<PAGE>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number 0-11902
GIBSON GREETINGS, INC.
Incorporated under the laws IRS Employer
of the State of Delaware Identification No. 52-1242761
2100 Section Road, Cincinnati, Ohio 45237
Telephone Number: Area Code 513-841-6600
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) ofthe 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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 16,089,186
shares of common stock, par value $.01, outstanding at May 8, 1994.
<PAGE>
<PAGE>
Part I., Item 1, Financial Statements
<TABLE>
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands except per share amounts)
(Unaudited)
<CAPTION>
March 31, December 31, March 31,
1994 1993 1993
--------- --------- ---------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 30,199 $ 9,477 $ 63,017
Trade receivables, net 60,457 192,163 48,900
Inventories 165,398 133,944 143,740
Prepaid expenses 5,578 4,207 4,632
Deferred income taxes 34,949 36,796 31,533
--------- --------- ---------
Total current assets 296,581 376,587 291,822
PLANT AND EQUIPMENT, net 117,591 116,900 114,629
NOTES RECEIVABLE, net 1,126 - -
OTHER ASSETS, net 83,314 86,924 52,045
--------- --------- ---------
$ 498,612 $ 580,411 $ 458,496
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Debt due within one year $ 4,004 $ 66,187 $ 1,881
Accounts payable 18,454 18,835 16,442
Income taxes payable 1,154 17,230 4,844
Other current liabilities 52,709 60,479 47,143
--------- --------- ---------
Total current liabilities 76,321 162,731 70,310
DEFERRED INCOME TAXES 234 (1,102) 176
LONG-TERM DEBT 72,936 74,365 68,833
OTHER LIABILITIES 48,219 20,736 15,319
--------- --------- ---------
Total liabilities 197,710 256,730 154,638
--------- --------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00;
5,000,000 shares authorized,
none issued - - -
Preferred stock, Series A, par
value $1.00; 300,000 shares
authorized, none issued - - -
Common stock, par value $.01;
50,000,000 shares authorized,
16,561,530, 16,533,267 and
16,507,419 shares issued, respectively 166 165 165
Paid-in capital 45,703 45,209 44,522
Retained earnings 260,729 283,904 264,668
Foreign currency adjustment 200 291 391
--------- --------- ---------
306,798 329,569 309,746
Less treasury stock, at cost,
481,344, 473,344 and 473,344
shares, respectively 5,896 5,888 5,888
--------- --------- ---------
Total stockholders' equity 300,902 323,681 303,858
--------- --------- ---------
$ 498,612 $ 580,411 $ 458,496
========= ========= =========
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
----------------------
1994 1993
--------- ---------
<S> <C> <C>
REVENUES $ 93,429 $ 84,907
COSTS AND EXPENSES:
Operating expenses:
Cost of products sold 36,028 30,996
Selling, distribution and
administrative expenses 57,852 49,661
--------- ---------
Total operating expenses 93,880 80,657
--------- ---------
Operating income (loss) before
financing and derivative transaction expenses (451) 4,250
Financing and derivative transaction expenses:
Interest expense, net of capitalized interest 1,974 1,656
Interest income (321) (429)
Loss on derivative transactions 19,700 -
--------- ---------
Total financing and derivative
transaction expenses, net 21,353 1,227
--------- ---------
Income (loss) before income taxes (21,804) 3,023
Income taxes (235) 1,221
--------- ---------
Net income (loss) $ (21,569) $ 1,802
========= =========
Net income (loss) per share $ (1.33) $ .11
========= =========
Dividends per share $ .10 $ .10
========= =========
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
<TABLE>
GIBSON GREETINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
----------------------
1994 1993
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (21,569) $ 1,802
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and write-down of display fixtures 5,670 6,479
Loss on disposal of plant and equipment 514 418
Loss on derivative transactions 19,700 -
Deferred income taxes 3,183 (2,103)
Amortization and write-down of deferred
costs and other intangibles 5,249 3,703
Change in assets and liabilities:
Decrease in trade receivables, net 131,706 120,705
Increase in inventories (31,454) (24,982)
Increase in prepaid expenses (1,371) (331)
Increase in notes receivable, net (1,126) -
Increase in other assets, net of amortization (1,639) (1,472)
Increase (decrease) in accounts payable (381) 1,704
Decrease in income taxes payable (16,076) (5,087)
Decrease in other current liabilities (7,770) (6,132)
Increase in other liabilities 7,783 279
All other, net 10 131
--------- ---------
Total adjustments 113,998 93,312
--------- ---------
Net cash provided by operating activities 92,429 95,114
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment (7,005) (8,820)
Proceeds from sale of plant and equipment 37 115
--------- ---------
Net cash used in investing activities (6,968) (8,705)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in short-term borrowings (62,270) (30,100)
Payments on long-term debt (1,350) (1,280)
Issuance of common stock 495 86
Acquisition of common stock for treasury (8) -
Dividends paid (1,606) (1,603)
--------- ---------
Net cash used in financing activities (64,739) (32,897)
--------- ---------
NET INCREASE IN CASH AND EQUIVALENTS 20,722 53,512
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 9,477 9,505
--------- ---------
CASH AND EQUIVALENTS AT END OF PERIOD $ 30,199 $ 63,017
========= =========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest, net of amounts capitalized $ 929 $ 1,221
Income taxes 12,632 8,406
</TABLE>
[FN]
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<PAGE>
GIBSON GREETINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 1994 and 1993
(Amounts in thousands)
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements include
the accounts of Gibson Greetings, Inc. and its subsidiaries (the Company).
