<PAGE> 1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 28, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________
Commission File Number 0-16148
MULTI-COLOR CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
OHIO 31-1125853
- ------------------------------------ -------------------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
205 WEST FOURTH STREET, CINCINNATI, OHIO 45202
- ----------------------------------------- -------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513) 381-1480
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, no par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
The aggregate market value of voting stock based on a closing price of $5.63 per
share held by nonaffiliates of the registrant is $5,499,119 as of June 18, 1999.
As of June 18, 1999, 2,305,460 shares of common stock, no par value, were issued
and outstanding.
<PAGE> 2
2
INDEX TO ANNUAL REPORT ON FORM 10-K
<TABLE>
<CAPTION>
PART I Page
<S> <C> <C>
Item 1 - Business 2
Item 2 - Properties 5
Item 3 - Legal Proceedings 5
Item 4 - Submission of Matters to a Vote of Security Holders 5
PART II
Item 5 - Market for the Registrant's Common Stock and Related Stockholder 6
Matters
Item 6 - Selected Financial Data 7
Item 7 - Management's Discussion and Analysis of Financial Condition and 8-11
Results of Operations
Item 7A - Quantitative and Qualitative Disclosures About Market Risk 11
Item 8 - Financial Statements and Supplementary Data 12-29
Item 9 - Changes in and Disagreements with Accountants on Accounting and 29
Financial Disclosure
PART III Part III (except for certain information relating to Executive Officers included 29
in Part I) is omitted. The Company intends to file with the Securities and
Exchange Commission within 120 days of the close of the fiscal year ended March
28, 1999 a definitive proxy statement containing such information pursuant to
Regulation 14A of the Securities Exchange Act of 1934 and such information shall
be deemed to be incorporated herein by reference from the date of filing such
document.
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8-K 29-32
</TABLE>
The Company believes certain statements contained in this report that
are not historical facts constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, and are
intended to be covered by the safe harbors created by that Act. Reliance should
not be placed on forward-looking statements because they involve known and
unknown risks, uncertainties and other factors which may cause actual results,
performance or achievements to differ materially from those expressed or
implied. Any forward-looking statement speaks only as of the date made. The
Company undertakes no obligation to update any forward-looking statements to
reflect events or circumstances after the date on which they are made.
Statements concerning expected financial performance, on-going business
strategies, and possible future action which the Company intends to pursue in
order to achieve strategic objectives constitute forward-looking information.
Implementation of these strategies and the achievement of such financial
performance are each subject to numerous conditions, uncertainties and risk
factors. Factors which could cause actual performance by the Company to differ
materially from these forward-looking statements include, without limitation,
factors discussed in conjunction with a forward-looking statement; changes in
general economic conditions; the success of its significant customers;
acceptance of new product offerings; changes in business strategy or plans;
vendor and customer Year 2000 compliance; quality of management; availability,
terms and development of capital; availability of raw materials; business
abilities and judgment of personnel; changes in, or the failure to comply with,
government regulations; competition; the ability to achieve cost reductions; and
increases in general interest rate levels affecting the Company's interest
costs. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
PART I
------
ITEM 1. BUSINESS
GENERAL
Multi-Color is one of the largest producers of printed labels for
branded consumer products in the United States. Labels printed by the Company
appear principally on mass-marketed products for which label appearance is a
significant element of product marketing and merchandising. In its latest fiscal
year, Multi-Color produced labels for a variety of consumer products including
liquid detergents, fabric softeners, food products, liquid cleaners, anti-freeze
and chewing gum. Multi-Color currently produces labels for approximately 30
customers.
<PAGE> 3
3
In 1985, Multi-Color acquired the net assets of the label divisions of
Georgia-Pacific for $14.3 million cash and a $1 million note. Multi-Color
established the Multi-Color Graphic Services division in 1987. This division
supplies color separations of labels and engraves cylinders. The division was
formed to improve the quality of separations and engravings supplied to
Multi-Color and its customers. This division completed an expansion in fiscal
1991 that allows it to engrave cylinders for the Company's Scottsburg, Indiana
plant. The Company constructed a rotogravure printing plant in Scottsburg,
Indiana in 1990. This plant was built to provide additional printing capacity
and capabilities to meet the changing needs of the marketplace.
During the second quarter of fiscal 1997, the Company started a new
entity with Think Laboratories, Inc. of Kashiwa, Japan, through a new
corporation owned 80% by the Company named Laser Graphic Systems, Incorporated
("LGSI"), to develop the market for laser engraving services in the United
States and to compliment the Multi-Color Graphic Services division. The Company
also initiated an expansion of its Scottsburg, Indiana facility which entailed
doubling the existing capacity of the plant during 1997. On May 14, 1999, the
Company and Think Laboratories, Inc. (Think) entered into an agreement whereby
the Company will purchase all of Think's equity interest in LGSI for $500,000.
Think will continue to provide improvements and technology enhancements for the
laser engraving process to the Company.
During fiscal 1999, the Company approved the construction of a 56,000
square foot addition to its Scottsburg, Indiana facility. This addition is
expected to allow the Company to consolidate all of its label manufacturing
operations, presently spread out over three leased facilities, under one roof.
This consolidation should also improve label manufacturing efficiency and is
targeted for completion during the second quarter of fiscal 2000.
The Company's executive offices are located at 205 West Fourth Street,
Cincinnati, Ohio 45202, and its telephone number is (513)381-1480. Unless the
context otherwise requires, the "Company" and "Multi-Color" refer to Multi-Color
Corporation and its predecessors.
PRODUCTS
The Company's predecessors began producing paper labels in 1918 and the
Company has maintained customer relationships that have existed since that time.
Multi-Color produces labels which are used to wrap products or are affixed to
finished product containers. These labels are printed for liquid detergent,
fabric softeners, food products, liquid cleaners, antifreeze and chewing gum. In
addition, the Company produces gift wrap.
In 1980, Multi-Color developed the in-mold label in response to the
increasing use of blow-molded plastic containers. Working in conjunction with a
customer, the Company and a leading supplier of blow-molded plastic containers
developed the in-mold label process which applies a label to a plastic container
as the container is being formed in the mold cavity. Multi-Color developed the
label and the method of applying the heat-activated adhesive to the label. The
in-mold label solves many of the quality problems associated with conventional
labels and produces a more attractive labeled container.
Multi-Color provides printed in-mold labels to consumer product
companies and, in addition, sells the unprinted in-mold label substrate to other
label printing companies.
The Company has recently introduced value added products and
capabilities targeted at the following markets:
1. A clear film which the Company believes will outperform
competitive products currently available and is well suited for
the personal care market.
2. Printing techniques that offer enhanced graphic appeal
particularly where metallic decorating is required to
differentiate premium products.
Multi-Color produces rotogravure cylinders at LGSI. Employing a
proprietary laser-exposing process which the Company licenses from Think
Laboratories, Inc., the resulting cylinders produce gravure's high quality at
costs comparable to other printing technologies. The Company is selling the
unique services of LGSI to customers other than its label customers and believes
that significant potential exists for this technology.
In addition, Multi-Color has expanded the reach of its products through
exports in a number of countries in South America; however, total sales to these
countries is still less than two percent of the Company's annual revenue.
