined by the independent public
accountants of the Corporation in their sole discretion, as follows:
If Consolidated Net Sales of the
Corporation and its Subsidiaries
Are: Sales Incentive Bonus Would Be:
- ----------------------------------- -----------------------------------------
$30,000,000 to $35,000,000 1/2 of 1% of consolidated net sales in
excess of $30,000,000 up to $35,000,000
$35,000,001 to $40,000,000 1/2 of 1% of consolidated net sales in
excess of $30,000,000 up to $35,000,000
and 5/8 of 1% of consolidated net sales
thereafter $40,000,000
$40,000,001 to $45,000,000 1/2 of 1% of consolidated net sales in
excess of $30,000,000 up to $35,000,000,
5/8 of 1% of next $5,000,000 of
consolidated net sales and3/4of 1% of
consolidated net sales thereafter up to
$45,000,000
$45,000,001 to $50,000,000 1/2 of 1% of consolidated net sales in
excess of $30,000,000 up to $35,000,000,
5/8 of 1% of next $5,000,000 of
consolidated net sales,3/4of 1% of next
$5,000,000 of consolidated net sales and
7/8 of 1% of consolidated net sales
thereafter up to $50,000,000
Over $50,000,000 1/2 of 1% of consolidated net sales in
excess of $30,000,000 up to $35,000,000,
5/8 of 1% of next $5,000,000 of
consolidated net sales,3/4of 1% of next
$5,000,000 of consolidated net sales, 7/8
of 1% of next $5,000,000 of consolidated
net sales and 1% of consolidated net sales
thereafter
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<PAGE>
provided, however that in the event that the Corporation shall
complete an acquisition (a "Material Acquisition") of another business whose
annual revenues (measured as of the 12 month period ending as of the last day of
the month prior to the closing of such acquisition) is equal to or greater than
the Corporation's annual revenues for such period, then for purposes of
determining the amount of net sales included in the "Consolidated Net Sales of
the Corporation and its Subsidiaries" for purposes of this Section 2(c) the
Employee shall be entitled to zero percent of such consolidated net sales
attributable to such Material Acquisition for the first year after the closing
of such Material Acquisition, 1/2% of such consolidated net sales attributable
to such Material Acquisition for the second year after the closing of such
Material Acquisition and 1% of such consolidated net sales attributable to such
Material Acquisition thereafter.
The Sales Incentive Bonus shall be determined no later than
ninety (90) days after the end of each annual fiscal period and paid no later
than thirty (30) days thereafter.
(d) The terms and conditions of a certain stock purchase
letter agreement, and the option letter agreement between the Employee and the
Corporation which were attached as Exhibits A and B, respectively, to the
Original Agreement and executed simultaneously with the Original Agreement shall
remain in full force and effect as originally executed.
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<PAGE>
(e) The Corporation will reimburse the Employee for his
necessary and reasonable out-of-pocket expenses incurred in the course of his
employment and in connection with his duties hereunder. In addition, the
Corporation shall also reimburse the Employee for business expenses incurred for
business development not specifically performed in connection with his duties
hereunder, in an amount which shall not exceed ONE THOUSAND FIVE HUNDRED DOLLARS
($1,500.00) per month, upon presentation to the Corporation of satisfactory
evidence of such expenses.
(f) The Corporation will provide the Employee with medical
insurance coverage under the Corporation's group medical insurance policy and
the Employee shall be entitled to participate in all other health, welfare,
retirement, disability, and other benefit plans, if any, available to employees
and senior executives of the Corporation.
(g) The Employee shall be entitled to paid vacations and/or
sick days during each fiscal period (February 1 to January 31) during the Term
of the same duration as other senior executive officers and directors of the
Corporation, which is currently forty (40) days per annum. In the event that the
Employee shall fail to utilize all of such vacation time in any one fiscal
period, then such time as shall not have been used shall accrue and may be
applied to future fiscal periods; provided, however, that in no event shall the
Employee be entitled to more than ten (10) weeks of vacation in any fiscal
period, inclusive of such accrued time.
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<PAGE>
(h) The Corporation will provide the Employee with the use
of an automobile and shall pay for, or reimburse the Employee for the payment
of, all customary expenses relating to the use and operation of such automobile,
including any lease payments, insurance and maintenance, gas and car phone in an
amount which shall not exceed ONE THOUSAND SEVEN HUNDRED FIFTY DOLLARS
($1,750.00) per month through January 31, 1996 and increase by THREE HUNDRED
DOLLARS ($300.00) per month commencing February 1, 1996 and an additional THREE
HUNDRED DOLLARS ($300.00) per month commencing February 1, 1998.
3. (a) The Term of this Agreement shall commence as of
February 1, 1994 and shall continue, except as otherwise provided herein,
through January 31, 2001 (the "Term").
(b) The Employee, at his option, subject to the limitations
set forth below, shall have the right to extend the Term of this Agreement for
two (2) additional two-year periods (the "First Option" and "Second Option,"
respectively) by written notice to the Corporation no more than one hundred
twenty (120) days and no less than ninety (90) days prior to the expiration of
this Term of this Agreement (or the term of the First Option), as the case may
be. All of the terms and conditions of this Agreement shall be applicable during
the periods of the First Option and Second Option except that (x) the Base
Salary under Section 2(a) of this Agreement shall be adjusted as follows:
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<PAGE>
FIRST OPTION TERM
(i) For the annual period commencing February 1,
2001 and ending January 31, 2002 - $450,000; and
(ii) For the annual period commencing February 1,
2002 and ending January 31, 2003 - $525,000.
SECOND OPTION TERM
(i) For the annual period commencing February 1,
2003 and ending January 31, 2004 - $600,000; and
(ii) For the annual period commencing February 1,
2004 and ending January 31, 2005 - $690,000, and
(y) the automobile reimbursement under Section 2(h) of this Agreement shall be
increased by an additional THREE HUNDRED DOLLARS ($300.00) per month during each
of the First Option and Second Option periods.
