FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ Mark one ]
[ X ] Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For quarter ended March 31, 1998
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 1-9334
BALDWIN TECHNOLOGY COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3258160
(State or other jurisdiction of (I.R.S Employer
incorporation or organization) Identification No.)
One Norwalk West, 40 Richards Avenue, Norwalk, Connecticut 06854
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 203-838-7470
(Former name, former address and former fiscal year, if changed
since last report.)
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
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 .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at April 30, 1998
Class A Common Stock
$0.01 par value 15,328,881
Class B Common Stock
$0.01 par value 1,835,883
Total number of pages in this document 13
<PAGE>
BALDWIN TECHNOLOGY COMPANY, INC.
INDEX
Page
Part I Financial Information
Consolidated Balance Sheet -
March 31, 1998 and June 30, 1997 1
Consolidated Statement of Income -
Three months and nine months ended
March 31, 1998 and 1997 2
Consolidated Statement of Changes in
Shareholders' Equity - Nine months
ended March 31, 1998 3
Consolidated Statement of Cash Flows -
Nine months ended March 31, 1998 and 1997 4-5
Notes to Consolidated Financial Statements 6-7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8-12
Part II Other Information
Item 6 Exhibits and Reports on Form 8-K 12
Signatures 13
CAUTIONARY STATEMENT -- This Form 10-Q may contain statements which
constitute "forward-looking" information as that term is defined in
the Private Securities Litigation Reform Act of 1995 or by the
Securities and Exchange Commission ("SEC") in its rules,
regulations and releases. Baldwin Technology Company, Inc. (the
"Company") cautions investors that any such forward-looking
statements made by the Company are not guarantees of future
performance and that actual results may differ materially from
those in the forward-looking statements. Some of the factors that
could cause actual results to differ materially from estimates
contained in the Company's forward-looking statements are set forth
in Exhibit 99 to Form 10-K for the year ended June 30, 1997.
PART I FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
(Unaudited)
March 31, June 30,
1998 1997
ASSETS
CURRENT ASSETS:
Cash $ 9,781 $ 9,421
Short-term securities 10 4,032
Accounts receivable trade, net of allowance for
doubtful accounts of $1,928($2,106 at June 30, 1997) 42,372 38,177
Notes receivable, trade 15,007 15,051
Inventories 34,980 27,833
Prepaid expenses and other 8,617 13,512
Total current assets 110,767 108,026
MARKETABLE SECURITIES:
Cost $620 ($712 at June 30, 1997) 742 942
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and buildings 3,098 3,136
Machinery and equipment 7,117 6,732
Furniture and fixtures 5,607 5,638
Leasehold improvements 1,086 976
Capital leases 5,266 5,397
22,174 21,879
Less: Accumulated depreciation and amortization 14,842 14,334
Net property, plant and equipment 7,332 7,545
PATENTS, TRADEMARKS AND ENGINEERING DRAWINGS at cost,
less accumulated amortization of $5,244 ($4,664 at
June 30, 1997) 4,921 5,279
GOODWILL, less accumulated amortization of $7,866
($7,368 at June 30, 1997) 29,714 31,452
OTHER ASSETS 8,576 8,879
TOTAL ASSETS $162,052 $162,123
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable $ 5,672 $ 8,312
Current portion of long-term debt 6,415 6,425
Accounts payable, trade 15,342 15,634
Notes payable, trade 12,217 11,273
Accrued salaries, commissions, bonus and profit-sharing 7,815 7,794
Customer deposits 10,935 6,439
Accrued and withheld taxes 1,741 1,941
Income taxes payable 3,571 5,369
Other accounts payable and accrued liabilities 15,623 15,143
Total current liabilities 79,331 78,330
LONG-TERM LIABILITIES:
Long-term debt 17,060 20,256
Other long-term liabilities 4,849 5,275
Total long-term liabilities 21,909 25,531
Total liabilities 101,240 103,861
SHAREHOLDERS' EQUITY:
Class A Common Stock, $.01 par, 45,000,000 shares
authorized, 16,431,683 shares issued
(16,391,683 at June 30, 1997) 164 164
Class B Common Stock, $.01 par, 4,500,000 shares
authorized, 2,000,000 shares issued 20 20
Capital contributed in excess of par value 57,359 57,185
Retained earnings 11,681 6,152
Cumulative translation adjustment (2,566) 538
Unrealized gain on investments net of $58 of
deferred taxes ($117 at June 30, 1997) 64 113
Less: Treasury stock, at cost:
Class A - 1,102,802 shares (1,102,802 at June 30, 1997)
Class B - 164,117 shares (164,117 at June 30, 1997) (5,910) (5,910)
Total shareholders' equity 60,812 58,262
COMMITMENTS ------ ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $162,052 $162,123
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 1 -
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF INCOME
(in thousands of dollars except per share data)
(Unaudited)
For the three months For the nine months
ended March 31, ended March 31,
1998 1997 1998 1997
Net sales $60,199 $58,318 $163,864 $176,953
Cost of goods sold 41,193 39,031 109,974 119,849
Gross Profit 19,006 19,287 53,890 57,104
Operating expenses:
General and administrative 6,272 7,291 17,837 20,321
Selling 4,430 5,390 13,578 16,198
Engineering 3,310 3,451 9,480 10,761
Research and development 1,408 1,761 3,909 5,377
Provision for loss on
the disposition of
pre-press operations (Note 3) 46,036
15,420 17,893 44,804 98,693
Operating income (loss) 3,586 1,394 9,086 (41,589)
Other (income) expense:
Interest expense 678 854 2,182 2,662
Interest income (87) (97) (401) (305)
Minority interest (73) (97) (73)
Other income, net (562) (669) (1,662) (1,596)
29 15 22 688
Income (loss) before taxes 3,557 1,379 9,064 (42,277)
Provision for income taxes 1,332 634 3,535 1,729
Net income (loss) $ 2,225 $ 745 $ 5,529 $(44,006)
Basic income (loss)
per share $ 0.13 $ 0.04 $ 0.32 $ (2.55)
Diluted income (loss)
per share $ 0.13 $ 0.04 $ 0.32 $ (2.55)
Weighted average number of
shares:
Basic 17,157 17,128 17,139 17,263
Diluted 17,531 17,128 17,406 17,263
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 2 -<PAGE>
<TABLE>
BALDWIN TECHNOLOGY COMPANY INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands, except share data)
(Unaudited)
<CAPTION>
Capital
Class A Class B Contributed Cumulative Unrealized
Common Stock Common Stock in Excess Retained Translation Gain(Loss)on Treasury Stock
Shares Amount Shares Amount of Par Earnings Adjustment Investments Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1997 16,391,683 $164 2,000,000 $20 $57,185 $ 6,152 $538 $113 (1,266,919) $(5,910)
Net income for the nine months 5,529
Stock options exercised 40,000 174
Unrealized loss on
available for sale
securities, net of tax (49)
Translation adjustment (3,104)
Balance at March 31, 1998 16,431,683 $164 2,000,000 $20 $57,359 $11,681 $(2,566) $ 64 (1,266,919) $(5,910)
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 3 -
BALDWIN TECHNOLOGY COMPANY, INC. CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(in thousands)
(Unaudited)
For the nine months
ended March 31,
1998 1997
Cash Flows from operating activities:
Income (loss) from operations $ 5,529 $(44,006)
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 2,829 3,502
Accrued retirement pay 458 (310)