<PAGE> 4
4
SALES AND MARKETING
Multi-Color receives annual or quarterly requirements estimates for
labels from its customers and ships against orders received, except in certain
cases where the Company has agreements with minimum purchase requirements.
The Company's marketing efforts are directed toward obtaining new
customers and increasing the Company's share of existing customers' overall
label requirements by meeting their specialized and technical label needs. The
Company's marketing strategy is to emphasize those sectors where Multi-Color's
equipment and expertise distinguish the Company from other label producers. The
Company maintains a marketing and technical support staff of eight people who
are responsible for developing innovative solutions, including new labels, for
customers' label needs.
Approximately 57% of the Company's total sales in fiscal 1999 were to
three customers: The Procter & Gamble Company, 30% (divided among six product
categories and three separate buyers); Wm. Wrigley Jr. Company, 15%; and Alvin
Press, 12%. The loss or substantial reduction of the business of any of the
major customers would have a material adverse effect on the Company.
PRINTING OPERATIONS
Multi-Color's printing equipment consists of four rotogravure printing
presses in its Scottsburg plant. All of the Company's presses are capable of
multi-color, high-speed and high-quality graphic printing. The Company also has
a wide variety of cutting and finishing equipment used to process printed
material. The wide range of capabilities and versatility provided by the
Company's equipment permits it to respond rapidly to changing customer needs,
including the development of new products. The Company believes it has
sufficient capacity to meet any expected growth of its products. At March 28,
1999 and March 28, 1998, the label backlogs were approximately $3,000,000.
RESEARCH AND DEVELOPMENT
Multi-Color believes research and development of new products helps it
maintain its leading position in the in-mold label business. While the process
for making in-mold labels is not patented, Multi-Color believes its experience
and expertise related to the production of in-mold labels have enabled it to
maintain its leadership in the in-mold label and substrate market.
The Company's emphasis is to develop and market new products for
applications where superior technical characteristics are required. Multi-Color
developed and is successfully marketing a range of plastic in-mold labels for
applications in which plastic containers are subjected to more demanding
physical requirements.
Multi-Color's research and development expenditures totaled $340,000 in
fiscal 1999, $447,000 in fiscal 1998 and $246,000 in fiscal 1997.
RAW MATERIALS
Multi-Color purchases proprietary products from a number of printing
suppliers which is common in the printing industry. To prevent potential
disruptions to its manufacturing facilitates, Multi-Color has developed
relationships with more than one supply source for each of its critical raw
materials. Additionally, its raw material suppliers are major corporations, each
demonstrating successful historical performance. Although this should prevent
any long term business interruption due to the inability of obtaining raw
materials, there could be short term manufacturing disruptions during the
customer qualification period for any new raw material source.
COMPETITION
The Company has a large number of competitors in its traditional label
business and three principal competitors in the in-mold label and substrate
business. Some of these competitors in the traditional label business have
greater financial and other resources than the Company. The three competitors in
the in-mold label and substrate business are either private companies or
subsidiaries of public companies and the Company cannot access the financial
resources of these organizations. Multi-Color could be adversely affected should
a competitor develop labels similar or technologically superior to the Company's
in-mold label. Although price is an important competitive factor in the
Company's business, the Company believes competition is principally dependent
upon quality, service, and technical expertise and experience. Customer service,
quality and qualification requirements present barriers to new entrants into
Multi-Color's markets.
<PAGE> 5
5
EMPLOYEES
As of March 28, 1999, the Company had 237 employees, of whom 64 were
salaried and 173 were hourly. Multi-Color considers its labor relations to be
good and has not experienced any work stoppages during the previous ten years.
REGULATION
The Company operations are subject to regulation by federal and state
environmental protection agencies. To insure ongoing compliance with federal and
state environmental protection agency requirements, the Company revamped its
environmental compliance procedures during fiscal 1999. An outside environmental
consultant was retained by the Company to monitor environmental compliance
during fiscal 1999 at a cost of approximately $72,000. Additionally, the Company
made capital investments of approximately $75,000 to maintain compliance with
federal and state environmental requirements. The Company is estimating it will
spend approximately $200,000 in fiscal 2000 to improve its existing equipment as
part of its ongoing environmental compliance strategy.
The United States Food and Drug Administration regulates the raw
materials used in labels for food products. These regulations apply to the
consumer products companies for which Multi-Color produces labels. Multi-Color
uses materials specified by the consumer products companies in producing labels
for food products.
ITEM 2. PROPERTIES
Multi-Color operates two production facilities. The Scottsburg, Indiana
plant has 56,300 square feet and is situated on 14 acres, 30 miles north of
Louisville, Kentucky. The Erlanger, Kentucky facility, housing its Multi-Color
Graphics division and Laser Graphic Systems, Inc., has approximately 12,000
square feet and is located on approximately 3 acres, 10 miles south of
Cincinnati. The Company owns the real estate constituting all of its plant
sites. The land and buildings of all the plant sites are encumbered by mortgages
in favor of the lenders under the Company's credit facility. The Company's
executive offices are located at 205 West Fourth Street, Cincinnati, Ohio in
approximately 5,000 square feet of leased office space. The Company's properties
are in good condition, are well-maintained, and are adequate for the Company's
intended uses. During April, 1998, the Company sold its 300,000 square foot
building located in Cincinnati. The Company leased approximately 50,000 square
feet of the Cincinnati plant for warehouse purposes until March 28, 1999. As
previously stated, the Company has approved the construction of a 56,000 square
foot addition to its Scottsburg, Indiana plant which is scheduled for completion
during the second quarter of fiscal 2000. The Company will enter into a sale
leaseback arrangement for its Scottsburg facility when the addition is
completed.
ITEM 3. LEGAL PROCEEDINGS
On June 17, 1998, Multi-Color received proposed final findings and
orders from the Director of the Ohio Environmental Protection Agency (OEPA)
concerning certain alleged violations of environmental laws at the Company's
Cincinnati facility which include a proposed civil penalty of $282,700. The
Company subsequently reached an agreement with OEPA on March 8, 1999 which
included a settlement requiring payment of $100,000 and associated costs.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None during the fourth quarter of the fiscal year ending March 28,
1999.
EXECUTIVE OFFICERS
Francis D. Gerace was promoted to President and was appointed a
Director on May 18, 1999. Prior to that time Mr. Gerace served as the Company's
Vice President of Operations from April 1998 to May 1999. Mr. Gerace was
Director of Strategic Business Systems for Fort James Corporation's Packaging
Business from 1993 to 1997. From 1974 to 1993, Mr. Gerace held various general
management positions with Conagra, Inc. and Beatrice Foods Company.
Stephen G. Mulch was appointed Vice President of Corporate Sales and
Business Development of the Company on April 6, 1998. Prior to joining
Multi-Color, Mr. Mulch was Vice President and General Manager of a four plant
division of Fort James Corporation's Packaging Business from 1991 to 1997. From
1972 to 1991, Mr. Mulch held various positions with Tenneco, Inc. including
general manager of the offset carton converting plant in Grand Rapids, Michigan.
William R. Cochran was appointed Vice President, Chief Financial
Officer of the Company in June of 1994 and Secretary in June, 1998. Prior to
joining Multi-Color, Mr. Cochran was Chief Financial Officer of AluChem, Inc.
from 1990 to 1994. From 1975 to 1990, Mr. Cochran was employed in various
accounting functions for Libbey Owens Ford, Owens-Corning and Deloitte & Touche,
LLP.