4. (a) Except as otherwise provided herein, the Term
of the employment of the Employee shall terminate:
(i) automatically upon the death of the
Employee;
(ii) at the option of the Corporation, upon
written notice thereof to the Employee, in the event that the
Employee shall become permanently incapacitated (as
hereinafter defined); or
(iii) at the option of the Corporation, upon 30
days' prior written notice thereof to the Employee specifying
the basis thereof, in the event of a material breach by the
Employee of any of the
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<PAGE>
provisions of this Agreement which is not cured by the
Employee within thirty (30) days after the Employee is
provided with such written notice, or in the event that the
Employee shall, during the term of this Agreement, engage in
any criminal conduct constituting a felony and criminal
charges are brought against the Employee by a governmental
authority or, in the determination of the Board of Directors
of the Corporation, be guilty of willful malfeasance or gross
negligence which materially and adversely affects the business
of the Corporation. (b) For purposes of this Agreement, the
Employee shall
be deemed permanently incapacitated in the event that the Employee shall, by
reason of his physical or mental disability, fail to substantially perform his
usual and regular duties for the Corporation for a consecutive period of twelve
(12) months or for twelve (12) months in the aggregate in any eighteen (18)
month period; provided, however, that the Employee shall not be deemed
permanently incapacitated unless and until a physician, duly licensed to
practice medicine and reasonably acceptable to the Corporation and the Employee,
shall certify in writing to the Corporation that the nature of the Employee's
disability is such that it will continue as a substantial impediment to the
Employee's ability to substantially perform his duties hereunder.
5. Notwithstanding anything to the contrary contained herein:
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<PAGE>
(a) During the term of this Agreement, the Corporation
agrees to pay the insurance premiums on any insurance policies owned by the
Employee and issued at "standard rates," in an aggregate face amount not to
exceed $1,000,000; provided, however, that the annual premium costs shall not
exceed $7,500.00 per annum. In the event that the Employee shall die during the
term of this Agreement, the Corporation shall, in lieu of any other compensation
payable hereunder, pay (i) to the beneficiaries theretofore designated in
writing by the Employee (or to the Employee's estate if no such beneficiaries
shall have been designated), a sum equal to the total compensation of any kind
paid to the Employee pursuant to paragraph 2 during the Corporation's last
fiscal year prior to the death of the Employee, less the aggregate amount of any
insurance proceeds received by the Corporation on insurance policies it owns on
the life of the Employee, which shall be paid to the Employee upon receipt by
the Corporation, in twenty-four (24) equal monthly installments, without
interest, with the first such installment to be paid on the first day of the
second month following the date of death and the remaining installments to be
paid on each of the following twenty-three (23) monthly anniversary dates of
such first payment; and (ii) to the Employee's estate, all sums due and payable
by the Corporation to the Employee for any periods prior to the date of death
(and not theretofore paid).
(b) In the event that the Employee shall become permanently
incapacitated, then for the period prior to any
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<PAGE>
termination of his employment in accordance with paragraph 4(a)(ii) above, as a
result of the Employee becoming permanently incapacitated, the Employee shall
continue to receive one hundred percent (100%) of his regular annual Base Salary
provided for herein which is attributable to such period. Such payments shall be
in addition to all income disability benefits, if any, which the Employee may
receive from policies provided by or through the Corporation, or individually,
including state-required short-term disability.
(c) In the event that the employment of the Employee shall
be terminated by reason of the Employee becoming permanently incapacitated,
then, as additional consideration for his past services to the Corporation, he
shall receive one hundred percent (100%) of his then current annual Base Salary,
in equal monthly installments, without interest, for a period of twelve (12)
months from the date of such termination.
(d) In the event of a termination of the Employee's
employment pursuant to paragraph 4(a)(iii) above, the Employee shall not be
entitled to any payments other than such compensation as shall have been earned
by him prior to the occurrence of the event giving rise to the termination and
not paid as of the date of such termination.
(e) In the event that the Corporation shall desire to fund
the death benefits payable under paragraph 5(a) above with a policy or policies
of insurance on the life of the Employee or the disability benefits payable
under paragraphs 5(b) and 5(c)
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<PAGE>
above with a disability policy, the Employee shall cooperate with the
Corporation in obtaining such insurance policy(ies) and shall submit to such
medical examinations and execute such documents as may be required in connection
with the obtaining of such insurance.
(f) The Employee may terminate this Agreement for "Good
Reason." For purposes of this Agreement, "Good Reason" shall mean, that if a
Change in Control (as hereinafter defined) has occurred, a determination is made
by the Employee, in writing (which written notice shall specify in detail the
full facts and circumstances thereof), that as a result of the Change in Control
and a change in circumstances thereafter affecting his position, the Employee,
in his sole discretion (exercised in good faith), determines that (x) he is
unable to exercise the authorities, functions, duties or responsibilities of the
positions for which he is hereby employed or (y) there is otherwise a material
change in the nature or scope of the authorities, functions, duties or
responsibilities of the positions in which the Employee is hereby employed,
either of which situation is not remedied within thirty (30) days after receipt
by the Corporation of written notice from the Employee of such determination.
In the event the Employee exercises his rights under this
paragraph 5(f), he shall be entitled to a lump sum amount (the "Severance
Payment") equal to the product of 2.99 times the average total annual
compensation of any kind paid to the Employee by the Corporation during the
Corporation's last five
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<PAGE>
full fiscal years prior to the date of termination of employment. The Severance
Payment earned in accordance with this paragraph 5(f) shall be paid to Employee
within five (5) days after the date of termination of Employee's employment
(hereinafter referred to as the "Termination Date") and all other amounts, if
any, to be paid to Employee pursuant to a Change of Control shall also be paid
by the Corporation within five (5) days of the Termination Date (hereinafter
referred to as the "Payment Date"), unless the applicable plan or document
governing the other amounts, if any, states otherwise. In addition, all stock
options the Employee holds shall vest upon a Change of Control and the
provisions of paragraph 7 of this Agreement shall be null and void as of the
date of termination of employment.