Provision for losses on accounts receivable 67 287
Provision for loss on the pre-press disposition 46,036
Changes in assets and liabilities net of
effects from the disposition and
acquisition in 1996 -
Accounts and notes receivable, net (9,057) (3,715)
Inventories (8,675) 1,440
Prepaid expenses and other (691) (495)
Customer deposits 4,809 1,202
Accrued compensation 385 (1,105)
Accounts and notes payable, trade 3,104 1,883
Income taxes payable (1,502) (1,174)
Accrued and withheld taxes (140) (179)
Other accounts payable and accrued liabilities 450 1,489
Interest payable 301 532
Net cash (used) provided by operating activities (2,133) 5,387
Cash flows from investing activities:
Proceeds from the pre-press disposition 5,925
Acquisitions of subsidiaries, net of cash acquired (543)
Additions of property, net (1,420) (955)
Additions of patents, trademarks and drawings, net (254) (339)
Other assets (314) 194
Net cash provided (used) by investing activities 3,937 (1,643)
Cash flows from financing activities:
Long-term borrowings 9,806 3,765
Long-term debt repayment (12,746) (8,599)
Short-term borrowings 2,457 6,475
Short-term debt repayment (4,566) (4,610)
Principal payments under capital lease
obligations (194) (199)
Other long-term liabilities 277 (561)
Treasury stock purchased (481)
Stock options exercised 174
Net cash used by financing activities (4,792) (4,210)
Effects of exchange rate changes (674) (655)
Net decrease in cash and
cash equivalents (3,662) (1,121)
Cash and cash equivalents at beginning of year 13,453 9,794
Cash and cash equivalents at end of period $ 9,791 $ 8,673
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 4 -<PAGE>
BALDWIN TECHNOLOGY COMPANY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Supplemental disclosures of cash flow information:
For the nine months
ended March 31,
1998 1997
(in thousands)
Cash paid during the period for:
Interest $ 1,881 $ 2,130
Income taxes $ 5,333 $ 3,361
Supplemental schedule of non-cash investing and financing activities:
For the nine months ended March 31, 1998:
There were no significant non-cash transactions for the nine months ended
March 31, 1998.
The Company entered into capital lease agreements of $77,826 for the nine
months ended March 31, 1998.
For the nine months ended March 31, 1997:
The Company recorded a provision for the disposition of its pre-press
operations in a non-cash transaction in the amount of $46,036,000. In
conjunction with the disposition the related assets and liabilities of the
pre-press operations were reduced to fair value less the estimated costs of
disposal and recorded in "Other assets". (See Note 3 - Notes to
Consolidated Financial Statements.)
The Company reclassified $6,250,000 of its 8.17% Senior Notes to "Current
portion of long-term debt" from "Long-term debt" as the first scheduled
installment became current.
Patent costs of $693,000 that were capitalized and were recorded in other
assets have been realized as royalties at March 31, 1997.
The Company entered into capital lease agreements of $1,885 for the nine
months ended March 31, 1997.
The accompanying notes to consolidated financial statements
are an integral part of these statements.
- 5 -
BALDWIN TECHNOLOGY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - General:
Baldwin Technology Company, Inc. (Baldwin, or the Company) is engaged
primarily in the development, manufacture and sale of material handling,
accessory, and control equipment for the printing and print on demand
industries.
The consolidated financial statements include the accounts of Baldwin
and its subsidiaries and reflect all adjustments (consisting of only normal
recurring adjustments) which are, in the opinion of management, necessary
to present a fair statement of the results for the interim periods.
Operating results for the three month and nine month periods ended March
31, 1998 are not necessarily indicative of the results that may be expected
for the year ending June 30, 1998.
All significant intercompany transactions have been eliminated in
consolidation. The Company adopted Statement of Financial Accounting
Standards No. 128 "Earnings per Share" (FAS 128) on December 31, 1997.
Accordingly, for the three and nine month periods ended March 31, 1998 and
1997, net income was divided by the weighted average number of common
shares outstanding in order to calculate basic earnings per share and net
income was divided by the total of the weighted average number of common
shares outstanding and common stock equivalents in order to calculate
diluted earnings per share. Common stock equivalents for the three month
periods ended March 31, 1998 and 1997 consisted of 374,422 shares and no
(0) shares, respectively, for stock options. The weighted average number
of common and common equivalent shares outstanding for the three month
periods ended March 31, 1998 and 1997 were 17,531,186 and 17,128,264,
respectively. Common stock equivalents for the nine month periods ended
March 31, 1998 and 1997 consisted of 267,714 shares and no (0) shares,
respectively, for stock options. For the nine month periods ended March
31, 1998 and 1997 the weighted average number of common and common
equivalent shares were 17,406,274 and 17,262,870, respectively. As there
were no (0) common equivalent shares for either the three or nine month
periods ended March 31, 1997, there is no difference between basic and
diluted earnings per share as presented versus primary or fully diluted
earnings per share as previously reported.
Note 2 - Inventories:
Inventories consist of the following:-
March 31, June 30,
1998 1997
Raw material $15,893,000 $11,383,000
In process 13,285,000 8,833,000
Finished goods 5,802,000 7,617,000
$34,980,000 $27,833,000
Inventories decreased by $1,273,000 due to translation effects of
exchange from June 30, 1997 to March 31, 1998.
Note 3 - Disposition of pre-press operations:
During the quarter ended December 31, 1996 the Company wrote down the
net assets of its pre-press operation to their estimated fair values
concurrent with the Company's decision to dispose of such operations.
The Company valued the pre-press business at fair value less the
estimated costs of disposal by recording a charge of $46,036,000 to
operations.
- 6 -
The following proforma condensed Consolidated Statement of Income of
the Company reflects the removal of the results of the Company's pre-press
operations for the three and nine month periods ended March 31, 1997.
Three Nine
months ended months ended
March 31, March 31,
1997 1997
Net sales $51,598,000 $155,872,000
Gross profit 17,159,000 50,337,000
Operating expenses 15,390,000 44,399,000
Provision for loss on
pre-press disposal 46,036,000
Operating income (loss) 1,769,000 (40,098,000)
Other expenses 12,000 726,000
Pre-tax income (loss) $ 1,757,000 $(40,824,000)
Note 4 - Restructuring Charge and Reserves:
A restructuring reserve was charged to income during the quarter ended
December 31, 1995 in the amount of $3,000,000. The reserve was established
in order to accrue the costs associated with a planned workforce reduction
at the Company's German operations as well as to accrue for dealer claims
associated with changes made to the European dealer network and
distribution system. The Company also has $87,000 remaining from a fiscal
1992 restructuring charge, all of which relates to an excess facility
sublease subsidy.