Intercompany transactions and balances have been eliminated in consolidation.
The unaudited condensed consolidated financial statements have been prepared
in accordance with Article 10-01 of Regulation S-X of the Securities and
Exchange Commission and, as such, do not include all information required by
generally accepted accounting principles. However, in the opinion of the
Company, these financial statements contain all adjustments, consisting of
only normal recurring adjustments, necessary to present fairly the financial
position as of March 31, 1994, December 31, 1993 and March 31, 1993, the
results of its operations for the three months ended March 31, 1994 and 1993
and its cash flows for the three months ended March 31, 1994 and 1993.
The Company suggests that these financial statements be read in conjunction
with the consolidated financial statements and notes included in the Company's
1993 Annual Report to Stockholders.
Interest rate swap and derivative transactions that do not qualify as hedges
are recorded at their fair market value which is the estimated amount that the
Company would receive or pay to terminate the transactions at the reporting
date.
Certain prior year amounts in the consolidated financial statements have been
reclassified to conform with the 1994 presentation.
Note 2 - Seasonal Nature of Business
Because of the seasonal nature of the Company's business, results of
operations for interim periods are not necessarily indicative of results for
the full year.
Note 3 - Trade Receivables
Trade receivables consist of the following:
March 31, December 31, March 31,
1994 1993 1993
--------- --------- ---------
Trade receivables $ 105,480 $ 245,682 $ 100,007
Less reserve for returns,
allowances, cash discounts
and doubtful accounts 45,023 53,519 51,107
--------- --------- ---------
$ 60,457 $ 192,163 $ 48,900
========= ========= =========
Note 4 - Inventories
Inventories consist of the following:
March 31, December 31, March 31,
1994 1993 1993
--------- --------- ---------
Finished goods $ 104,033 $ 83,074 $ 82,570
Work-in-process 13,845 13,147 13,637
Raw materials and supplies 47,520 37,723 47,533
--------- --------- ---------
$ 165,398 $ 133,944 $ 143,740
========= ========= =========
Note 5 - Interest Expense
There was no capitalized interest for the three months ended March 31, 1994
and 1993.
<PAGE>
<PAGE>
Note 6 - Net Income Per Share
The weighted average number of shares of common stock and equivalents
outstanding used in computing net income per share is as follows:
1994 1993
------- -------
Three months ended March 31, 16,198 16,074
======= =======
Note 7 - Derivative Transactions
The Company has two interest rate derivative transactions outstanding at March
31, 1994 which are recorded at fair market value. The Company entered into
these two transactions on March 4, 1994 in replacement of two prior interest
rate derivative transactions that had a negative market value, on that date,
of $17.5 million. The two new transactions have a set minimum floor loss of
$3 million at maturity and a maximum potential loss of $27.575 million. The
Company recorded a loss in the accompanying condensed consolidated statements
of income of $19.7 million for the three months ended March 31, 1994 which is
comprised of the $3 million minimum loss to be paid upon maturity and an
additional $16.7 million unrealized loss to record these transactions at
market value. The current market value was determined by a financial
institution's valuation model based on the projected future value of the
transactions at maturity.
The Company cannot realize a gain at maturity on either open transaction.