(g) For the purposes of this Agreement, a "Change in
Control" shall be deemed to have occurred upon the occurrence of any of the
following: (i) the acquisition of the "beneficial ownership," as such term is
defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934 (as
amended, the "1934 Act"), from and after the date of this Agreement, directly or
indirectly, of 20% or more of the outstanding voting stock of the Corporation or
any parent corporation of the Corporation by one or more "persons" (as such term
is used in Sections 13(d) and 14(d)(2) of the 1934 Act), whether or not any such
persons are affiliated or acting individually or as a group and whether or not
any such acquisition occurs as a result of one or more transactions (which may
or may not occur at the same time), by
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<PAGE>
any person who did not own, directly or indirectly, 20% of more of the
outstanding voting stock of the Corporation as of the date of this Agreement,
(ii) if all or substantially all of the business of the Corporation is disposed
of pursuant to a transfer of the Corporation's assets to any person, (iii) a
merger, consolidation or other transaction in which the Corporation is not the
surviving corporation, (iv) if the Corporation is materially or completely
liquidated, or (v) a change in the composition of a majority of the Board within
twelve (12) months after any "person" is or becomes the beneficial owner,
directly or indirectly, of 20% or more of the voting power of the then
outstanding securities of the Corporation.
(h) For purposes of this Agreement, any good faith
determination of "Good Reason" made by the Employee under Paragraph 5(f) shall
be conclusive.
(i) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Corporation to Employee or for his benefit (whether paid or
payable or distributed or distributable pursuant to the terms of this Agreement
or otherwise) (a "Payment"), would be nondeductible by the Corporation for
Federal income tax purposes because of Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), then the aggregate present value of amounts
payable or distributable to Employee or for his benefit pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred
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<PAGE>
to as "Agreement Payments") shall be reduced to the "Reduced Amount". The
"Reduced Amount" shall be an amount expressed in present value which maximizes
the aggregate present value of Agreement Payments without causing any Payment to
be nondeductible by the Corporation because of Section 280G of the Code. For
purposes of paragraph 5(i), present value shall be determined in accordance with
Section 280G(d)(4) of the Code.
(i) All determinations required to be made under
subparagraph 5(i) shall be made by the Corporation's then independent certified
accountants, which shall provide detailed supporting calculations both to the
Corporation and Employee within fifteen (15) business days of the Termination
Date, or such earlier time as is requested by the Corporation, and a written
opinion to Employee at the Corporation's cost that Employee has substantial
authority not to report any Excise Tax on Employee's federal income tax return
with respect to the Payments. Any such determination by the Corporation's then
independent certified accountants shall be binding upon the Corporation and the
Employee. Employee shall determine which and how much of the Payments shall be
eliminated or reduced consistent with the requirements of subparagraph 5(i),
provided that, if Employee does not make such determination within ten business
days of the receipt of the calculations made by the Corporation's then
independent certified accountants, the Corporation shall elect which and how
much of the Payments shall be eliminated or reduced consistent with the
requirements of
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<PAGE>
paragraph (i) and shall notify Employee promptly of such election. Within five
business days thereafter, the Corporation shall pay to or distribute to Employee
or for Employee's benefit such amounts as are then due to Employee under this
Agreement. For purposes of paragraph (i), "Excise Tax" shall mean the excise tax
imposed by Section 4999 of the Code or any interest or penalties with respect to
such excise tax.
(ii) As a result of the uncertainty in the
application of Section 280G of the Code at the time of the initial determination
by the Corporation's then certified independent accountants hereunder, it is
possible that Payments will have been made by the Corporation which should not
have been made ("Overpayment") or that Additional Payments which will not have
been made by the Corporation could have been made ("Underpayment"), in each
case, consistent with the calculations required to be made hereunder. In the
event that the Corporation's then certified independent accountants, based upon
the assertion of a deficiency by the Internal Revenue Service against Employee
which the Corporation's then certified independent accountants believes has a
high probability of success determines that an Overpayment has been made, any
such Overpayment paid or distributed by the Corporation to Employee or for
Employee's benefit shall be treated for all purposes as a loan ab initio to
Employee which Employee shall repay to the Corporation together with interest at
the applicable federal rate provided for in Section 7872(f)(2) of the Code;
provided,
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<PAGE>
however, that no such loan shall be deemed to have been made and no amount shall
be payable by Employee to the Corporation if and to the extent such deemed loan
and payment would not either reduce the amount on which Employee is subject to
tax under Section 1 and Section 4999 of the Code or generate a refund of such
taxes. In the event that the Corporation's then certified independent
accountants, based upon controlling precedent or other substantial authority,
determines that an Underpayment has occurred, any such Underpayment shall be
promptly paid by the Corporation to the Employee or for the Employee's benefit
together with interest at the applicable federal rate provided for in Section
7872(f)(2) of the Code.
(j) The Employee shall not be required to mitigate the
amount of any Payment provided for in paragraph 5(i) by seeking other employment
or otherwise, nor shall the amount of any Payment provided for in paragraph 5(i)
be reduced by any compensation earned by the Employee as the result of
employment by another employer after the Termination Date, or otherwise. The
Corporation's obligation to make the Payments provided for in paragraph 5(i) and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
it may have against Employee or others.
(k) The failure by Employee to set forth in any notice of
termination of employment any fact or circumstances which contributes to a
showing of Good Reason shall not waive any of
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<PAGE>
Employee's rights hereunder or preclude the Employee from asserting such fact or
circumstance in enforcing Employee's rights hereunder.
(l) If a Change of Control occurs, the terms and provisions
of paragraph 5(i) of this Agreement governing the payments to be made shall
control in lieu of any provisions elsewhere in this Agreement.
(m) The Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to expressly
assume and agree to perform according to paragraph 5 in the same manner and to
the same extent that the Corporation would be required to perform it if no such
succession had taken place. As used in this paragraph 5, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
6. The Employee acknowledges that, because of his duties and
his position of trust under this Agreement, he will become familiar with trade
secrets and other confidential information (including, but not limited to,
operating methods and procedures, secret lists of actual and potential sources
of supply, customers and employees, costs, profits, markets, sales and plans for
future developments) which are valuable assets and property rights of the
Corporation and not publicly known.