The following schedule shows the use of restructuring reserves for
severance and sublease subsidies for the nine months ended March 31, 1998.
Restructuring reserves consist of the following:-
March 31, June 30,
1998 1997
Severance and dealer claims $ 223,000 $1,144,000
Excess facility sublease subsidy 87,000 160,000
$ 310,000 $1,304,000
Note 5 - Common Stock:
Stock Options:-
On November 21, 1997, six (6) eligible non-employee Directors of the
Company were automatically granted non-qualified options for a total of
5,358 shares of Class A Common Stock and 642 shares of Class B Common Stock
under the Company's 1990 Directors' Stock Option Plan at exercise prices of
$5.125 and $6.4063 per share, respectively, the fair market values on the
date of grant. Restrictions, as described in the Company's 1991 Proxy
Statement, are similar to the 1996 Stock Option Plan, (the "1996 Plan"),
with the exception of the dates of exercise, vesting and termination.
On August 12, 1997 the Board of Directors granted non-qualified
options to purchase 375,000 shares of the Company's Class A Common Stock to
certain executives under the Company's 1996 Plan at an exercise price of
$3.00 per share, the fair market value on the date of grant. The options
granted are otherwise identical with regard to restrictions on options
previously granted.
- 7 -
<PAGE>
BALDWIN TECHNOLOGY COMPANY, INC.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position
and consolidated financial statements.
The Company's disposition of its former Pre-press operations on June
30, 1997 results in significant distortions when comparing operating
performance of the current and prior year periods. The following condensed
Consolidated Statement of Income of the Company sets forth the actual 1998
and 1997 results for the respective periods together with 1997 proforma
results which reflects the removal of the Company's former pre-press
operations and the provision for loss on the disposal of those operations
for the three and nine month periods ended March 31, 1997. The proforma
1997 amounts will be used in the following discussion of the current year
actual results as compared to the prior year results.
Nine months ended March 31,
(in $000's except per share data)
less
Actual Actual Pre-press Proforma
1998 1997 1997 1997
Net sales $163,864 $176,953 $ 21,081 $155,872
Gross profit 53,890 57,104 6,767 50,337
Selling, general and
administrative expenses 31,415 36,519 6,303 30,216
Other operating expenses 13,389 16,138 1,955 14,183
Provision for loss on
the disposition of
Pre-press operations 46,036 46,036
Operating income (loss) 9,086 (41,589 ) (47,527 ) 5,938
Other expense (income) 22 688 (38) 726
Income (loss) before taxes 9,064 (42,277) (47,489) 5,212
Provision for income taxes 3,535 1,729 (262) 1,991
Net income (loss) $ 5,529 $(44,006) $(47,227)$ 3,221
Basic income (loss)
per share $0.32 $(2.55) $(2.74 ) $0.19
Diluted income (loss)
per share $0.32 $(2.55) $(2.74 ) $0.19
Three months ended March 31,
(in $000's except per share data)
less
Actual Actual Pre-press Proforma
1998 1997 1997 1997
Net sales $60,199 $58,318 $6,720 $51,598
Gross profit 19,006 19,287 2,128 17,159
Selling, general and
administrative expenses 10,702 12,681 1,883 10,798
Other operating expenses 4,718 5,212 620 4,592
Operating income (loss) 3,586 1,394 (375) 1,769
Other expense 29 15 3 12
Income (loss) before taxes 3,557 1,379 (378) 1,757
Provision for income taxes 1,332 634 8 626
Net income (loss) $ 2,225 $ 745 $ (386) $ 1,131
Basic income (loss)
per share $0.13 $0.04 $(0.02 ) $0.07
Diluted income (loss)
per share $0.13 $0.04 $(0.02 ) $0.07
- 8 -
Nine Months Ended March 31, 1998 vs. Nine Months
Ended March 31, 1997.
Net sales for the nine months ended March 31, 1998 increased by
$7,992,000, or 5.1%, to $163,864,000 from $155,872,000 for the nine months
ended March 31, 1997. Currency rate fluctuations attributable to the
Company's overseas operations decreased net sales by $9,886,000 for the
current period. In terms of local currency, sales as compared to the prior
year, have increased by 4.7% in Germany, 10.7% in Sweden, 8.2% in the
United Kingdom, 27.6% in France and 14.0% in Japan. In the Americas, net
sales increased by 12.4%.
Gross profit for the nine month period ended March 31, 1998 was
$53,890,000 (32.9% of net sales), as compared to $50,337,000 (32.3% of net
sales) for the nine month period ended March 31, 1997, an increase of
$3,553,000 or 7.1%. Currency rate fluctuations decreased gross profit by
$3,238,000 in the current period. Gross profit was higher as a percentage
of sales when compared to the prior year due primarily to increased sales
volume and a decrease in manufacturing costs, principally at the Company's
German operation.
Selling, general and administrative expenses were $31,415,000 (19.2% of
net sales), for the nine month period ended March 31, 1998 as compared to
$30,216,000 (19.4% of net sales) for the same period of the prior year, an
increase of $1,199,000 or 4.0%. Currency rate fluctuations decreased these
expenses by $1,567,000 and the acquisition of the Print-On-Demand Group,
which occurred in January of 1997, added $615,000 to these expenses in the
current period. Otherwise, selling, general and administrative expenses
increased by $2,151,000. Selling expenses increased by $1,432,000 and were
primarily due to increased direct sales personnel, increased sales
commissions related to higher sales volumes and higher trade show related
expenses while general and administrative expenses increased by $697,000
due primarily to increased compensation and consulting costs in the current
period which were partially offset by lower severance costs than inccurred
in the prior year. Other operating expenses decreased by $794,000 over the
same period of the prior year. Currency rate fluctuations decreased these
expenses by $846,000 in the current period with the remaining increase in
these expenses relating primarily to higher product research costs which
were partially offset by reductions in engineering personnel in Germany.
Interest expense for the nine month period ended March 31, 1998 was
$2,182,000 as compared to $2,515,000 for the nine month period ended March
31, 1997. Currency rate fluctuations decreased interest expense by
$307,000. Interest income was $401,000 and $253,000 for the nine month
periods ended March 31, 1998 and March 31, 1997, respectively. Currency
rate fluctuations decreased interest income by $86,000 in the current
period. Interest income increased primarily due to interest earned on the
proceeds from the disposition of the Company's Pre-press operations. Other
income increased primarily due to higher royalty income and foreign
currency transaction gains which increased to $178,000 versus $129,000 for
the prior year. Currency rate fluctuations increased other income by
$87,000 for the current period.