Each transaction has a $25 million notional value. On one transaction, the
Company's minimum loss will be $3 million and its maximum loss would be $17.5
million, depending on the six-month LIBOR rate on June 7, 1995. The Company
is adversely impacted at the rate of $72.5 for each basis point that the six-
month LIBOR rate on that date exceeds 3.90%, up to a maximum of 5.90%. On the
other transaction, the Company's maximum loss is capped at $10.075 million,
depending on the basis point spread for interest rate swaps (the "swap
spread") on August 15, 1995 relative to the 10.75% U.S. Treasury Note maturing
August 15, 2005. The Company is adversely impacted if such swap spread on
that date is less than 33.5 basis points, with the amount of its loss
calculated at the rate of $746.3 for each basis point, and with its exposure
capped if such spread is less than 20 basis points. The Company will realize
no loss on this transaction if the swap spread is at or above 33.5 basis
points on August 15, 1995. As of March 31, 1994, the six-month LIBOR rate was
4.25% and the swap spread was 33 basis points. The Company may elect to
liquidate the transactions at any time prior to maturity based on market
conditions prevailing at the time.
The negative market values of these two positions at March 31, 1994 are as
follows:
Six-month LIBOR Band - 3.9% to 5.9% $13,450
Swap Spread 6,250
-------
$19,700
=======
Based on the stated maturity dates, the accrual for the loss is shown as an
Other Liability in the accompanying condensed consolidated balance sheet. As
required by SFAS No. 109, the Company has recorded the tax benefit from the
loss on these derivative transactions and an offsetting valuation allowance
for the full amount of the estimated tax benefit due to current uncertainties
surrounding the amount, timing and characteristics of the loss.
Note 8 - Legal Matters
In 1990, a complaint was issued against the Company alleging certain unfair
labor practices in connection with a strike at one of its facilities. On
December 18, 1991, an Administrative Law Judge of the National Labor Relations
Board ("NLRB") issued a recommended order, which included reinstatement and
back pay affecting approximately 160 strikers, based on findings that the
Company had violated certain provisions of the National Labor Relations Act.
On May 7, 1993, the NLRB upheld the Administrative Law Judge's decision in
some respects, and enlarged the number of strikers entitled to back pay to
approximately 240. A prompt notice of appeal was filed in the United States
Court of Appeals for the District of Columbia Circuit. Management believes it
has substantial defenses to these charges and these defenses are being
presented in briefs in the Company's appeal. The appeal is scheduled to be
heard on September 14, 1994. In addition, the Company is a defendant in
certain other litigation. Management does not believe that an adverse outcome
as to any or all of these matters would have a material adverse effect on the
Company's net worth or total cash flows; however, the impact on the statement
of operations in a given year could be material.
<PAGE>
<PAGE>
Part I., Item 2., Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
Three Months Ended March 31, 1994 and 1993 Revenues increased 10.0% to $93.4
million in the first quarter of 1994 from $84.9 million in the first quarter
of 1993. This was principally due to sales by The Paper Factory of
Wisconsin, Inc. (The Paper Factory) which was acquired June 1, 1993, as well
as increases in sales of gift wrap and international sales of greetings cards.
These gains were partially offset by lower domestic shipments of greeting
cards during the quarter as a result of shipments in late 1993 to ensure that
customers received adequate replenishment of everyday cards as well as
supplies of Valentine products. Additionally, the severe winter weather
experienced in certain areas of the country adversely impacted retail sales
and, in turn, customer reordering of everyday products. Returns and
allowances were 21.3% of sales for the three months ended March 31, 1994
compared to 23.9% for the same period in 1993. Operating expenses totaled
$93.9 million in the first quarter of 1994 representing a 16.4% increase over
the corresponding quarter in 1993. Cost of products sold, as a percent of
revenues, increased due to lower domestic greeting card sales while selling,
distribution and administrative expenses increased due to expenses associated
with The Paper Factory as well as higher expenses to expand the Company's
rapidly growing Mexican operations.
Financing and derivative transaction expenses increased over 1993 primarily
due to losses on certain interest rate derivative transactions of $19.7
million in the first quarter of 1994 (see below).
Pretax loss of $21.8 million in the first quarter of 1994 compared with 1993
pretax income of $3.0 million, while the net loss of $21.6 million in the
first quarter of 1994 compared with 1993 net income of $1.8 million for the
same period.