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<PAGE>
Except in connection with the performance of his duties for the Corporation, the
Employee agrees that he will not, during or at any time after the term of this
Agreement, either directly or indirectly, disclose to any person, firm or
corporation such trade secrets or other confidential information, including, but
not limited to, any facts concerning the systems, methods, procedures or plans
developed or used by the Corporation. The Employee agrees to retain all such
trade secrets and other confidential information in a fiduciary capacity for the
sole benefit of the Corporation, its successors and assigns. Upon termination of
his employment by the Corporation or at any time that the Corporation may so
request, the Employee will surrender to the Corporation all non-public papers,
notes, reports and other documents (and all copies thereof) relating to the
business of the Corporation which he may then possess or have under his control.
7. For a period of two (2) years following the expiration or
earlier termination of this Agreement and within a two hundred fifty (250) mile
radius of New York City the Employee shall not, without the prior written
consent of the Corporation, directly or indirectly:
(a) solicit any business for or from, or become associated
with, as principal, agent, employee, consultant, or in any other capacity, any
person who, or entity which, at the time of, or during the twelve (12) months
immediately preceding such
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<PAGE>
expiration or termination was in direct competition with the Corporation;
(b) become a principal, agent, employee, consultant, or
otherwise become associated with any person who, or entity which, has taken
affirmative action which would permit such entity or person to actually engage
in direct competition with the Corporation during a period of two (2) years
following the expiration or earlier termination of this Agreement.
8. The provisions of Paragraphs 6 and 7 of this Agreement are
of a unique nature and of extraordinary value and of such a character that a
material breach of the provisions of either Paragraphs 6 or 7 of this Agreement
by the Employee will result in irreparable damage and injury to the Corporation
for which the Corporation will not have any adequate remedy at law. Therefore,
in the event that the Employee commits or threatens to commit any such breach,
the Corporation will have (a) the right and remedy to have the provisions of
Paragraphs 6 and 7 of this Agreement specifically enforced by any court having
equity jurisdiction, it being agreed that in any proceeding for an injunction,
and upon any motion for a temporary or permanent injunction, the Employee's
ability to answer in damages shall not be a bar or interposed as a defense to
the granting of such injunction and (b) the right and remedy to require the
Employee to account for and to pay over to the Corporation all compensation,
profits, monies, accruals, increments and other benefits (hereinafter referred
to collectively as the "Benefits")
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<PAGE>
derived or received by him as a result of any transactions constituting a breach
of any of the provisions of Paragraphs 6 and 7 of this Agreement, and the
Employee hereby agrees to account for and pay over such Benefits to the
Corporation. Each of the rights and remedies enumerated in (a) and (b) above
shall be independent of the other, and shall be severally enforceable, and all
of such rights and remedies shall be in addition to, and not in lieu of, any
other rights and remedies available to the Corporation under law or in equity.
9. In the event that any provision, or any portion of any
provision, of this Agreement shall be held to be void or unenforceable, the
remaining provisions of this Agreement, and the remaining portion of any
provision found void or unenforceable in part only, shall continue in full force
and effect.
10. The Employee represents and warrants that he has made no
commitment of any kind whatsoever inconsistent with the provisions of this
Agreement and that he is under no disability of any kind to enter into this
Agreement and to perform all of his obligations hereunder.
11. This Agreement shall inure to the benefit of and shall be
binding upon the parties and their respective successors and permitted assigns.
This Agreement being personal to the Employee, cannot be assigned by him. This
Agreement may be assigned by the Corporation in the event and in connection with
a merger, consolidation or sale of all or substantially all of the
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assets of the Corporation provided that the assignee agrees in writing to assume
all of the obligations of the Corporation under this Agreement. Prompt written
notice of such assignment shall be provided by the Corporation to the Employee.
12. Any dispute or controversy between the parties relating to
or arising out of this Agreement or any amendment or modification hereof,
including but not limited to the selection of a physician as provided in
Sections 4(b) and 5(b) of this Agreement, shall be determined by the Supreme
Court, County of Nassau, State of New York. The service of any notice, process,
motion or other document in connection with an action under this Agreement, may
be effectuated by either personal service upon a party or by certified mail duly
addressed to him at his address set forth on page 1 hereof.
13. Any notice or communication required or permitted to be
given hereunder shall be deemed duly given if delivered personally or sent by
registered or certified mail, return receipt requested, to the address of the
intended recipient as herein set forth or to such other address as a party may
theretofore have specified in writing to the other. Any notice or communication
intended for the Corporation shall be addressed to the attention of its Board of
Directors.
14. A waiver of any breach or violation of any term,
provision, agreement, covenant, or condition herein contained shall not be
deemed to be a continuing waiver or a waiver of any future or past breach or
violation.
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<PAGE>
15. This Agreement constitutes the entire agreement and
understanding between the Corporation and the Employee relating to the latter's
employment, supersedes any prior agreement between the parties relating to such
matter, shall be governed by and construed in accordance with the laws of the
State of New York and may not be changed, terminated or discharged orally.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands as of the day and year first above written.
UNIFLEX, INC.
By:/s/ Herbert Barry
------------------
Herbert Barry, Chairman of the
Board and Chief Executive
Officer
/s/ Robert K. Semel
-------------------
Robert K. Semel
EMPLOYMENT AGREEMENT
AGREEMENT entered into as of the 1st day of February, 1996, by
and between UNIFLEX, INC., a Delaware corporation having its principal office at
383 West John Street, Hicksville, New York 11802 (hereinafter referred to as the
"Corporation"), and MARTIN BROWNSTEIN, residing at 140 Foxwood Drive, Jericho,
New York 11753 (hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Corporation has employed the Employee and the
Employee has been employed by the Corporation under an employment agreement
dated as of February 1, 1991 and expiring on January 31, 1996; and
WHEREAS, the Employee and the Corporation desire to enter into
a new employment agreement upon the terms and conditions hereinafter set forth,
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and for other good and valuable consideration, it is agreed as
follows:
1. (a) The Corporation hereby employs the Employee and the
Employee agrees to work for the Corporation as Senior Vice President of the
Corporation. The Employee shall serve as and perform the duties of Senior Vice
President of the Corporation during the term of this Agreement. In such
capacity, the Employee shall have supervision and control over, and
responsibility for, all aspects of the business, activities and affairs relating
to the
<PAGE>
Corporation's sales to those customers listed in the Advertising Specialty
Institute Directory ("ASI Sales").