The Company's effective tax rate on income before taxes was 39% for the
nine month period ended March 31, 1998 as compared to 38.2% for the nine
month period ended March 31, 1997. Currency rate fluctuations decreased
the provision for income taxes by $170,000 for the current period. The
current period's effective rate reflects the impact of foreign source
income which is generally taxed at substantially higher rates than domestic
income.
Net income for the nine month period ended March 31, 1998 increased to
$5,529,000 from $3,221,000 for the nine month period ended March 31, 1997,
or to $0.32 from $0.19 per share. Currency rate fluctuations decreased net
income by $265,000 for the current period. The weighted average number of
common and common equivalent shares outstanding during the nine month
periods ended March 31, 1998 and March 31, 1997 were 17,406,274 and
17,262,870, respectively.
- 9 -
Three Months Ended March 31, 1998 vs. Three Months
Ended March 31, 1997.
Net sales for the three months ended March 31, 1998 increased by
$8,601,000, or 16.7%, to $60,199,000 from $51,598,000 for the three months
ended March 31, 1997. Currency rate fluctuations attributable to the
Company's overseas operations decreased net sales by $2,455,000 for the
current period. In terms of local currency and as compared to the prior
year's quarter, sales increased by 31.4% in Germany, by 43.1% in Sweden and
by 17.2% in France. Sales were down by 11.5% in the United Kingdom. In
Japan, sales increased by 0.7%. In the Americas, net sales increased by
21.5%.
Gross profit for the three month period ended March 31, 1998 was
$19,006,000 (31.6% of net sales), as compared to $17,159,000 (33.3% of net
sales) for the three month period ended March 31, 1997, an increase of
$1,847,000 or 10.8%. Currency rate fluctuations decreased gross profit by
$685,000 in the current period. Gross profit was lower as a percentage of
net sales when compared to the prior year due primarily to increased sales
of lower margin roll handling equipment and decreased sales of newspaper
related products in Japan.
Selling, general and administrative expenses were $10,702,000 (17.8%
of net sales), for the three month period ended March 31, 1998 as compared
to $10,798,000 (20.9% of net sales) for the same period of the prior year,
a decrease of $96,000 or 0.8%. Currency rate fluctuations decreased these
expenses by $343,000 in the current period. Otherwise, selling, general
and administrative expenses increased by $247,000. Selling expenses
increased by $448,000 and were primarily related to sales volume and direct
sales personnel increases while general and administrative expenses
decreased by $200,000 due primarily to increased compensation costs in the
current period which were more than offset by decreases in severance
expense. Other operating expenses increased by $126,000 over the same
period of the prior year. Currency rate fluctuations decreased these
expenses by $186,000 in the current period with the remaining increase in
these expenses relating primarily to increased research and development
project costs.
Interest expense for the three month period ended March 31, 1998 was
$678,000 as compared to $805,000 for the three month period ended March 31,
1997. Currency rate fluctuations decreased interest expense by $61,000.
Interest income was $87,000 and $85,000 for the three month periods ended
March 31, 1998 and March 31, 1997, respectively. Other income and
expense includes net foreign currency transaction gains (losses) of $78,000
and $(107,000) for the three months ended March 31, 1998 and 1997,
respectively. Currency rate fluctuations decreased other income by $9,000
for the current period. Other income decreased primarily due to lower net
royalty income in the current period.
The Company's effective tax rate on income before taxes was 37.4% for
the three month period ended March 31, 1998 as compared to 35.6% for the
three month period ended March 31, 1997. Currency rate fluctuations
decreased the provision for income taxes by $43,000 for the current period.
The current period's effective rate reflects the impact of foreign source
income which is generally taxed at substantially higher rates than domestic
income.
Net income for the three month period ended March 31, 1998 increased by $1,094,000
or 96.7% to $2,225,000 from $1,131,000 for the three month period ended March 31, 1997, or
to $0.13 from $0.07 per share. Currency rate fluctuations decreased net income by $75,000
for the current period. Weighted average equivalent shares outstanding during
the three month periods ended March 31, 1998 and March 31, 1997 were
17,531,186 and 17,128,264, respectively.
- 10 -
Liquidity and Capital Resources at March 31, 1998
Liquidity and Working Capital
The Company's long-term debt includes $18,750,000 of 8.17% senior
notes (the "Senior Notes") due October 29, 2000. The Company also has a
four-year $20,000,000 Revolving Credit Agreement (the "Revolver") with
NATIONSBANK, N.A., as Agent, which matures in December, 1999. The Senior
Notes and the Revolver require the Company to maintain certain financial
covenants and have certain restrictions regarding the payment of dividends,
limiting them throughout the terms of the Senior Notes and the Revolver to
$1,000,000 plus 50% of the Company's net income after January 1, 1997. In
addition, the Company was required to pledge certain of the shares of its
domestic subsidiaries as collateral for both the Senior Notes and the
Revolver.
Both the Senior Notes and the Revolver require the Company to maintain
a ratio of current assets to current liabilities (as those terms are
defined in the agreements) of not less than 1.4 to 1. At March 31, 1998,
this ratio was 1.60 to 1.
Net cash provided (used) by investing activities was $3,937,000 for
the nine months ended March 31, 1998 versus $(1,643,000) for the nine
months ended March 31, 1997. The change was primarily due to the
collection of the proceeds from the disposition of the Company's Pre-press
operations. Net cash (used) by financing activities was $(4,792,000) for
the period ended March 31, 1998 as compared to $(4,210,000) at March 31,
1997. The change was primarily due to increased debt repayments. During
the current period a DM 6,000,000 drawdown (U.S. $3,476,000) was made
under the Revolver and a simultaneous repayment was made on a short-term
open bank loan facility. Additionally, the first scheduled repayment of
the Company's Senior Notes ($6,250,000) was made in October, 1997.
The Company's working capital increased from $22,043,000 at March 31,
1997, to $31,436,000 at March 31, 1998, an increase of $9,393,000 or 42.6%.
Currency rate fluctuations decreased working capital by $1,645,000. Trade
accounts and notes receivable increased due to increased sales levels while
inventories increased due to increased order backlog. These increases in
working capital were partially offset by increases in trade accounts
payable and customer deposits. The Company's working capital increased by
$1,740,000 or 5.9% from $29,696,000 at June 30, 1997 to $31,436,000 at
March 31, 1998. Currency rate fluctuations decreased working capital by
$2,414,000 in the current period. The primary reasons for the increase in
working capital resulted from the increase in trade accounts and notes
receivable and inventories as discussed above, the repayment of DM
6,000,000 of short-term bank loans, a decrease in income taxes payable and
an increase in advance payments to suppliers. The effects of the above
working capital increases were partially offset by increases in customer
deposits on orders related to the increase in backlog, the collection of a
$6,000,000 note receivable related to the disposition of the Company's Pre-
press operations, an increase in trade payables related to the increased
level of inventory, an increase in bank loans for working capital
requirements and a decrease in cash and short term securities.