Financing and derivative transaction expenses The Company has two interest
rate derivative transactions outstanding at March 31, 1994, which are recorded
at fair market value. These two transactions have caps on the Company's total
exposure and replace previous uncapped positions that were entered into
subsequent to December 31, 1993. Except for the two positions described below
and two relatively minor ($3 million notional value) interest rate swaps on
industrial revenue bonds, the Company has discontinued trading in any
swap/derivative positions.
On March 4, 1994, the Company felt compelled to enter into the two outstanding
interest rate derivative transactions in order to replace and to cap its
exposure on two prior interest rate derivative transactions that had a
negative market value, on that date, of $17.5 million. The two new
transactions, which are recorded at fair market value, have a set minimum
floor loss of $3 million at maturity and a maximum potential loss of $27.575
million. The Company recorded a loss in the accompanying condensed
consolidated statements of income of $19.7 million for the three months ended
March 31, 1994 which is comprised of the $3 million minimum loss to be paid
upon maturity and an additional $16.7 million unrealized loss based upon the
fair market value of the transactions on that date. The current market value
was determined by a financial institution's valuation model based on the
projected future value of the transactions at maturity. These positions will
continue to be reported at current fair market value until they mature or are
closed out.
The combined effect of these two transactions is that the Company's losses
will be between $3 million and $27.575 million. The Company's losses would be
minimized at $3 million if the six-month LIBOR rate is at or below 3.90% on
June 7, 1995 and the basis point spread for interest rate swaps (the "swap
spread") relative to the 10.75% U.S. Treasury Note maturing August 15, 2005 is
at or above 33.5 basis points on August 15, 1995. On the other hand, its
losses would be maximized at $27.575 million if the six-month LIBOR rate
equals or exceeds 5.90% on June 7, 1995 and the swap spread is 20 basis points
or less on August 15, 1995. The Company may elect to liquidate the
transactions at any time prior to maturity based on market conditions
prevailing at the time. As of March 31, 1994, the six-month LIBOR rate was
4.25% and the swap spread was 33 basis points. See also Note 7 of Notes to
Condensed Consolidated Financial Statements.
If held to maturity, and if market conditions at maturity are the same as
existed on March 31, 1994, the transactions would result in a total realized
loss of approximately $5.9 million. The additional $13.8 million unrealized
loss that is being recognized currently results from future adverse movements
projected by the financial institution's valuation model. If those projected
adverse movements do not occur, or if favorable movements occur, gains in an
amount determined by then current market conditions would be recognized in
future periods to reverse the prior recognition of unrealized losses, up to a
net loss of $3 million in the best case at maturity of the transactions.
Similarly, if there are further future adverse movements, the Company could be
required to recognize up to an additional $7.875 million of loss.
<PAGE>
<PAGE>
The full amount of the $19.7 million loss had no cash flow impact in the first
quarter of 1994; cash will not be required until maturity for each of the
respective positions unless they are liquidated prior thereto. The positions
may be liquidated and paid out at any time prior to maturity and the Company
will continue to review the desirability of liquidating them on an ongoing
basis.
Liquidity and Capital Resources
Cash flows from operating activities for the first three months of 1994
provided $114.0 million in cash compared to $93.3 million for the same period
in 1993. The increase from 1993 reflected a higher trade receivable balance
from the previous year-end, combined with an increase of non-cash charges of
$25.8 million, primarily reflecting the unrealized loss on derivative
transactions. Partially offsetting this increase was higher inventory levels
combined with lower income taxes payable.
Cash used in investing activities for plant and equipment purchases in 1994
was $7.0 million compared to $8.8 million in 1993. Capital expenditures in
1993 included the purchase of a distribution center by the Company's U.K.
based subsidiary.
Cash used in financing activities in the first quarter of 1994 was $64.7
million compared to $32.9 million in 1993. The increase reflects the payoff
of higher short-term borrowing levels at December 31, 1993 compared to
December 31, 1992.
Management believes that its cash flows from operations and credit sources
will provide adequate funds, both on a short-term and on a long-term basis,
for currently foreseeable debt payments, lease commitments and payments under
existing customer agreements, as well as for financing existing operations,
currently projected capital expenditures, anticipated long-term sales
agreements consistent with industry trends and other contingencies. See Part
II, Item 1.