(b) The Employee agrees to devote his full business time to
working for the Corporation and performing the aforesaid duties and such other
duties as shall from time to time be assigned to him by the Board of Directors
of the Corporation consistent with his position as Senior Vice President of the
Corporation. During the term of his employment hereunder, the Employee shall
have no interest in, or perform any services for, any other company whether or
not such company is competitive with the Corporation, except that this
prohibition shall not be deemed to apply to passive investments in businesses
not competitive with the business of the Corporation or to investments of 5% or
less of the outstanding stock of public companies whose stock is traded on a
national securities exchange or is traded in the over-the-counter market or to
any ownership interest of the Employee in Wickatunk Motivators, Inc., a
speciality advertising company operated by the Employee's wife. For purposes of
this paragraph l(b), a "passive investment" shall be deemed to mean the
investment in a business which does not require or result in the participation
of the Employee in the management or operations of such business except during
times other than regular business hours and which does not interfere with his
duties and responsibilities to the Corporation. Nothing contained herein shall
limit the right of the Employee to make speeches, write articles or participate
in public debate and discussions in and by means of any medium of communication
provided that such
-2-
<PAGE>
activities are not inconsistent with the Employee's obligations hereunder.
(c) Consistent with the Employee's aforesaid duties, the
Employee shall, at all times during the term hereof, be subject to the
supervision and direction of the Board of Directors of the Corporation with
respect to his duties, responsibilities and the exercise of his powers.
(d) The services of the Employee hereunder shall be
rendered primarily in the metropolitan area of the City of New York primarily in
Nassau County at the Corporation's principal executive offices; provided,
however, that the Employee shall make such trips outside of the metropolitan
area of the City of New York as shall be reasonably necessary in connection with
the Employee's duties hereunder.
2. The Corporation shall pay to the Employee during the term
of his employment by the Corporation and the Employee shall accept as his
compensation for his services hereunder:
(a) (i) Commissions on all products of the Corporation
(including all of its subsidiaries and divisions) sold by the Employee at the
Corporation's standard commission rates in effect at the time of any such sale;
(ii) Commissions on all ASI Sales, whether or not by
the Employee, as follows:
(a) One percent (1%) of all ASI Sales up to and
including One Million Five Hundred Thousand Dollars ($1,500,000) in any fiscal
year; and
-3-
<PAGE>
(b) One and One Quarter Percent (1 1/4%) of all
ASI Sales in excess of One Million Five Hundred Thousand Dollars ($1,500,000) in
any fiscal year.
(b) Commissions provided for in subparagraph 2(a) above
shall be payable only on net sales proceeds actually received by the Corporation
which, for purposes of such subparagraph, shall be deemed to mean gross sales
less returns, price allowances and discounts. In this connection, the Employee
acknowledges and agrees that all orders obtained by the Employee and/or other
salesman for the Corporation are subject to the Corporation's acceptance or
rejection.
(c) For any period during which the Employee is unable to
fully perform his usual and regular duties for the Corporation, such payments of
compensation shall be reduced by an amount equal to the aggregate of all income
disability benefits which he may receive. If the Employee shall receive any such
payment from the Corporation then, to the extent that he subsequently receives
any payment of disability benefits attributable to the period for which he was
paid by the Corporation, he shall promptly reimburse the Corporation.
(d) The Corporation shall grant to the Employee an
incentive stock option to purchase up to Ten Thousand (10,000) shares of Common
Stock of the Corporation pursuant to the Corporation's 1993 Stock Option Plan
and in accordance with the option letter agreement (the "Option Agreement")
between the
-4-
<PAGE>
Employee and the Corporation. The Option Agreement is attached as EXHIBIT A and
made a part of this Agreement.
(e) The Corporation will reimburse the Employee for his
necessary and reasonable out-of-pocket expenses incurred in the course of his
employment and in connection with his duties hereunder, as requested and
approved by the Corporation and upon presentation to the Corporation of
satisfactory evidence of such expenses provided those expenses are corporate in
nature. Any selling expenses incurred to produce direct sales for the Employee's
Accounts shall be borne by the Employee.
(f) The Corporation will provide the Employee with medical
insurance coverage under the Corporation's group medical insurance policy and
the Employee shall be entitled to participate in all health, welfare,
retirement, disability and other benefit plans available to employees and senior
executives of the Corporation.
(g) The Employee shall be entitled to thirty (30) paid
vacation and/or sick days during each twelve (12) month period during the term
of this Agreement.
3. (a) The term of the Employee's employment hereunder shall
be deemed to commence effective as of February 1, 1996 and shall continue
through January 31, 1998.
(b) The Employee, at his option, shall have the right to
extend the term of this Agreement, if not previously terminated, for one
additional one-year period (the "Extension") by written notice to the
Corporation no more than one hundred twenty (120)
-5-
<PAGE>
days and no less than sixty (60) days prior to January 31, 1998. All of the
terms and conditions of this Agreement shall be applicable during the Extension.