John R. Voelker was appointed Vice President of Sales and Marketing of
the Company in June of 1995. Prior to that time Mr. Voelker served as the
Company's Vice President National Accounts from 1992 to 1995 and Vice President
Multi-Color Graphics from 1989 to 1992.
<PAGE> 6
6
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's shares trade in the over-the-counter market under the
NASDAQ-NMS symbol LABL. The following table sets forth the high and low sales
prices of the Company's common stock ("Common Stock") as reported in the NASDAQ
National Market System during fiscal year 1998 and 1999. These prices may not
necessarily be indicative of any reliable market value.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
March 31, 1997 through June 29, 1997 $7.50 $5.75
June 30, 1997 through September 28, 1997 $8.38 $6.75
September 29, 1997 through December 28, 1997 $7.50 $6.25
December 29, 1997 through March 29, 1998 $10.00 $6.00
Year Ended March 29, 1998 $10.00 $5.75
March 30, 1998 to June 28, 1998 $7.50 $6.25
June 29, 1998 to September 27, 1998 $7.50 $5.38
September 28, 1998 to December 27, 1998 $7.63 $6.00
December 28, 1998 to March 28, 1999 $7.75 $6.25
Year Ended March 28, 1999 $7.75 $5.38
</TABLE>
As of June 18, 1999, there were approximately 425 shareholders of
record of the Common Stock.
Multi-Color currently intends to retain its earnings to fund the growth
of its business and does not anticipate paying any cash dividends on Common
Stock in the foreseeable future. The Company's financing agreements currently
prohibit the payment of Common Stock cash dividends. Additionally, the Company
is prohibited from paying dividends on the Common Stock unless all dividends
declared on the Company's Series A Convertible Preferred Stock and Series B
Convertible Preferred Stock have been fully paid. The Company is currently in
arrears on dividends payable on its preferred stock.
<PAGE> 7
7
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended (1)
-------------------------------------------------------------
MARCH 28 March 29 March 30 March 31 April 2
1999 1998 (4) 1997 1996 1995 (2)
-------------------------------------------------------------
(In thousands, except per share amounts)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $ 49,786 $ 47,576 $ 48,143 $ 55,375 $ 61,777
Gross profit 6,929 4,840 8,267 8,508 2,803
Operating income (loss) 2,165 (2,455) 2,579 2,631 (7,168)
Income (loss) before extraordinary item and
cumulative effect of a change in accounting
principle 1,259 (4,071) 1,627 1,191 (8,523)
Extraordinary item -- -- -- -- 225
Cumulative effect of a change in accounting
principle 224 -- -- -- --
Net Income (loss) 1,484 (4,071) 1,627 1,191 (8,748)
Diluted earnings (loss) per share 0.50 (2.00) 0.58 0.55 (4.03)
Weighted average shares outstanding - diluted 2,949 2,172 2,821 2,178 2,169
Preferred dividends 275 279 261 -- --
Working capital $ (1,869) $ (1,827) $ 661 $ (3) $(17,031)(3)
Total assets 29,781 30,854 28,487 30,454 35,959
Short-term debt 4,369 4,782 3,411 2,902 19,898(3)
Long-term debt 11,086 11,208 9,902 14,873 8
Shareholders' investment 6,010 4,665 8,907 4,920 2,998
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Multi-Color maintained a fiscal year of 52 or 53 weeks beginning on the
Monday nearest to March 31 through March 28, 1999. Fiscal year 1994 was a
53 week fiscal year. All other fiscal years set forth herein are 52 weeks.
(2) Fiscal year 1995 results include a write down of $3,800 on certain
equipment and an extraordinary charge of $225 related to prepayment fees
associated with a previous financing agreement.
(3) Includes $14,700 of long-term debt which was subject to acceleration and
therefore classified as current.
(4) Fiscal year 1998 results include a restructuring charge of $315, a write
down of $438 on certain property, and a $668 loss on sale of assets.
<PAGE> 8
8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction
with the Company's Consolidated Financial Statements and notes thereto appearing
elsewhere herein.
RESULTS OF OPERATIONS
The following table shows, for the periods indicated, certain
components of the Company's consolidated statements of operations as a
percentage of net sales and the percentage changes in the dollar amounts of such
components compared to the indicated prior period.
<TABLE>
<CAPTION>
Percentage of Net Sales
-----------------------------
1999 1998 1997
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0%
Cost of Goods Sold 86.1% 89.8% 82.8%
Gross Profit 13.9% 10.2% 17.2%
Selling, General & Administrative Expenses 9.6% 13.8% 11.8%
Restructuring Charge -- .7% --
Impairment Loss on Long-Lived Assets -- 1.0% --
Operating Income (Loss) 4.3% (5.3%) 5.4%
Interest Expense 2.2% 2.1% 2.1%
Other (.4%) 1.2% (.1%)
Income (Loss) Before Income Taxes and
Cumulative Effect of a Change in
Accounting Principle 2.5% (8.6%) 3.4%
Income taxes -- -- --
Net Income (Loss) Before Cumulative Effect of a Change in Accounting 2.5% (8.6%) 3.4%
Principle
Cumulative Effect of Change in Accounting for Inventories, Net of Tax (.5%) -- --
Net income (Loss) 3.0% (8.6%) 3.4%
</TABLE>
COMPARISON OF FISCAL YEARS ENDED MARCH 28, 1999 AND MARCH 29, 1998
<TABLE>
<CAPTION>
1999 1998 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $49,785,886 $47,575,608 $2,210,278
</TABLE>
Net sales increased $2,210,000, or 4.6%, in 1999 as compared to 1998.
In-mold and cylinder sales increased 6.4% or approximately $2,600,000 over 1998
levels. The Company has confidence in the long-term growth of the in-mold label
and rotogravure cylinder markets, which is supported by the expansion program in
process at the Scottsburg label manufacturing facility.
<TABLE>
<CAPTION>
1999 1998 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Gross Profit $ 6,929,086 $ 4,840,344 $2,088,742
As a % of Sales 13.9% 10.2% 3.7%
</TABLE>
Gross profit increased $2,089,000 as compared to the prior year. The
increase in gross profit was primarily attributable to improved efficiencies and
waste reduction realized at the Scottsburg facility during fiscal 1999 offset by
the reclassification of plant administration expenses ($900,000), to cost of
goods sold and higher cost product produced in the fiscal 1998 fourth quarter
and sold in the first quarter of fiscal 1999.
<TABLE>
<CAPTION>
1999 1998 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Selling, General
Administrative Expenses $ 4,764,312 $ 6,542,759 $ (1,778,447)
As a % of Sales 9.6% 13.8% (4.2%)
</TABLE>
Selling, general, and administrative expenses decreased $1,778,000 as
compared to the prior year. The decrease in selling, general and administrative
expenses is primarily due to the previously mentioned reclassification of plant
administrative expenses ($900,000) to cost of goods sold, cost reductions made
in administrative overhead, and expense control offset in part by the Company
changing its accrual for environmental matters. As previously disclosed, the
Company voluntarily notified officials in
<PAGE> 9
9
Indiana that environmental compliance issues existed at the Scottsburg plant.