<PAGE>
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings
In 1989, unfair labor practice charges were filed against the Company as an
outgrowth of a strike at its Berea, Kentucky facility. Remedies sought
include back pay from August 8, 1989 and reinstatement of employment for
approximately 200 employees. In February 1990, the General Counsel of the
National Labor Relations Board ("NLRB") issued a complaint based on certain of
the allegations of these charges (In the Matter of Gibson Greetings, Inc. and
International Brotherhood of Fireman and Oilers, AFL-CIO, Cases 9-CA-26706,
27660, 26875). On December 18, 1991, an Administrative Law Judge of the NLRB
issued a recommended order, which included reinstatements and back pay
affecting approximately 160 strikers, based on findings that the Company had
violated certain provisions of the National Labor Relations Act. On May 7,
1993, the NLRB upheld the Administrative Law Judge's decision in some
respects, and enlarged the number of strikers entitled to back pay to
approximately 240. A prompt notice of appeal was filed in the United States
Court of Appeals for the District of Columbia Circuit. The Company believes
it has substantial defenses to the charges, and these defenses are being
presented in briefs in the Company's appeal. The appeal is scheduled to be
heard on September 14, 1994. In addition, the Company is a defendant in
certain other litigation. Management does not believe that an adverse outcome
as to any or all of these matters would have a material adverse effect on the
Company's net worth or total cash flows; however,the impact on the statement
of operations in a given year could be material.
Item 2. Changes In Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibit 10(a) Employment Agreement between Gibson Greetings, Inc.
and Nelson J. Rohrbach, dated May 28, 1993
b) Reports on Form 8-K
The Company filed a Form 8-K with the Securities and
Exchange Commission on March 4, 1994 attaching the
Company's press release dated March 4, 1994. No
financial statements were required to be filed in
connection with the report.
The Company filed a Form 8-K with the Securities and
Exchange Commission on April 20, 1994 attaching the
Company's press release dated April 19, 1994. No
financial statements were required to be filed in
connection with the report.
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Gibson
Greetings, Inc. has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GIBSON GREETINGS, INC.
Date May 13, 1993
By:/s/ William L. Flaherty
------------------------
William L. Flaherty
Vice President-Finance
Principal Financial
and Accounting Officer
<PAGE>
<PAGE>
Exhibit 10(a)
May 28, 1993
Mr. Nelson J. Rohrbach
Appleton, Wisconsin
Dear Jack:
This will confirm that you have agreed to serve as President of the
Paper Factory of Wisconsin, Inc. ("the Company"). As President, you will
report directly to the Board of Directors of the Company and to the Chief
Executive Officer of Gibson Greetings, Inc. and will be responsible for all of
the operations of the Company as Chief Executive Officer. The following terms
and conditions will govern your service to the Company.
1. You will serve the Company, whose home office shall be located in
Appleton, Wisconsin, for your term of employment hereunder, on a full-
time basis as Chief Executive Officer, and the Company will employ you
as such, for a period of four years commencing on the date of Closing of
that Stock Purchase Agreement to which you are a party and ending four
years from such date unless your employment terminates (or death occurs)
as hereinafter provided. Your annual salary will be your current salary
which amount will be reviewed every fifteen months from your last
salary adjustment and which may be adjusted from time to time by the
Company throughout the term of this Agreement in accordance with the
salary administration program at Gibson Greetings, Inc.
2. You will participate, subject to legal requirements and to mutually
agreeable changes, to the same extent and in the same manner as you
participated prior to execution of this agreement, in the Management
Incentive Plan attached hereto as Exhibit A (but with the individual
incentive measurements and various target levels determined by the Chief
Executive Officer of Gibson Greetings, Inc.) and in the fringe benefit
programs of the Company which, as examples, include the Company's 401(k)
plan, the Company's vacation plan, the Company's health benefit plan,
and, in your case, the provision of an automobile and Country Club dues.
In addition, you will participate in a Special Bonus Plan to the extent
set forth herein and in Exhibit B, which is attached to and made a part
hereof. You also will be an eligible employee for purposes of
consideration for participation in the Stock Option Plan of Gibson
Greetings, Inc. subject to determinations of participation by the
appropriate Gibson committee.