4. (a) This Agreement (except as otherwise provided herein)
and the employment of the Employee hereunder shall terminate:
(i) automatically upon the death of the Employee;
(ii) at the option of the Corporation, upon written
notice thereof to the Employee, in the event that the Employee shall become
permanently incapacitated (as hereinafter defined); and
(iii) at the option of the Corporation, upon 30 days'
prior written notice thereof to the Employee specifying the basis thereof, in
the event of a material breach by the Employee of any of the provisions of this
Agreement which are not cured by the Employee within thirty (30) days after the
Employee is provided with such written notice, or in the event that the Employee
shall, during the term of this Agreement, engage in any criminal conduct
constituting a felony and criminal charges are brought against the Employee by a
governmental authority, or, in the determination of the Board of Directors of
the Corporation, be guilty of willful malfeasance or gross negligence which
would tend to materially and adversely affect the business of the Corporation.
(b) For purposes of this Agreement, the Employee shall be
deemed permanently incapacitated in the event that the
-6-
<PAGE>
Employee shall, by reason of his physical or mental disability, fail to fully
perform his usual and regular duties for the Corporation for a consecutive
period of twelve (12) months or for twelve (12) months in the aggregate in any
eighteen (18) month period; provided, however, that the Employee shall not be
deemed permanently incapacitated unless and until a physician, duly licensed to
practice medicine and reasonably acceptable to the Corporation and the Employee,
shall certify in writing to the Corporation that the nature of the Employee's
disability is such that it will continue as a substantial impediment to the
Employee's ability to perform his duties hereunder.
5. Notwithstanding anything to the contrary contained herein;
(a) In the event that the Employee shall die during the
term of this Agreement, the Corporation shall, in lieu of any other compensation
payable hereunder, pay to the beneficiaries theretofore designated in writing by
the Employee (or to the Employee's estate if no such beneficiaries shall have
been designated), a sum equal to:
(i) One Hundred Percent (100%) of the compensation
payable to the Employee during the twelve (12) month period immediately
preceding the Employee's death, such sum to be paid in twelve (12) equal monthly
installments commencing one month following such death; and
(ii) Fifty Percent (50%) of the compensation payable to
the Employee during the twelve (12) month period
-7-
<PAGE>
immediately preceding the Employee's death, such sum to be paid in twelve equal
monthly installments commencing on the first day of the month immediately
following the completion of the payments provided for in subparagraph 5(a)(i)
above.
The sum of the payments provided for in subparagraphs 5(a)(i) and
5(a)(ii) shall not, however, exceed Five Hundred Thousand Dollars ($500,000),
and to the extent that the Corporation receives the proceeds of any life
insurance on the life of the Employee (as provided in Section 5(e)) such
proceeds shall be paid to the beneficiaries theretofore designated in writing by
the Employee (or the Employee's estate if no such beneficiaries shall have been
designated) to fund the obligations under subparagraphs 5(a)(i) and 5(a)(ii) and
shall reduce such obligations on a dollar for dollar basis. The balance, if any,
due the Employee under subparagraphs 5(a)(i) and 5(a)(ii) shall thereafter be
paid in eighteen (18) equal monthly installments in lieu of the twenty-four (24)
monthly installments otherwise specified in subparagraphs 5(a)(i) and 5(a)(ii)
provided that the insurance proceeds received by Corporation and paid to the
Employee's beneficiaries or estate shall be equal or greater than Two Hundred
Fifty Thousand Dollars ($250,000).
(b) In the event that the Employee shall become
incapacitated, then for the period prior to any termination of his employment in
accordance with paragraph 4(a)(ii) above as a result of the Employee becoming
permanently incapacitated, the Employee shall continue to receive one hundred
percent (100%) of his regular
-8-
<PAGE>
annual compensation herein provided for attributable to such period. Such
payments shall be in addition to all income disability payments, if any, which
the Employee may receive from policies provided by or through the Corporation,
including state-required short term disability.
(c) In the event that the employment of the Employee shall
be terminated by reason of his permanent incapacity, then, as additional
consideration for his past services to the Corporation, he shall receive one
hundred percent (100%) of the compensation payable to the Employee during the
twelve (12) month period immediately preceding the Employee's termination by
reason of his permanent incapacity, in equal monthly installments, without
interest, for a period of twelve (12) months from the date of such termination.
(d) In the event of a termination of the Employee's
employment pursuant to paragraph 4(a)(iii) above, the Employee shall not be
entitled to any payments other than such compensation as shall have been earned
by him prior to the occurrence of the event giving rise to the termination and
not paid as of the date of such termination.
(e) In the event that the Corporation shall, in its sole
and absolute discretion, desire to fund the death benefits payable under
paragraph 5(a) above with a policy or policies of insurance on the life of the
Employee or the disability benefits payable under paragraphs 5(b) and 5(c) above
with a disability policy, the Employee shall cooperate with the Corporation in
-9-
<PAGE>
obtaining such insurance policy(ies) and shall submit to such medical
examinations and execute such documents as may be required in connection with
the obtaining of such insurance.
6. The Employee acknowledges that, because of his duties and
his position of trust under this Agreement, he will become familiar with trade
secrets and other confidential information (including, but not limited to,
operating methods and procedures, secret lists of actual and potential sources
of supply, customers and employees, costs, profits, markets, sales and plans for
future developments) which are valuable assets and property rights of the
Corporation and not publicly known. Except in connection with the performance of
his duties for the Corporation the Employee agrees that he will not, during or
at any time after the term of this Agreement, either directly or indirectly,
disclose to any person, firm or corporation such trade secrets or other
confidential information, including, but not limited to, any facts concerning
the systems, methods, procedures or plans developed or used by the Corporation.
The Employee agrees to retain all such trade secrets and other confidential
information in a fiduciary capacity for the sole benefit of the Corporation, its
successors and assigns. Upon termination of his employment by the Corporation or
at any time that the Corporation may so request, the Employee will surrender to
the Corporation all non-public papers, notes, reports and other documents (and
all copies thereof) relating to the business of the Corporation which he may
then possess or have under his control.