The Company subsequently announced that the Indiana Department of Environmental
Management ("IDEM") had made an initial proposal for an administrative
settlement to resolve the compliance issues which included a settlement of
claims for penalties in the amount of $1,277,000 and associated costs. The
Company reached an agreement with IDEM to resolve these matters during the
fiscal 1999 second quarter. In light of those developments and certain
developments in Ohio at that time, the Company increased its' environmental
reserve by $544,000 during the fiscal 1999 second quarter.
<TABLE>
<CAPTION>
1999 1998 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Restructuring Charge - $ 314,599 $ (314,599)
</TABLE>
During 1998, the Company accrued a restructuring charge of $314,599 for
the previously announced closing of the Cincinnati printing plant to handle
severance and benefit obligations associated with the plant closing.
<TABLE>
<CAPTION>
1999 1998 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Impairment Loss
Long-Lived Assets - $ 438,459 $ (438,459)
</TABLE>
The 1998 impairment loss on long-lived assets represents the loss on
sale of the Cincinnati plant which was completed two days subsequent to the end
of the fiscal year on March 31, 1998. The amount shown represents the difference
between the basis in the property and the selling price.
<TABLE>
<CAPTION>
1999 1998 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Interest Expense $ 1,121,565 $ 1,032,579 $ 88,986
</TABLE>
Interest expense increased as compared to the same period in the prior
year and was the result of higher average borrowings under the revolving credit
line combined with higher average short-term rates.
The Company recorded no amounts for income taxes in 1999 as it
anticipates utilizing net operating loss carryforward benefits generated in
prior periods. There is no net deferred tax balance.
The Company recorded net income for 1999 of $1,484,000 or an increase
of $5,555,000 from the net loss of $(4,071,000) in 1998, due to the factors
discussed above.
COMPARISON OF FISCAL YEARS ENDED MARCH 29, 1998 AND MARCH 30, 1997
<TABLE>
<CAPTION>
1998 1997 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 47,575,608 $ 48,142,920 $ (567,312)
</TABLE>
Due to the Company phasing out certain categories of prime labels, the
sales decline of 1.2% was anticipated. Prime label sales declined $3,583,000 to
approximately $8,968,000 in 1998. The decline in prime label sales was the
result of the Company phasing out sales to one major customer as the
profitability did not meet the minimum returns established by management. Prime
labels are labels applied to the consumer-product packaging after the package is
manufactured. Sales of in-mold labels and cylinders increased 8.5% or
approximately $3,000,000 over 1997 levels. The Company has confidence in the
long-term growth of the in-mold label and rotogravure cylinder markets which is
supported by the expansion programs initiated during 1998 at the Scottsburg
label and Erlanger cylinder manufacturing facilities.
<TABLE>
<CAPTION>
1998 1997 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Gross Profit $ 4,840,344 $ 8,266,949 $ (3,426,605)
As a % of Sales 10.2% 17.2% (7.0%)
</TABLE>
In support of the expected growth of in-mold label sales, during 1998,
the Company initiated an expansion program at the Scottsburg plant which doubled
its printing capacity. The Company installed a refurbished rotogravure press and
purchased a new Uteco Italian rotogravure press. Additionally, this expansion
program was initiated to give Multi-Color sufficient printing capacity allowing
the Company to close its Cincinnati facility.
The 1998 decline in gross profit was primarily the result of a delay of
the start-up of the new presses at Scottsburg and the resulting continuing
fiscal 1998 operation of the Cincinnati plant which was scheduled to be shut
down during the latter part of the second quarter. These two events combined to
increase expenses and contributed to the majority of the reduction of gross
profit. Although the Company was successful in selling the Cincinnati plant on
March 31, 1998, the facility negatively impacted 1998 results by approximately
$720,000.
<PAGE> 10
10
Additionally, the Company incurred one-time-only charges of
approximately $1,100,000 during the fourth quarter and had to curtail production
on two presses at its Scottsburg plant during the fourth quarter due to
environmental compliance problems. Both of these events negatively impacted the
1998 gross profit results.
<TABLE>
<CAPTION>
1998 1997 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Selling, General
Administrative Expenses $ 6,542,759 $ 5,688,392 $ 854,367
As a % of Sales 13.8% 11.8% 2.0%
</TABLE>
Selling, general, and administrative expenses increased $854,000 in
fiscal 1998. The increase was attributable to the Company accruing a proposed
final findings and orders from the Ohio Environmental Protection Agency which
included a civil penalty, severance agreement charges, utilization of an outside
consultant to assist in the start-up of the Scottsburg expansion, increased
legal expenses, and increased bad debt expense.
<TABLE>
<CAPTION>
1998 1997 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Restructuring
Charge $ 314,599 $ - $ 314,599
</TABLE>
During the second quarter, the Company accrued a restructuring charge
of $310,000 for the previously announced closing of the Cincinnati printing
plant to handle severance and benefit obligations associated with the plant
closing. An additional $4,599 was accrued during the fourth quarter of fiscal
1998 resulting in a total restructuring charge of $314,599.
<TABLE>
<CAPTION>
1998 1997 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Impairment Loss
Long-Lived Assets $ 438,459 $ - $ 438,459
</TABLE>
The 1998 impairment loss on long-lived assets represents the loss on
sale of the Cincinnati plant which was completed two days subsequent to the end
of the fiscal year on March 31, 1998. The amount shown represents the difference
between the basis in the property and the selling price.
<TABLE>
<CAPTION>
1998 1997 Change
- ------------------------------------------------------------------
<S> <C> <C> <C>
Interest Expense $ 1,032,579 $ 1,011,709 $ 20,870
</TABLE>
Interest expense increased due to higher average borrowings on the
Company's working capital line offset by the retirement of the Cincinnati
Industrial Revenue Bonds.
The Company recorded no amounts for income taxes in 1998 as it
anticipates utilizing net operating loss carryforward benefits generated in
prior periods. There is no net deferred tax balance.
The Company recorded a net loss for 1998 of $(4,071,000) or a decrease
of $(5,698,000) from the net profit of $1,627,000 in 1997, due to the factors
discussed above.
Liquidity and Capital Resources
The Company is dependent on availability under its Revolving Credit
Agreement, approximately $1,600,000 at March 28, 1999, and its operations to
provide for cash needs. The Company entered into a new credit agreement with PNC
Bank, Ohio, National Association and Comerica Bank on June 22, 1998 which is a
restatement of its prior credit agreements. The earlier credit agreements were
amended several times between 1994 and 1998 to reflect, among other things, the
Company's inability to meet certain financial covenants, including cash flow
coverage ratios, leverage ratios and current ratios, and to reflect equity
infusions and changes in the Company's results of operations during that time
period. The new credit agreement, which has been amended twice since June 22,
1998, provides for available borrowings under a revolving line of credit up to a
maximum of $5,000,000, subject to certain borrowing base limitations. The new
credit agreement also allows $3,500,000 of capital expenditures including an
expansion program for a new facility in Scottsburg. Under the terms of the new
credit agreement, the Company is subject to a number of financial covenants.