The Company maintains relationships with foreign and domestic banks
which have extended credit facilities to the Company totaling $30,582,000,
including amounts available under the Revolver. As of March 31, 1998, the
Company had outstanding $8,918,000 under these lines of credit, of which
$3,246,000 is classified as long-term debt. Total debt levels as reported
on the balance sheet at March 31, 1998 are $797,000 lower than they would
have been if June 30, 1997 exchange rates had been used.
Net capital expenditures made to meet the normal business needs of the
Company for the nine months ended March 31, 1998 and March 31, 1997,
including commitments for capital lease payments, were $1,674,000 and
$1,294,000, respectively.
The Company believes its cash flow from operations and bank lines of
credit are sufficient to finance its working capital and other capital
requirements for the near and long-term future.
- 11 -
Year 2000 Compliance.
The Company is aware that many companies are facing issues associated
with the limitations of the programming code in existing computer systems,
whereby the computer systems may not properly recognize date sensitive
information as the millennium (year 2000) approaches.
The Company, with the assistance of outside consultants, has evaluated
its internal operating systems and determined that several of its business
units are currently not year 2000 compliant. The company has purchased or
licensed the requisite computer hardware and software needed to correct
these issues for most of the affected business units and expects to
complete the installation and implementation of these systems by mid-1999.
The costs for purchased software and hardware are capitalized in
accordance with the Company's policies while leased assets and
modification costs are expensed as incurred. The cost to modify or replace
the Company's systems to be year 2000 compliant are not expected to have a
material effect on the Company's financial condition or its results of
operations.
The Company does not believe that any of its products have significant
year 2000 compliance issues. Neither does it believe that any of its
significant suppliers or customers have significant year 2000 compliance
issues. In the event that any of the Company's significant suppliers or
customers does not successfully and timely achieve year 2000 compliance,
the Company's business or operations could be adversely affected.
Impact of Inflation
The Company's results are affected by the impact of inflation on
manufacturing and operating costs. Historically, the Company has used
selling price adjustments, cost containment programs and improved operating
efficiencies to offset the otherwise negative impact of inflation on its
operations.
BALDWIN TECHNOLOGY COMPANY, INC.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.25 Employment Agreement dated March 11, 1998 and effective
as of July 1, 1997 between Baldwin Technology Company,
Inc. and William J. Lauricella (filed herewith).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K. There were no reports on Form 8-K filed for
the three months ended March 31, 1998.
- 12 -<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
BALDWIN TECHNOLOGY COMPANY, INC.
BY s\ William J. Lauricella
Vice President, Chief Financial
Officer and Treasurer
Dated: May 6, 1998
- 13 -
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS IN THE COMPANY'S CURRENT REPORT ON FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH UNAUDITED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 9781
<SECURITIES> 10
<RECEIVABLES> 59307
<ALLOWANCES> 19280
<INVENTORY> 34980
<CURRENT-ASSETS> 110767
<PP&E> 22174
<DEPRECIATION> 14842
<TOTAL-ASSETS> 162052
<CURRENT-LIABILITIES> 79331
<BONDS> 0
0
0
<COMMON> 184
<OTHER-SE> 60628
<TOTAL-LIABILITY-AND-EQUITY> 162052
<SALES> 60199
<TOTAL-REVENUES> 60199
<CGS> 41193
<TOTAL-COSTS> 41193
<OTHER-EXPENSES> 14771
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 678
<INCOME-PRETAX> 3557
<INCOME-TAX> 1332
<INCOME-CONTINUING> 2225
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2225
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
EXHIBIT 10.25
March 11, 1998
Mr. William J. Lauricella
116 Gristmill Road
Monroe, CT 06468
Dear Mr. Lauricella:
This Agreement sets forth the terms of your employment with
Baldwin Technology Company, Inc., a Delaware corporation (the
"Company"), and is effective as of July 1, 1997, and unless sooner
terminated, shall expire on June 30, 2003.
1. DUTIES. During the term of your employment hereunder, you
shall be employed as the Chief Financial Officer of the Company,
and you shall direct and manage the financial business, affairs and
property of the Company subject to the direction of the Chief
Executive Officer of the Company (the "Chief Executive Officer").
2. COMPENSATION. As compensation for your services during the
term of your employment hereunder:
A. Salary. You shall be paid a salary at the annual rate of
one-hundred eighty-one thousand four-hundred and forty dollars
($181,440) (hereinafter referred to as your "base salary"), payable
in appropriate installments to conform with regular payroll dates
for salaried personnel of the Company. Notwithstanding the
foregoing, in determining the amount of the appropriate
installments referred to above, the base salary amount is to be
reduced by any premiums in excess of one thousand dollars
($1,000.00) paid by the Company on a split-dollar insurance policy
in accordance with the agreement, dated September 29, 1994, between
you and the Company, as such agreement may be modified from time to
time. (As of July 1, 1997, the amount by which the base salary is
reduced is $8,500.00).
B. Reviews and Adjustments. On or about April 24, 1998 and
each succeeding April 24 during the term of your employment
hereunder, your performance shall be reviewed by the Chief
Executive Officer and your attainment of mutually agreed-upon
objectives evaluated; your base salary for the ensuing twelve (12)
months commencing on such April 24 may be adjusted, subject to
approval by the Compensation Committee of the Board of Directors of
the Company, in accordance with your level of performance. In no
case, however, will any such adjustment to your salary ever be a
negative amount unless you expressly agree to such a reduction.
C. Incentive Compensation. During the term of your
employment hereunder, and at such other times subsequent thereto as
are otherwise set forth herein, you shall be paid annually, within
three (3) months of the end of each fiscal year, beginning with the
fiscal year ending June 30, 1998, incentive compensation in an
amount determined for such fiscal year under the Company's
Executive and Key Person Cash Incentive Program (the "Incentive
Program") as in effect at that time.
D. Deferred Compensation. On the first day of each month
that you are still performing services under the terms of this
Agreement, the Company shall accrue for your benefit deferred
compensation (the "Deferred Compensation") in the amount of three-
thousand seven hundred and fifty dollars ($3,750).The sum of all
such monthly accruals of Deferred Compensation shall constitute the
"Aggregate Deferred Compensation". The Aggregate Deferred
Compensation, to the extent vested, is to be paid to you in equal
monthly installments, over a ten (10) year period beginning at such
times as are set forth in this Agreement. Wherever so used in this
Agreement, the term "Monthly Deferred Compensation" shall mean the
Aggregate Deferred Compensation divided by one-hundred-twenty (120)
months. Effective July 1, 1997 the Aggregate Deferred Compensation
has vested to the extent of 40%, as of June 30, 1998 it shall be
vested to the extent of 50%, as of June 30,1999 it shall be vested
to the extent of 60%, as of June 30, 2000 it shall be vested to the
extent of 70%, as of June 30, 2001 it shall be vested to the extent
of 80%, as of June 30, 2002 it shall be vested to the extent of
90%, and as of June 30, 2003 it shall be vested to the extent of
100% so that as of the latter date the full amount of the Aggregate
Deferred Compensation shall be due and payable in the instances set
forth elsewhere in this Agreement.