-10-
<PAGE>
7. For a period of two (2) years following the expiration or
earlier termination of this Agreement and within a two hundred fifty (250) mile
radius of the New York City the Employee shall not, without the prior written
consent of the Corporation, directly or indirectly:
(a) solicit any business for or from, or become associated
with, as principal, agent, employee, consultant, or in any other capacity, any
person who, or entity which, at the time of, or during the twelve (12) months
immediately preceding such expiration or termination was in direct competition
with the Corporation;
(b) become a principal, agent, employee, consultant, or
otherwise become associated with any person who, or entity which, has taken
affirmative action which would permit such entity or person to actually engage
in direct competition with the Corporation.
8. The provisions of Paragraphs 6 and 7 of this Agreement are
of a unique nature and of extraordinary value and of such a character that a
material breach of the provisions of either Paragraphs 6 or 7 of this Agreement
by the Employee will result in irreparable damage and injury to the Corporation
for which the Corporation will not have any adequate remedy at law. Therefore,
in the event that the Employee commits or threatens to commit any such breach,
the Corporation will have (a) the right and remedy to have the provisions of
Paragraphs 6 and 7 of this Agreement specifically enforced by any court having
equity jurisdiction, it being agreed
-11-
<PAGE>
that in any proceeding for an injunction, and upon any motion for a temporary or
permanent injunction, the Employee's ability to answer in damages shall not be a
bar or interposed as a defense to the granting of such injunction and (b) the
right and remedy to require the Employee to account for and to pay over to the
Corporation all compensation, profits, monies, accruals, increments and other
benefits (hereinafter referred to collectively as the "Benefits") derived or
received by him as a result of any transactions constituting a breach of any of
the provisions of Paragraphs 6 and 7 of this Agreement, and the Employee hereby
agrees to account for and pay over such Benefits to the Corporation. Each of the
rights and remedies enumerated in (a) and (b) above shall be independent of the
other, and shall be severally enforceable, and all of such rights and remedies
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Corporation under law or in equity.
9. In the event that any provision, or any portion of any
provision, of this Agreement shall be held to be void or unenforceable, the
remaining provisions of this Agreement, and the remaining portion of any
provision found void or unenforceable in part only, shall continue in full force
and effect.
10. The Employee represents and warrants that he has made no
commitment of any kind whatsoever inconsistent with the provisions of this
Agreement and that he is under no disability of any kind to enter into this
Agreement and to perform all of his obligations hereunder.
-12-
<PAGE>
11. This Agreement shall inure to the benefit of and shall be
binding upon the parties hereto and their respective successors and permitted
assigns. This Agreement being personal to the Employee, cannot be assigned by
him. This Agreement may be assigned by the Corporation in the event and in
connection with a merger, consolidation or sale of all or substantially all of
the assets of the corporation provided that the assignee agrees in writing to
assume all of the obligations of the Corporation under this Agreement. Prompt
written notice of such assignment shall be provided by the Corporation to the
Employee.
12. Any dispute or controversy between the parties relating to
or arising out of this Agreement or any amendment or modification hereof shall
be determined by the Supreme Court, County of Nassau, State of New York. The
service of any notice, process, motion or other document in connection with an
action under this Agreement may be effectuated by either personal service upon a
party or by certified mail duly addressed to him at his address set forth on
page 1 hereof.
13. Unless otherwise required by law, the Corporation shall
not recognize any assignment, transfer, pledge, hypothecation, execution or
attachment of any amount or part thereof which becomes payable hereunder.
14. Any notice or communication required or permitted to be
given hereunder shall be deemed duly given if delivered personally or sent by
registered or certified mail, return receipt requested, to the address of the
intended recipient as herein set
-13-
<PAGE>
forth or to such other address as a party may theretofore have specified in
writing to the other. Any notice or communication intended for the Corporation
shall be addressed to the attention of its Board of Directors.
15. A waiver of any breach or violation of any term,
provision, agreement, covenant, or condition herein contained shall not be
deemed to be a continuing waiver or a waiver of any future or past breach or
violation.
16. This Agreement constitutes the entire agreement and
understanding between the Corporation and the Employee relating to the latter's
employment, supersedes any prior agreement between the parties relating to such
matter, shall be governed by and construed
-14-
<PAGE>
in accordance with the laws of the State of New York and may not be changed,
terminated or discharged orally.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands as of the day and year first above written.
UNIFLEX, INC,
By:/s/ Herbert Barry
------------------
Herbert Barry,
Chief Executive Officer
/s/MARTIN BROWNSTEIN
------------------
MARTIN BROWNSTEIN
-15-
<PAGE>
UNIFLEX, INC.
383 West John Street
Hicksville, New York 11802
April 16, 1996
To: Martin Brownstein
383 West John Street
Hicksville, New York 11802
We are pleased to inform you that on April 15, 1996, the Stock
Option Committee of the Board of Directors of Uniflex, Inc. (the "Company")
granted you an incentive stock option pursuant to the Company's 1993 Stock
Option Plan (the "Plan"), to purchase 10,000 shares (the "Shares") of Common
Stock, par value $.10 per share, of the Company, at a price of $8.25 per Share.
This option may be exercised prior to January 31, 2002 (on
which date the option will, to the extent not previously exercised, expire) as
follows: (i) as to one-third the number of Shares on or after February 1, 1997
and prior to January 31, 2000, (ii) as to one-third the number of Shares on or
after February 1, 1998 and prior to January 31, 2001 and (iii) as to the
remaining one-third of the number of Shares on or after February 1, 1999 and
prior to January 31, 2002. You must purchase a minimum of 100 Shares each time
you choose to purchase Shares, except to purchase all of the remaining Shares
available to you.
This option is issued in accordance with and is subject to and
conditioned upon all of the terms and conditions of the Plan (a copy of which in
its present form is attached hereto), as from time to time amended, provided,
however, that no future amendment or termination of the Plan shall, without your
consent, alter or impair any of your rights or obligations under this option.
Reference is made to the terms and conditions of the Plan, all of which are
incorporated by reference in this option agreement as if fully set forth herein.
Unless at the time of the exercise of this option a
registration statement under the Securities Act of 1933, as amended (the "Act"),
is in effect as to such Shares, any Shares purchased by you upon the exercise of
this option shall be acquired for investment and not for sale or distribution,
and if the Company so requests, upon any exercise of this option, in whole or in
part, you will execute and deliver to the Company a certificate to such effect.