Additionally, the Company is prohibited from paying deferred dividends on its
outstanding preferred stock, is limited in its ability to pay current dividends
on its outstanding preferred stock, and is limited in its ability to borrow
other funds until certain performance criteria are met. The amount of accrued
but unpaid preferred dividends was $354,034 at March 28, 1999.
In fiscal 1999, cash provided by operating activities was $2,300,000
compared to $1,300,000 in 1998. The increase was primarily due to an increase in
net income. In fiscal 1999, net cash used in investing activities was ($45,000)
compared to ($3,277,000) in 1998. The decrease was attributable to a decrease in
capital expenditures. Net cash used in financing activities was ($2,234,000) in
fiscal 1999 compared to net cash provided by financing activities of $1,905,000
in 1998. In 1998, net cash provided by financing activities was impacted by the
issuance of $1,300,000 in net long term debt and additional borrowings of
$1,370,000 under the revolving line of credit. In 1999, net cash used in
financing activities was impacted by increased payments of $1,660,000 to the
sinking fund and a $400,000 reduction in the revolving line of credit. The
Company believes it has both sufficient short and long term liquidity financing.
The Company had a deficit in working capital of $(1,869,000) at the end of
fiscal 1999 as
<PAGE> 11
11
compared to a working capital deficit of $(1,827,000) at the end of fiscal 1998.
At May 31, 1999, the Company was in compliance with its loan covenants and
current in its principal and interest payments on all debt.
During fiscal 2000, the Company has no scheduled material principal
payments under any of its debt obligations. The Company expects during the
second fiscal quarter to complete the sale and leaseback of its Scottsburg
facility. The net proceeds from the sale, approximately $1,900,000, will be
utilized to reduce long-term debt. Accordingly, debt service requirements
representing sinking fund payments, for fiscal 2000 are expected to be
approximately $850,000. The Company intends to make capital expenditures other
than those in connection with any expansion of its Scottsburg facility of
approximately $1,750,000 during fiscal 2000. The Company believes that cash flow
from operations and availability under the revolving line of credit are
sufficient to meet its capital requirements and debt service requirements for
fiscal 2000. From time to time the Company has reviewed potential acquisitions
of businesses. While the Company has no present commitments to acquire any
businesses, such an acquisition may require the Company to issue additional
equity or incur additional debt.
Inflation
The Company does not believe that its operations have been materially
affected by inflation.
Computer Systems - Year 2000 Impact
STATE OF READINESS: The Company has implemented a Year 2000 compliance program
designed to ensure that the Company's computer systems and applications will
function properly beyond 1999. The program implementation involves employees
from all areas of the Company. The Company believes it has identified all the
systems which need testing, including, but not limited to, its traditional
information systems, as well as those systems containing embedded chip
technology, commonly found in the Company's presses and buildings and equipment
connected with the buildings' infrastructure such as heating, refrigeration and
air conditioning systems. The majority of testing to determine if the systems
are Year 2000 compliant is complete. The majority of the remediation phase is
complete and currently in use. The remainder of the remediation phase is
projected to be completed by the end of September, 1999. In some cases,
purchased software will be the basis for modifying non-compliant systems.
COSTS: The total expected cost of the Company's Year 2000 compliance program is
projected to be less then $300,000, consisting primarily of the installation of
a new computer system and internal salaries, of which approximately $275,000 had
been spent as of March 28, 1999. All costs are either capitalized or expensed as
incurred. The Company expects funding for these costs to come from working
capital.
RISK: Although the full consequences are unknown, the failure of one of the
Company's critical systems or the failure of an outside system, such as that of
the Federal Reserve or electrical utilities, may result in interruption of the
Company's business which may result in a materially adverse effect on the
operations or financial condition of the Company. With particular respect to raw
materials purchased for processing from the Company's key vendors, the Company
does not expect that any vendor's or small group of vendor's Year 2000 problems
would have a long-term negative effect on the Company since the Company does not
believe that any of its competitors would be in a position to sell competitive
products either. Notwithstanding the foregoing, the loss of revenue for an
extended period of time would likely have a materially adverse effect on the
Company. The Company has contacted its significant customers and vendors with
respect to their ability to comply with the Year 2000. Despite the relative lack
of problems encountered in these discussions, the Company has no direct
confirmation or control of Year 2000 remediation efforts by its customers and
suppliers and therefore, there can be no assurance that system failures that
cause materially adverse results to customers or vendors would not have an
adverse effect on the Company.
CONTINGENCY PLANS: The Company is in the process of developing contingency plans
for those areas which might be affected by the Year 2000 problems; however,
there can be no assurance that a contingency plan will exist for all situations.
Further, until the Company has received information from most of its suppliers
and customers, any contingency plan would be preliminary.
ITEM 7A. QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks from changes in interest rates
and certain of its outstanding debt. The outstanding loan balance under the
Company's bank credit facility bears interest at a variable rate based on
prevailing short-term interest rates in the United States and Europe. Based on
the last fiscal year's average outstanding debt, 100 basis point change in
interest rate would change interest expense by approximately $149,000. The
Company does not presently use financial or derivative instruments to manage its
interest costs. The Company has minimal foreign exchange risks.
<PAGE> 12
12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements and Financial Statement
Schedules
PART lll
--------
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Report of Independent Certified Public Accountants 13
Consolidated Statements of Operations for the years ended
March 28, 1999; March 29, 1998 and March 30, 1997 14
Consolidated Balance Sheets as of March 28, 1999 and March 29, 1998 15
Consolidated Statements of Shareholders' Investment for the years ended
March 28, 1999; March 29, 1998 and March 30, 1997 16
Consolidated Statements of Cash Flows for the years ended
March 28, 1999; March 29, 1998 and March 30, 1997 17
Notes to Consolidated Financial Statements 18-29
</TABLE>
All Financial Statement Schedules have been omitted because either they
are not required or the information is included in the financial statements and
notes thereto.
<PAGE> 13
13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Directors of Multi-Color Corporation:
We have audited the accompanying consolidated balance sheets of
Multi-Color Corporation (an Ohio corporation) as of March 28, 1999 and March 29,
1998, and the related consolidated statements of operations, shareholders'
investment, and cash flows for each of the three years in the period ended March
28, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Multi-Color Corporation as of March 28, 1999 and March 29, 1998, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years then ended in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
Cincinnati, Ohio
May 3, 1999, except for Note 11 as to which the date is May 14, 1999
<PAGE> 14
14
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended March 28, 1999, March 29, 1998 and March 30, 1997
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $ 49,785,886 $ 47,575,608 $ 48,142,920
Cost of goods sold 42,856,800 42,735,264 39,875,971
- ----------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 6,929,086 4,840,344 8,266,949
Selling, general and administrative expenses 4,764,312 6,542,759 5,688,392
Restructuring charge (Note 14) -- 314,599 --
Impairment loss on long-lived assets (Note 2(f)) -- 438,459 --
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME (LOSS) 2,164,774 (2,455,473) 2,578,557
Interest expense 1,121,565 1,032,579 1,011,709
Minority interest in losses of subsidiary (Note 11) (33,385) (84,889) (13,424)
Other (income) expense, net (primarily loss on sale of assets in 1998) (182,866) 667,831 (46,886)
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE 1,259,460 (4,070,994) 1,627,158
Income taxes (Note 5) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE 1,259,460 (4,070,994) 1,627,158
Cumulative Effect of Change in Accounting for Inventories, Net of Tax (224,392) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 1,483,852 $ (4,070,994) $ 1,627,158
- ----------------------------------------------------------------------------------------------------------------------------------
Preferred stock dividends $ 275,183 $ 279,408 $ 260,809
Net income (loss) applicable to common shares: $ 1,208,669 $ (4,350,402) $ 1,366,349
- ----------------------------------------------------------------------------------------------------------------------------------
Weighted average shares and equivalents outstanding:
Basic 2,268,012 2,172,482 2,169,937
Diluted 2,949,212 2,172,482 2,821,300
- ----------------------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per common share:
Income (loss) before Cumulative Effect $ 0.43 $ (2.00) $ 0.63
Cumulative Effect of Change in Accounting for Inventories 0.10 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income (loss) $ 0.53 $ (2.00) $ 0.63
Diluted earnings (loss) per common and common equivalent share:
Income (loss) before Cumulative Effect $ 0.43 $ (2.00) $ 0.58
Cumulative Effect of Change in Accounting for Inventories 0.07 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net Income (loss) $ 0.50 $ (2.00) $ 0.58
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.