3. Stock and Loans. In order to permit you (but only if you, in
your sole discretion so elect) to purchase shares of the Company's
Class B Common Stock, par value $.01 per share (the "Class B
Stock"), that may become available from time to time, you shall be
eligible, to the extent allowable under the Company's various loan
covenants or any other legal restrictions under which the Company
may operate, to obtain loans from the Company in the aggregate
principal amount of up to twice your then-current base salary which
shall be used by you to purchase such shares of Class B Stock. Any
loans made under this section shall (i) not exceed one million
dollars ($1,000,000.00) in the aggregate, (ii) bear interest,
payable annually, at a rate equal to the Company's borrowing rate
(as adjusted on the first day of each calendar quarter) on its U.S.
short-term banking facilities, (iii) require pledging by you to the
Company of all shares of Class B Stock purchased using the proceeds
of any such loans (until sold in part or in full as described
herein), and (iv) require repayment by you within six (6) months of
the last day of your employment by the Company, except in case of
your death, in which instance repayment shall be within twelve (12)
months of the date of your death. Notwithstanding anything to the
contrary contained in this Paragraph 3, if at any time you sell any
of such shares of Class B Stock while any amount of any said loan
remains unpaid, you shall, within five (5) days of receipt of the
funds from such sale, pay to the Company, in repayment of part or
all, as the case may be, of any said loan, an amount equal to (a)
that amount (the "Principal Repayment") equal to the product of
(i) the aggregate unpaid amount of all such loans, multiplied by
(ii) a fraction, the numerator of which is the number of shares of
the Class B Stock sold and the denominator of which is the number
of shares of Class B Stock purchased using the proceeds of all such
loans (provided, however that the Principal Repayment shall not
exceed the unpaid balance of all such loans), plus (b) any accrued
but unpaid interest on the amount of the Principal Repayment to the
date of such repayment.
4. INSURANCE. During the term of your employment hereunder, the
Company, subject to your insurability, shall (i) pay the premiums
on a contract or contracts of life insurance on your life providing
for an aggregate death benefit of five hundred thousand dollars
($500,000), which contract or contracts will be owned by you, your
spouse or such other party as may be designated by you; (ii)
purchase key person term life insurance on your life in the
aggregate amount of one million dollars ($1,000,000), which
contract or contracts will be owned by the Company; provided,
however, that upon your death if there are any loans outstanding
between you and the Company pursuant to Section 3 of this
Agreement, the Company agrees to pay to your survivors or estate an
amount equal to the unpaid balance of such loans, up to but not
exceeding five hundred thousand dollars ($500,000), of the death
benefits received by the Company from such key person term life
insurance policy.
5. REIMBURSEMENT OF EXPENSES. In addition to the compensation
provided for herein, the Company shall reimburse to you, or pay
directly, in accordance with the policies of the Company as in
effect at the time, all reasonable expenses incurred by you in
connection with the business of the Company, and its subsidiaries
and affiliates, including but not limited to business-class travel
if overseas, reasonable accommodations, and entertainment, subject
to documentation in accordance with the Company's policy.
6. EXTENT OF SERVICES.
A. In General. During the term of your employment
hereunder, you shall devote your best and full-time efforts to the
business and affairs of the Company.
B. Limitation on Other Services. During the term of your
employment hereunder, you shall not undertake employment with, or
participate in the conduct of the business affairs of, any other
person, corporation, or entity, except at the direction or with
written approval of the Board of Directors of the Company.
C. Personal Investments. Nothing herein shall preclude you
from having, making, or managing personal investments which do not
involve your active participation in the affairs of the entities in
which you so invest, but, unless approved in writing by the Board
of Directors of the Company, during the term of your employment
hereunder, you shall not have more than a one percent (1%)
ownership interest in any entity which is directly competitive with
any business conducted by the Company at that time. The phrase
"conducted by the Company" as used in this Paragraph 6C and in
Paragraph 13 hereof shall mean the business conducted by the
Company or by any corporation or other entity in which the Company
owns fifty percent (50%) or more of the stock or equity interests
(either voting or non-voting) in such other entity (a
"Subsidiary").
7. LOCATION. Your duties hereunder shall be performed for the
Company worldwide, with substantial time in the Company's offices
in Norwalk, Connecticut.
8. VACATION; OTHER BENEFITS.
A. Vacation. During the term of your employment hereunder,
you shall be entitled to a vacation or vacations, with pay, in
accordance with the Company's vacation policy as in effect at the
time. At the sole discretion of the Chief Executive Officer you
may be granted additional paid vacation days; such variations are
to be confirmed, in advance, in writing. You may accumulate up to
twelve (12) weeks vacation, but not more than three (3) weeks from
any single prior year. Any such accumulated vacation may be used
in any subsequent year or years (but no more than two (2) weeks of
such accumulated vacation in any one year) in addition to the
vacation to which you are entitled for each such year.
B. The Company's Benefit Plans. During the term of your
employment hereunder, you shall be eligible for inclusion, to the
extent permitted by law, as a full-time employee of the Company or
any Subsidiary, in any and all (i) pension, profit sharing,
savings, and other retirement plans and programs as in effect at
the time, (ii) life and health (medical, dental, hospitalization,
short-term and long-term disability) insurance plans and programs
as in effect at the time, (iii) stock option and stock purchase
plans and programs as in effect at the time, (iv) accidental death
and dismemberment protection plans and programs as in effect at the
time, (v) travel accident insurance plans and programs as in effect
at the time, and (vi) other plans and programs sponsored by the
Company or any Subsidiary for employees or executives generally as
in effect at the time, including any and all plans and programs
that supplement any or all of the foregoing types of plans or
programs.
C. Automobile, Professional Services and Club Dues. During
the term of your employment hereunder, (i) the Company shall
provide an automobile for your use pursuant to the Company's
written policy on company autos as in effect at that time; (ii) the
Company shall reimburse to you, or pay directly, upon submission by
you to the Company of statements for services, the amounts payable
by you to any person or persons of your choice that you retain to
advise you with regard to financial, investment, and tax matters,
including any related legal fees; provided, however, that the costs
for such services for which you shall be reimbursed or which shall
be paid shall not, in the aggregate, exceed five thousand dollars
($5,000) per fiscal year beginning with the fiscal year ending June
30, 1998; and (iii) the Company shall reimburse to you, or pay
directly, upon submission by you to the Company of invoices for
same, a reasonable annual membership or user fee at a health,
fitness, golf, tennis, social or other similar club, provided,
however, that said fee for which you shall be reimbursed or which
shall be paid shall not exceed three thousand dollars ($3,000.00)
per fiscal year beginning with the fiscal year ending June 30,
1998.