The Company shall not be obligated to issue any Shares
<PAGE>
pursuant to this option if, in the opinion of counsel to the Company, the Shares
to be so issued are required to be registered or otherwise qualified under the
Act or under any other applicable statute, regulation or ordinance affecting the
sale of securities, unless and until such Shares have been so registered or
otherwise qualified.
You understand and acknowledge that, under existing law,
unless at the time of the exercise of this option a registration statement under
the Act is in effect as to such Shares (i) any Shares purchased by you upon
exercise of this option may be required to be held indefinitely unless such
Shares are subsequently registered under the Act or an exemption from such
registration is available; (ii) any sales of such Shares made in reliance upon
Rule 144 promulgated under the Act may be made only in accordance with the terms
and conditions of that Rule (which, under certain circumstances, restrict the
number of shares which may be sold and the manner in which shares may be sold);
(iii) in the case of securities to which Rule 144 is not applicable, compliance
with Regulation A promulgated under the Act or some other disclosure exemption
will be required; (iv) certificates for Shares to be issued to you hereunder
shall bear a legend to the effect that the Shares have not been registered under
the Act and that the Shares may not be sold, hypothecated or otherwise
transferred in the absence of an effective registration statement under the Act
relating thereto or an opinion of counsel satisfactory to the Company that such
registration is not required; (v) the Company will place an appropriate "stop
transfer" order with its transfer agent with respect to such Shares; and (vi)
the Company has undertaken no obligation to register the Shares or to include
the Shares in any registration statement which may be filed by it subsequent to
the issuance of the shares to you. In addition, you understand and acknowledge
that the Company has no obligation to you to furnish information necessary to
enable you to make sales under Rule 144.
This option (or installment thereof) is to be exercised by
delivering to the Company a written notice of exercise in the form attached
hereto as Exhibit A, specifying the number of Shares to be purchased, together
with payment of the purchase price of the Shares to be purchased. The purchase
price is to be paid in cash or, at the discretion of the Stock Option Committee,
by delivering shares of the Company's stock already owned by you and having a
fair market value on the date of exercise equal to the exercise price of the
option, or a combination of such shares and cash, or otherwise in accordance
with the Plan.
-2-
<PAGE>
Would you kindly evidence your acceptance of this option and
your agreement to comply with the provisions hereof and of the Plan by executing
this letter under the words "Agreed To and Accepted."
Very truly yours,
UNIFLEX, INC.
By:____________________________
Herbert Barry,
Chief Executive Officer
AGREED TO AND ACCEPTED:
- -----------------------
Martin Brownstein
-3-
<PAGE>
EXHIBIT A
Uniflex, Inc.
383 West John Street
Hicksville, New York 11802
Gentlemen:
Notice is hereby given of my election to purchase _____ shares
of Common Stock, $.10 par value (the "Shares"), of Uniflex, Inc., at a price of
$____ per Share, pursuant to the provisions of the incentive stock option
granted to me on April 15, 1996, under the Company's 1993 Stock Option Plan.
Enclosed in payment for the Shares is:
----
/___/ my check in the amount of $________.
----
*/___/ ___________ Shares having a total value
$________, such value being based on the
closing price(s) of the Shares on the date
hereof.
The following information is supplied for use in issuing and
registering the Shares purchased hereby:
Number of Certificates
and Denominations ___________________
Name ___________________
Address ___________________
___________________
Social Security Number ___________________
Dated: _______________, 19__
Very truly yours,
--------------------------
Martin Brownstein
*Subject to the approval of the
Stock Option Committee
-4-
PATRUSKY, MINTZ & SEMEL
CERTIFIED PUBLIC ACCOUNTANTS
22 CORTLANDT STREET
NEW YORK, N.Y. 10007
(212) 732-2600
TELEX 6971510
TELEFAX (212) 374-1967
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
(No. 33-70754) on Form S-8 of our report dated April 8, 1996 of Uniflex, Inc.
and Subsidiaries for the year ended January 31, 1996, and to the reference to
our firm under the caption "Experts" in the Prospectus.
/s/ PATRUSKY, MINTZ & SEMEL
---------------------------
PATRUSKY, MINTZ & SEMEL
New York, New York
April 17, 1996
MILLER ELLIN & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
INTERNATIONAL PLAZA
750 LEXINGTON AVENUE NEW YORK N.Y. 10022-1200
(212 750-9100
FAX (212) 750-2727
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
(No. 33-70754) on Form S-8 of our report dated March 21, 1 995 of Uniflex, Inc.
and Subsidiary for the years ended January 3 1, 1995 and 1994, and to the
reference to our firm under the caption "Experts" in the Prospectus.
/s/ MILLER, ELLIN & COMPANY
---------------------------
MILLER, ELLIN & COMPANY
New York, New York
April 18, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S FORM 10-K FOR THE YEAR ENDED JANUARY 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-END> JAN-31-1996
<CASH> 1,196,593
<SECURITIES> 0
<RECEIVABLES> 3,364,989
<ALLOWANCES> 174,500
<INVENTORY> 2,699,948
<CURRENT-ASSETS> 9,036,983
<PP&E> 6,427,427
<DEPRECIATION> 7,696,409
<TOTAL-ASSETS> 16,282,612
<CURRENT-LIABILITIES> 2,338,151
<BONDS> 0
0
0
<COMMON> 266,638
<OTHER-SE> 10,244,835
<TOTAL-LIABILITY-AND-EQUITY> 16,282,612
<SALES> 31,509,963
<TOTAL-REVENUES> 31,509,963
<CGS> 20,322,952
<TOTAL-COSTS> 28,780,271
<OTHER-EXPENSES> 413,111
<LOSS-PROVISION> 113,112
<INTEREST-EXPENSE> 413,111
<INCOME-PRETAX> 2,316,581
<INCOME-TAX> 858,000
<INCOME-CONTINUING> 1,458,581
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,458,581
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