<PAGE> 15
15
CONSOLIDATED BALANCE SHEETS
As of March 28, 1999 and March 29, 1998
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 2(d)) $ 9,997 $ 12,352
Accounts receivable, net:
Trade (Note 9) 4,488,774 4,605,268
Other 25,777 76,538
Note receivable (Note 8) 52,943 129,709
Inventories (Note 2(e)) 4,443,871 5,022,985
Deferred tax benefit (Note 5) 407,603 475,800
Prepaid expenses, supplies, pension and other 141,593 164,598
Prepaid income taxes 21,000 29,944
Property held for sale, net (Note 2(g)) -- 905,415
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 9,591,558 11,422,609
PROPERTY, PLANT AND EQUIPMENT, NET (NOTE 2(F)) 17,714,230 18,619,681
SINKING FUND DEPOSITS (NOTE 3) 2,283,900 620,648
DEFERRED CHARGES, NET 91,243 48,240
NOTE RECEIVABLE (NOTE 8) -- 42,513
NOTE RECEIVABLE FROM OFFICER/SHAREHOLDER (NOTE 8) 100,000 100,000
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 29,780,931 $ 30,853,691
====================================================================================================================================
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Short-term debt (Note 3) $ 3,253,730 $ 3,664,436
Current portion of long-term debt (Note 3) 1,000,000 1,024,256
Current portion of capital lease obligations (Note 10) 115,153 93,316
Accounts payable (Note 2(i)) 4,589,053 6,968,195
Accrued liabilities:
Payroll benefits and related taxes (Note 4(a)) 1,021,945 866,353
Deferred compensation (Note 4(c)) 485,800 --
Real estate and personal property taxes 280,351 325,917
Interest and other 714,984 307,362
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 11,461,016 13,249,835
LONG-TERM DEBT (NOTE 3) 11,000,000 11,000,000
CAPITAL LEASE OBLIGATIONS (NOTE 10) 85,792 207,980
DEFERRED INCOME TAXES (NOTE 5) 407,603 475,800
DEFERRED COMPENSATION (NOTE 4(C)) 447,798 853,760
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities 23,402,209 25,787,375
- ------------------------------------------------------------------------------------------------------------------------------------
Minority Interest (Note 11) 368,302 401,687
- ------------------------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 12)
SHAREHOLDERS' INVESTMENT (NOTES 7, AND 13):
Preferred stock, no par value; 1,000,000 shares authorized,
- 11,918 and 13,242 shares issued and outstanding at March 28, 1999 and March 29, 1998
(aggregate liquidation preference of $476,706) Series B 476,706 529,666
- 52,500 shares issued and outstanding at March 28, 1999 and March 29, 1998
(aggregate liquidation preference of $2,625,000) Series A 2,418,303 2,418,303
Common stock, no par value; 10,000,000 shares authorized, 2,208,300 and
2,182,060 shares issued and outstanding at March 28, 1999 and March 29, 1998 220,830 218,206
Paid-in capital 9,379,410 9,191,952
Accumulated deficit (6,484,829) (7,693,498)
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' investment 6,010,420 4,664,629
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' investment $ 29,780,931 $ 30,853,691
====================================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.
<PAGE> 16
16
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' INVESTMENT
For the Years Ended March 28, 1999, March 29, 1998 and March 30, 1997
<TABLE>
<CAPTION>
Preferred Stock Common Stock
----------------------------------------------------------
Number of Number of Additional
Shares Shares Paid-In Accumulated Pension
Outstanding Amount Outstanding Amount Capital Deficit Liability
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
March 31, 1996 13,242 $ 529,666 2,172,569 $ 217,257 $ 9,140,334 $(4,709,445) $ (257,769)
ADD (DEDUCT):
Net income -- -- -- -- -- 1,627,158 --
Preferred stock issued 52,500 2,418,303 -- -- -- -- --
Purchase of treasury stock -- -- -- -- -- -- --
Issuance of common stock -- -- 7,950 795 34,311 -- --
Preferred dividends
declared -- -- -- -- -- (260,809) --
Change in additional
pension liability -- -- -- -- -- -- 212,087
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE,
March 30, 1997 65,742 2,947,969 2,180,519 218,052 9,174,645 (3,343,096) (45,682)
ADD (DEDUCT):
Net loss -- -- -- -- -- (4,070,994) --
Issuance and retirement
of treasury stock -- -- (909) (91) 8,691 -- --
Preferred dividends
declared -- -- -- -- -- (279,408) --
Issuance of common stock -- -- 2,450 245 8,616 -- --
Change in additional
pension liability -- -- -- -- -- -- 45,682
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE,
March 29, 1998 65,742 2,947,969 2,182,060 218,206 9,191,952 (7,693,498) --
ADD (DEDUCT)
Net income -- -- -- -- -- 1,483,852 --
Preferred dividends declared -- -- -- -- -- (275,183) --
Issuance of common stock -- -- 13,000 1,300 38,900 -- --
Issuance of stock options -- -- -- -- 96,922 -- --
Conversion of Preferred
Stock to Common Stock (1,324) (52,960) 13,240 1,324 51,636 -- --
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE,
March 28, 1999 64,418 $ 2,895,009 2,208,300 $ 220,830 $ 9,379,410 $(6,484,829) $ --
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Treasury
Stock Total
- ------------------------------------------------------------
<S> <C> <C>
BALANCE,
March 31, 1996 -- $ 4,920,043
ADD (DEDUCT):
Net income -- 1,627,158
Preferred stock issued -- 2,418,303
Purchase of treasury stock (45,000) (45,000)
Issuance of common stock -- 35,106
Preferred dividends
declared -- (260,809)
Change in additional
pension liability -- 212,087
- ------------------------------------------------------------
BALANCE,
March 30, 1997 (45,000) 8,906,888
ADD (DEDUCT):
Net loss -- (4,070,994)
Issuance and retirement
of treasury stock 45,000 53,600
Preferred dividends
declared -- (279,408)
Issuance of common stock -- 8,861
Change in additional
pension liability -- 45,682
- ------------------------------------------------------------
BALANCE,
March 29, 1998 -- 4,664,629
ADD (DEDUCT)
Net income -- 1,483,852
Preferred dividends declared -- (275,183)
Issuance of common stock -- 40,200
Issuance of stock options -- 96,922
Conversion of Preferred
Stock to Common Stock --
- ------------------------------------------------------------
BALANCE,
March 28, 1999 $ -- $ 6,010,420
============================================================
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.