9. TERMINATION OF EMPLOYMENT.
In the event your employment is terminated for any of the reasons
set forth under this Paragraph 9, the Company shall pay to you or
your legal representative, estate or heirs, as the case may be, the
following amounts, which are in addition to the amounts stipulated
under any subparagraph of this Paragraph 9:
(i) A single lump sum payment, not later than the last day of
your employment, of:
(a) Any accrued but unpaid salary set forth in Paragraph
2A (as adjusted by Paragraph 2B) hereof, including salary in
respect of any accrued and accumulated vacation, due to you at the
date of such termination; and
(b) Any amounts owing, but not yet paid, pursuant to
Paragraph 5 hereof.
(ii) Any accrued but unpaid incentive compensation as set
forth in Paragraph 2C hereof due to you at the date of such
termination for the fiscal year ending on or immediately prior to
the date of such termination which shall be paid within three (3)
months of the end of such fiscal year.
A. Termination by the Company Without Cause. The Company
may, without cause, terminate your employment hereunder at any time
upon ten (10) or more days' written notice to you. In the event
your employment is terminated under this Paragraph 9A, the Company
shall pay to you the following:
(i) A single lump sum payment, not later than the last
day of your employment, of severance pay in an amount equal to your
then current annual base salary as defined in Paragraph 2A (as
adjusted by Paragraph 2B) hereof;
(ii) A single lump sum payment of any incentive
compensation set forth in Paragraph 2C hereof earned in the fiscal
year of the termination of your employment, which incentive
compensation shall be determined on the basis of the Company's
operations through June 30 of such fiscal year, and shall be pro-
rated through the last day of your employment, and shall be paid
within three (3) months of such June 30; and
(iii) To the extent vested, the Monthly Deferred
Compensation with the first payment beginning on the first day of
the month immediately succeeding the last day of your employment.
The Company shall have no further obligation to you under this
Agreement and you shall have no further obligation to the Company
under this Agreement except as provided in Paragraph 12 and
Paragraph 13 hereof.
B. Termination by the Company With Cause. The Company may, for
cause, terminate your employment hereunder at any time by written
notice to you. In the event your employment is terminated under
this Paragraph 9B, you shall forfeit the incentive compensation set
forth in Paragraph 2C hereof for the fiscal year in which such
termination or resignation occurs. In the event your employment is
terminated under this paragraph 9B, the Company shall pay to you,
to the extent vested, the Monthly Deferred Compensation as set
forth in Paragraph 2D with the first payment beginning on the first
day of the month immediately succeeding the month in which you
attain the age of 55.
The Company shall have no further obligation to you under this
Agreement and you shall have no further obligation to the Company
under this Agreement except as provided in Paragraph 12 and
Paragraph 13 hereof. For purposes of this Agreement, the term
"cause" shall mean (1) a failure by you to remedy, within ten (10)
days of the Company's written notice to you, either (a) a
continuing neglect in the performance of your duties under this
Agreement, or (b) any action taken by you that seriously prejudices
the interests of the Company, or (2) your conviction of a felony.
C. TERMINATION BY MUTUAL CONSENT. You may terminate your
employment hereunder at any time with the written consent of the
Company. In the event your employment is terminated pursuant to
this paragraph 9C, the Company shall pay to you the following:
(i) A single lump sum payment, of any incentive
compensation set forth in Paragraph 2C hereof earned in the fiscal
year of the termination of your employment, which incentive
compensation shall be determined on the basis of the Company's
operations through June 30 of such fiscal year, and shall be pro-
rated through the last day of your employment, and shall be paid
within three (3) months of such June 30; and
(ii) To the extent vested, the Monthly Deferred
Compensation as set forth in Paragraph 2D with the first monthly
payment beginning on the first day of the month immediately
succeeding the last day of your employment.
The Company shall have no further obligation to you under this
Agreement and you shall have no further obligation to the Company
under this Agreement except as provided in Paragraph 12 and
Paragraph 13 hereof.
D. DISABILITY. If you should suffer a Permanent Disability
at any time, the Company may terminate your employment hereunder
upon ten (10) or more days' prior written notice to you. For
purposes of this Agreement, a "Permanent Disability" shall be
deemed to have occurred only when you are qualified for benefits
under the Company's Long Term Disability Insurance Policy. In the
event of the termination of your employment hereunder by reason of
Permanent Disability, the Company shall pay to you or your legal
representative:
(i) In conformity with regular payroll dates for
salaried personnel of the Company, an amount equal to fifty percent
(50%) of the base salary you were receiving at the date of such
termination under Paragraph 2A hereof (as adjusted by Paragraph 2B
hereof), payable until you attain the age of 65 or die, whichever
occurs first; provided, however, that the amount payable under this
Paragraph 9D(i) shall be reduced to the extent of any payments made
to you through any Company-sponsored group long term disability
plan and also to the extent of any payments made to you under any
other long term disability insurance policy (the "Supplemental LTD
Policy") where the premiums for said Supplemental LTD Policy have
either been paid by the Company or reimbursed to you by the
Company.
(ii) Any incentive compensation set forth in Paragraph 2C
hereof earned in the fiscal year in which the termination of your
employment occurs, which incentive compensation shall be determined
on the basis of the Company's operations through June 30 of such
fiscal year, and shall be pro-rated through the last day of your
employment, and shall be paid within three (3) months of such June
30;
(iii) Upon your attainment of age 65 or your death,
whichever occurs first, to the extent vested, the Monthly Deferred
Compensation as set forth in Paragraph 2D with the first monthly
payment beginning on the first day of the month immediately
succeeding the month in which you attained the age of 65 or died.
The Company shall have no further obligation to you under this
Agreement and you shall have no further obligation to the Company
under this Agreement except as provided in Paragraph 12 and
Paragraph 13 hereof.
E. Termination by Death. In the event of the termination of
your employment by reason of death, at any time, the Company shall
pay to your legal representative, estate or heirs:
(i) Any incentive compensation set forth in Paragraph 2C
hereof earned in the fiscal year in which the termination of your
employment occurs, which incentive compensation shall be determined
on the basis of the Company's operations through June 30 of such
fiscal year, and shall be pro-rated through the last day of your
employment, and shall be paid within three (3) months of such June
30;
(ii) To the extent vested, the Monthly Deferred
Compensation as set forth in Paragraph 2D with the first monthly
payment beginning on the first day of the month immediately
succeeding the last day of your employment.
The Company shall have no further obligation to you under this
Agreement and you shall have no further obligation to the Company
under this Agreement except as provided in Paragraph 12 and
Paragraph 13 hereof.
F. Termination Upon Expiration of Agreement. If not
previously terminated, your employment with the Company shall
terminate upon the expiration of the full term of this Agreement on
June 30, 2003. Upon the expiration of this agreement the Company
shall pay to you the Monthly Deferred Compensation as set forth in
Paragraph 2D hereof, with the first monthly payment beginning on
the first day of the month immediately succeeding the month in
which you shall have attained the age of 55.
The Company shall have no further obligation to you under this
Agreement and you shall have no further obligation to the Company
under this Agreement except as provided in Paragraph 12 and
Paragraph 13 hereof.