<PAGE>
<PAGE>
Mr. Nelson J. Rohrbach
Page Two
3. In the event you are unable to perform your duties hereunder due to
illness or other incapacity, which illness or incapacity continues for
more than six consecutive or nonconsecutive months in any twelve-month
period, the Company shall have the right, on not less than 30 days
written notice to you, to terminate your employment hereunder. In the
event of such termination of employment or in the case of your death:
(a) your participation in Phase I of the Special Bonus Plan shall
continue unabated for the period of such Phase I;
(b) your participation in Phase II of the Special Bonus Plan shall
terminate immediately and you shall not participate in such Phase
II Bonus Plan with respect to the fiscal year in which such
termination occurs or thereafter; and
(c) your salary and participation in other fringe benefit programs and
including the Company's Management Incentive Plan shall terminate
as of the end of the month of terminated employment or death,
provided you shall participate in the Management Incentive Plan on
a prorata basis with respect to the fiscal year in which such
termination or death occurs but not thereafter.
Termination of employment under this paragraph shall terminate
provisions of this Agreement with the exception of the provisions of
Paragraphs 5 and 6 of this Paragraph 3.
4. In the event you voluntarily terminate your employment during the term
of this Agreement (including retirement), of if the Company terminates
your employment for cause:
(a) your participation in Phase I of the Special Bonus Plan shall
continue unabated for the period of such Phase I;
(b) your participation in Phase II of the Special Bonus Plan shall
terminate immediately and you shall not participate in such Phase
II Bonus Plan with respect to the fiscal year in which such
termination occurs or thereafter; and
(c) your salary and participation in other fringe benefit programs and
including the Company's Management Incentive Plan shall terminate
as of the date of termination and you shall not participate in
such Plan with respect to the fiscal year in which such
termination occurs or thereafter.
<PAGE>
<PAGE>
Mr. Nelson J. Rohrbach
Page Three
As used herein, "cause" shall include, without limitation, inadequate
performance, a lack of commitment to the operations of the Company,
negligent performance, misconduct, a refusal to follow appropriate
directions or a material breach of this Agreement. Termination of
employment under this paragraph shall terminate provisions of this
Agreement with the exception of the provisions of Paragraphs 5 and 6 and
of this Paragraph 4.
5. In the event of termination of your employment hereunder for any reason,
you agree that (in addition to any other restrictions applicable to you
under the Stock Purchase Agreement described in Paragraph 1) for a
period of one year thereafter you will not directly or indirectly engage
or participate as a director, officer, employee, consultant, advisor,
shareholder, partner or joint venturer in any specialty retail store
engaged in the sale of paper party goods, greeting cards or gift wrap in
any of the markets served by Company on the date of termination. If any
of the provisions of this Paragraph 5 are held to be unenforceable
because of the scope, duration or area of its applicability, the court
making such determination shall have the power to modify such scope,
duration or area or all of them, and such provision shall then be
applicable in such modified form. Because the Company will be
irreparably damaged if the provisions of this paragraph are not
specifically enforced, Company shall be entitled to an injunction
restraining any violation of this paragraph by you (without any bond or
other security being required), or any other appropriate decree for
specific performance. Such remedies shall not be exclusive and shall be
in addition to any other remedy which Company may have.
6. In connection with this Agreement, you agree to continue to receive
Confidential Information in confidence, and not to disclose to others,
assist others in the application of, or use for your own gain, such
information, or any part thereof, unless and until it has become public
knowledge or has come into the possession of others by legal and
equitable means. You further agree that, upon termination of employment
with the Company, all documents, records, notebooks, and similar
writings, including copies thereof, then in your possession, whether
prepared by you or by others, will be left with or returned promptly to
the Company. For purposes of this Paragraph 6, "Confidential
Information" means information concerning Company's finances, plans,
sales, products, processes and services, and those of Company's parent,
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Mr. Nelson J. Rohrbach
Page Four
subsidiaries, divisions, and affiliates, which is disclosed to you or
known by you as a consequence of or through your employment with the
Company, and which is not generally know in the industry in which the
Company or its subsidiaries, divisions or affiliates are or may become
engaged.
7. So long as you are a participant in the Special Bonus Plan, the Company
shall be maintained as a separate operating entity.
8. This Agreement shall inure to the benefit of and be binding upon you and
your legal representatives as well as the Company, its successors and
assigns including, without limitations, any person, partnership,
corporation or other entity which may acquire all, or substantially all,
of the Company's assets and business.
To indicate your acceptance of and willingness to be bound by this
Agreement, please sign and return one duplicate original of this letter.
Yours truly,
THE PAPER FACTORY OF WISCONSIN, INC.
By /s/ Tom Thompson
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ACCEPTED AND AGREED TO:
/s/ Nelson J. Rohrbach
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Nelson J. Rohrbach
Dated: May 28, 1993
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