<PAGE> 17
17
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended March 28, 1999, March 29, 1998 and March 30, 1997
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,483,852 $(4,070,994) $ 1,627,158
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation 1,845,535 1,995,528 1,739,065
Amortization 32,575 38,000 53,234
Minority interest in losses of subsidiary (33,385) (84,889) (13,424)
Net (gain) loss on disposal of equipment 10,401 546,358 (186)
Increase in non-current deferred compensation 79,838 161,840 88,781
Increase in non-current pension obligation, net of equity charge -- 44,319 95,884
Decrease in notes receivable 119,279 109,048 99,697
Net (increase) decrease in accounts receivable, inventories,
prepaid expenses, supplies, and pension and other and refundable income taxes 778,318 (1,425,994) 798,108
Net increase (decrease) in accounts payable, accrued liabilities
(excluding restructuring charge) (2,039,755) 3,551,758 (1,935,996)
Impairment loss on long-lived assets -- 438,459 --
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,276,658 1,303,433 2,552,321
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,416,128) (4,312,323) (3,051,607)
Proceeds from sale of equipment 1,371,058 1,035,118 352,415
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (45,070) (3,277,205) (2,699,192)
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in revolving line of credit, net (410,706) 1,370,642 402,240
Sinking fund withdrawls (payments) (1,663,252) (546,197) 2,162,488
Proceeds from sale (purchase) of treasury stock, net -- 53,600 (45,000)
Proceeds from issuance of common stock, net 40,200 8,861 35,106
Proceeds from issuance of preferred stock, net -- -- 2,418,303
Proceeds from issuance of long-term debt -- 3,034,321 --
Repayment of long-term debt (24,256) (1,613,198) (4,901,960)
Preferred stock dividend payments -- (209,557) (260,809)
Proceeds from minority shareholder of subsidiary -- -- 500,000
Capitalized bank fees (75,578) (78,240) --
Repayment of capital lease obligation (100,351) (114,888) (123,166)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (2,233,943) 1,905,344 187,202
- --------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (2,355) (68,428) 40,331
- --------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 12,352 80,780 40,449
- --------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 9,997 $ 12,352 $ 80,780
- --------------------------------------------------------------------------------------------------------------------------------
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 1,121,565 $ 1,084,318 $ 1,079,629
Income taxes paid $ 38,550 $ 37,195 $ --
Supplemental Disclosure of Non Cash Activities:
Increase in property, plant and equipment and capital lease obligation $ -- $ -- $ 160,415
Increase in accrued interest and other and decrease in shareholders' investment
due to accrual of preferred stock dividends $ 275,183 $ 69,851 $ --
================================================================================================================================
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE
STATEMENTS.
<PAGE> 18
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 28, 1999, March 29, 1998 and March 30, 1997
(1) THE COMPANY
Multi-Color Corporation (the Company), headquartered in Cincinnati,
Ohio, primarily supplies printed labels and engravings to various name brand
consumer products companies located throughout the United States. The Company
has plants located in Scottsburg, Indiana and Erlanger, Kentucky.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) FISCAL YEAR
Through March 28, 1999 the fiscal year of the Company commenced on the
Monday closest to March 31. References to fiscal 1999, 1998, and 1997 are for
the fiscal years ended March 28, 1999, March 29, 1998 and March 30, 1997,
respectively. Beginning in 2000, the Company's fiscal year will end on March 31.
(b) PRINCIPLES OF CONSOLIDATION
The consolidated financials statements include the accounts of the
Company and its majority-owned subsidiary (Note 11). All significant
intercompany transactions have been eliminated.
(c) REVENUE RECOGNITION
Sales and related costs of goods sold are recognized upon shipment to
the customers.
(d) CASH AND CASH EQUIVALENTS
Cash and cash equivalents include operating cash accounts.
(e) INVENTORIES
Inventories are stated at the lower of FIFO (first-in, first-out) cost
or market. Inventories as of year-end consisted of the following:
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------
<S> <C> <C>
Finished goods $2,390,765 $2,564,039
Work-in-process 1,097,675 739,105
Raw materials 955,431 1,719,841
- -------------------------------------------
$4,443,871 $5,022,985
============================================
</TABLE>
Effective March 30, 1998, the Company elected to change its method of
inventory valuation to encompass a more complete absorption of overhead costs in
inventory. The cumulative effect of this accounting change as of March 30, 1998
was to increase income $224,000 and has been separately identified on the
consolidated statement of operations. Information is not available to determine
the effect of the change on net income (loss) for fiscal years ended March 29,
1998 and March 30, 1997.
(f) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following as of
year-end:
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------
<S> <C> <C>
Land and buildings $ 3,316,508 $ 2,976,900
Machinery and equipment 25,274,804 24,742,748
Furniture and fixtures 1,207,654 916,632
Construction in progress 9,900 366,413
- -----------------------------------------------------------
29,808,866 29,002,693
Accumulated depreciation (12,094,636) (10,383,012)
- -----------------------------------------------------------
$ 17,714,230 $ 18,619,681
===========================================================
</TABLE>
Property, plant and equipment are stated at cost. In recognition of the
losses experienced by the Company at the former Cincinnati location in prior
years, the Company recorded a $3,800,000 impairment loss in 1995 on certain
long-lived assets at the Cincinnati location to reduce the carrying cost to the
fair value as generally determined by an independent appraiser. Additional
impairment losses of $438,000 and $112,000 were recorded in 1998 and 1996,
respectively on the Cincinnati location's assets, while assets with an assigned
impairment value of $827,000, $2,038,000 and $246,000 were either sold or
disposed of in 1999, 1998 and 1997, respectively.
<PAGE> 19
19
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets, as follows:
Building...........................20-30 years
Machinery and equipment.............3-15 years
Furniture and fixtures..............5-10 years
(g) PROPERTY HELD FOR SALE
The Company had made available for sale certain property (former
Cincinnati facility) considered by management to be excess and no longer
necessary for the operations of the Company. Accordingly, this property, net of
accumulated depreciation of $950,878 and impairment losses of $438,000 at March
29, 1998 was classified as property held for sale. The aggregate carrying values
of such property are periodically reviewed and are stated at the lower of cost
or net realizable value. This property was sold in 1999.
(h) DEFERRED CHARGES
Deferred charges, net, consist primarily of costs associated with the
Scottsburg Industrial Revenue Bonds issued in 1998 which are amortized over the
term of the agreement (Note 3).
(i) ACCOUNTS PAYABLE
Accounts payable includes approximately $737,000 and $1,460,000 at
March 28, 1999 and March 29, 1998, respectively, for outstanding checks.
(j) INCOME TAXES
Deferred income tax assets and liabilities are provided for temporary
differences between the tax basis and reported amounts of assets and liabilities
that will result in taxable or deductible amounts in future years.