10. SOURCE OF PAYMENTS. All payments provided for hereunder shall
be paid from the general funds of the Company. The Company may,
but shall not be required to, make any investment or investments
whatsoever, including the purchase of a life insurance contract or
contracts on your life, to provide it with funds to satisfy its
obligations hereunder; provided, however, that neither you nor your
beneficiary or beneficiaries, nor any other person, shall have any
right, title, or interest whatsoever in or to any such investments
or contracts. If the Company shall elect to purchase a life
insurance contract or contracts on your life to provide the Company
with funds to satisfy its obligations hereunder, the Company shall
at all times be the sole and complete owner and beneficiary of such
contract or contracts, and shall have the unrestricted right to use
all amounts and to exercise all options and privileges thereunder
without the knowledge or consent of you, your beneficiary or
beneficiaries, or any other person, it being expressly agreed that
neither you, any such beneficiary or beneficiaries, nor any other
person shall have any right, title, or interest whatsoever in or to
any such contract or contracts unless expressly provided otherwise
in this Agreement.
11. ENFORCEMENT OF RIGHTS. Nothing in this Agreement, and no
action taken pursuant to its terms, shall create or be construed to
create a trust or escrow account of any kind, or a fiduciary
relationship between the Company and you, your beneficiary or
beneficiaries, or any other person. You, your beneficiary or
beneficiaries, and any other person or persons claiming a right to
any payments or interests hereunder shall rely solely on the
unsecured promise of the Company, and nothing herein shall be
construed to give you, your beneficiary or beneficiaries, or any
other person or persons, any right, title, interest, or claim in or
to any specific asset, fund, reserve, account, or property of any
kind whatsoever owned by the Company or in which it may have any
right, title, or interest now or in the future, but you or your
beneficiary or beneficiaries shall have the right to enforce a
claim for benefits hereunder against the Company in the same manner
as any unsecured creditor.
12. INVENTIONS AND CONFIDENTIAL INFORMATION. So long as you shall
be employed by the Company, you agree promptly to make known to the
Company the existence of any and all creations, inventions,
discoveries, and improvements made or conceived by you, either
solely or jointly with others, during the term of this Agreement
and for three (3) years thereafter, and to assign to the Company
the full exclusive right to any and all such creations, inventions,
discoveries, and improvements relating to any subject matter with
which the Company is now or shall become concerned, or relating to
any other subject matter if made with the use of the Company's
time, materials, or facilities. To the fullest extent permitted by
law, any and all of the foregoing creations, inventions,
discoveries and improvements shall be considered as "work-made-for-
hire" and the Company shall be the owner thereof. You further
agree, without charge to the Company but at its expense, if
requested to do so by the Company, to execute, acknowledge, and
deliver all papers, including applications or assignments for
patents, trademarks, and copyrights relating thereto, as may be
considered by the Company to be necessary or desirable to obtain or
assign to the Company any and all patents, trademarks, or
copyrights for any and all such creations, inventions, discoveries,
and improvements in any and all countries, and to vest title
thereto in the Company in all such creations, inventions,
discoveries, and improvements as indicated above conceived during
your employment by the Company, and for three (3) years thereafter.
You further agree that you will not disclose to any third person
any trade secrets or proprietary information of the Company, or use
any trade secrets or proprietary information of the Company in any
manner, except in the pursuit of your duties as an employee of the
Company, and that you will return to the Company all materials
(whether originals or copies) containing any such trade secrets or
proprietary information (in whatever medium) on termination of
your employment by the Company. The obligations set forth in this
Paragraph 12 shall survive the termination of your employment
hereunder. This Paragraph 12 replaces a previous agreement
executed by you pertaining to this subject, which prior agreement
is now null and void.
13. RESTRICTIVE COVENANT. For a period of three (3) years after
the termination of your employment by the Company, you shall not,
in any geographical location at which there is at that time
business conducted by the Company which was conducted by the
Company at the date of such termination, directly or indirectly,
own, manage, operate, control, be employed by, participate in, or
be connected in any manner with, the ownership, management,
operation, or control of, any business similar to or competitive
with such business conducted by the Company without the written
consent of the Company; provided, however, that you may have an
ownership interest of up to one percent (1%) in any entity,
notwithstanding that such entity is directly competitive with any
business conducted by the Company at the date of such termination.
14. ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement, or the breach or asserted breach
thereof, shall be settled by arbitration to be held in New York,
New York in accordance with the rules then obtaining of the
American Arbitration Association, and the judgment upon the award
rendered may be entered in any court having jurisdiction thereof.
The arbitrator shall determine which party shall bear the costs of
such arbitration, including attorneys' fees.
15. NON-ASSIGNABILITY. Your rights and benefits hereunder are
personal to you, and shall not be alienated, voluntarily or
involuntarily, assigned or transferred.
16. BINDING EFFECT. This Agreement shall be binding upon the
parties hereto, and their respective assigns, successors,
executors, administrators, and heirs. In the event the Company
becomes a party to any merger, consolidation, or reorganization,
this Agreement shall remain in full force and effect as an
obligation of the Company or its successors in interest. None of
the payments provided for by this Agreement shall be subject to
seizure for payment of any debts or judgments against you or your
beneficiary or beneficiaries, nor shall you or any such beneficiary
or beneficiaries have any right to transfer or encumber any right
or benefit hereunder; provided, however, that the undistributed
portion of the Aggregate Deferred Compensation shall at all times
be subject to set-off by the Company for debts owed by you to the
Company.
17. ENTIRE AGREEMENT. This Agreement contains the entire
agreement relating to your employment by the Company. It may only
be changed by written agreement signed by the party against whom
enforcement of any waiver, change, modification, extension,
deletion or revocation is sought.
18. NOTICES. All notices and communications hereunder shall be in
writing, sent by certified or registered mail, return receipt
requested, postage prepaid; by facsimile transmission, time and
date of receipt noted thereon; or by hand-delivery properly
receipted. The actual date of receipt as shown by the receipt
therefor shall determine the time at which notice was given. All
payments required hereunder by the Company to you shall be sent
postage prepaid, or, at your election, shall be transferred to you
electronically to such bank as you designate in writing to the
Company, including designation of the applicable electronic
address. The foregoing items (other than any electronic transfer
to you) shall be addressed as follows (or to such other address as
the Company or you may designate in writing from time to time):
To you: To the Company:
William J. Lauricella Baldwin Technology Company, Inc.
116 Gristmill Road One Norwalk West
Monroe, CT 40 Richards Avenue
Norwalk, CT 06854
19. LAW TO GOVERN. This Agreement shall be governed by, and
construed and enforced according to, the laws of the State of
Connecticut without giving effect to the principles of conflict of
laws.
Very truly yours,
BALDWIN TECHNOLOGY COMPANY, INC.
By:__________________________________
Gerald A. Nathe
Its President
Duly Authorized
AGREED TO AND ACCEPTED:
_________________________________
William J. Lauricella