(k) EARNINGS (LOSS) PER COMMON SHARE
The computation of basic earnings (loss) per common share is based upon
the weighted average number of common shares outstanding during the period and
the weighted average number of contingently issuable common shares upon
satisfaction of all necessary conditions. At March 28, 1999 contingently
issuable shares total 97,160 and relate to common shares issuable under a
deferred compensation agreement. Diluted earnings (loss) per common share is
based upon the weighted average number of common shares outstanding during the
period plus, in periods in which they have a dilutive effect, the effect of
common shares contingently issuable, primarily from the conversion of Series A &
B convertible preferred stock, the exercise of stock options, and common shares
issuable under a deferred compensation agreement.
In the third quarter of 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128") . SFAS
128 changed the computation, presentation and disclosure requirements for
earnings per share ("EPS"). Under SFAS 128, EPS is presented as basic earnings
per share ("basic EPS") and diluted earnings per share ("diluted EPS") and
replaces the presentation of primary EPS and fully diluted EPS. The adoption of
SFAS 128 resulted in the restatement of earnings per share for all periods
presented in the Company's consolidated financial statements.
The following is a reconciliation of the number of shares used in the
basic EPS and diluted EPS computations:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------ ------------------------- -------------------------
Per Per Per
Share Share Share
Shares Amount Shares Amount Shares Amount
---------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS 2,268,012 $0.43 2,172,482 $(2.00) 2,169,937 $0.63
---------- ------ --------- ------ --------- ------
Cumulative effect of
change in accounting
for inventories 2,268,012 .10 -- -- -- --
Effect of dilutive 37,040 (.01) -- -- -- --
stock options -- -- -- -- 40,097 (0.01)
Convertible shares 644,160 (.02) -- -- 611,266 (0.04)
---------- ------ --------- ------ --------- ------
Diluted EPS 2,949,212 $0.50 2,172,482 $(2.00) 2,821,300 $0.58
---------- ------ --------- ------ --------- ------
</TABLE>
Preferred stock dividends of $275,183, $279,408 and $260,809 in fiscal
1999, 1998 and 1997, respectively, have been deducted from the net income or
added to the net loss generated in fiscal 1999, 1998 and 1997, respectively, to
arrive at the income/loss available to common stockholders for the calculation
of basic EPS. Common stock equivalents of approximately 701,630 shares,
resulting from convertible shares and stock options, were excluded from the
fiscal 1998 computation of diluted EPS because to do so would have been
antidilutive.
<PAGE> 20
20
(l) ADVERTISING COSTS
Advertising costs are charged to expense as incurred. Expenses were
minimal for the three fiscal years ended March 28, 1999.
(m) RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to expense as incurred.
Expenses were $340,000, $447,000 and $246,000 for 1999, 1998 and 1997,
respectively.
(n) STOCK-BASED COMPENSATION
The provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation" are effective for the Company in 1997. This standard requires that
employee stock-based compensation either continue to be determined under
Accounting Principles Board Opinion (APB) No. 25 "Accounting for Stock Issued to
Employees" or in accordance with the provisions of SFAS No. 123, whereby
compensation expense is recognized based on the fair value of stock-based awards
on the grant date. The Company accounts for such awards under the provisions of
APB No. 25 and, accordingly, no compensation cost has been recognized for the
stock awards unless required by APB No. 25. The Company has made the required
additional disclosures under SFAS No. 123 for 1999, 1998 and 1997 (Note 7).
(o) USE OF ESTIMATES IN FINANCIAL STATEMENTS
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
(p) FAIR VALUE DISCLOSURE
The fair value of financial instruments approximates carrying value.
(q) COMPREHENSIVE INCOME
The Company does not have any comprehensive income items other then net
income.
(r) NEW PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting No. 133, Accounting for Derivative Instruments and
Hedging Activities, which requires entities to report all derivatives at fair
value as assets or liabilities in their statements of financial position. This
statement is effective for financial statements issued for fiscal periods
beginning after June 15, 1999. The Company does not currently have any
derivative instruments or hedging activities to report under this standard.
<PAGE> 21
21
(3) DEBT
The components of the Company's debt are as follows:
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM DEBT
Revolving line of credit $ 3,253,730 $ 3,664,436
===============================================================================================================
LONG-TERM DEBT
Scottsburg Industrial Revenue Bonds, floating weekly rate, which approximates
3.52% at March 28, 1999, scheduled balloon
payment $5,750,000 in October 2009 5,750,000 5,750,000
Scottsburg Industrial Revenue Bonds, floating weekly rate,
which approximates 3.42% at March 28, 1999, scheduled balloon
payment of $3,000,000 in April 2007 3,000,000 3,000,000
Boone County Industrial Revenue Bonds, floating weekly rate, which
approximates 3.35% at March 28, 1999, scheduled balloon
payment of $3,250,000 in December 2009 3,250,000 3,250,000
Other -- 24,256
- ---------------------------------------------------------------------------------------------------------------
$ 12,000,000 $ 12,024,256
Less-current portion of debt and sinking fund payments (1,000,000) (1,024,256)
- ---------------------------------------------------------------------------------------------------------------
$ 11,000,000 $ 11,000,000
===============================================================================================================
</TABLE>
The following is a schedule of future annual principal payments payable
after one year (including sinking fund payments):
<TABLE>
<S> <C>
2001 $ 250,000
2002 -
2003 -
2004 -
2005 -
2006 and thereafter 10,750,000
--------------------------------------------------------------
$11,000,000
==============================================================
</TABLE>
On June 22, 1998, the Company restated its credit agreement with an
existing lender and a new additional lender. The restated credit agreement
provides for a revolving line of credit with borrowings up to a maximum of
$5,000,000 subject to certain borrowing base limitations. The interest rate
fluctuates and is based on the Company meeting certain ratios. For the year
ended March 28, 1999, the average interest rate was 7.83%. At March 28, 1999,
the Company had approximately $1,600,000 in available borrowings under the
revolving line of credit. The credit agreement expires July 31, 2000. The credit
agreement requires quarterly sinking fund deposits of $250,000 until termination
of the agreement. The agreement also contains various financial and operating
covenants which, among others, require the Company to maintain certain leverage,
working capital and cash flow ratios and limits the payment of dividends. On
April 16, 1999, the Company amended its credit agreement to increase the
collateral borrowing base for short term borrowings, increase the annual lease
payments to cover the lease payments for the Scottsburg expansion, and allow for
the payment of partial quarterly preferred dividends if certain cumulative net
income thresholds are maintained.
On May 1, 1999, the Company amended its credit agreement providing for
a reduction in its short term and long term borrowings rates and reduction
overall fee structure. Additionally, the lenders reduced the quarterly sinking
fund deposit requirement to $200,000 until termination of the agreement.
On April 1, 1997 the Company entered into a $3,000,000 industrial
development revenue bond financing (Series 1997 Bonds) with the City of
Scottsburg, Indiana in support of its Scottsburg, Indiana plant expansion.
With respect to the Bonds, the Company has the option to establish the
Bonds' interest rate form (variable or fixed interest rate). When a fixed
interest rate is selected, the fixed rate assigned will approximate the market
rate for comparable securities. When a variable rate is selected, or at the end
of a fixed interest rate period, the Bondholders reserve the right to demand
payment of the bonds. In the event that any of the Bondholders exercise their
rights, a remarketing agent is responsible for remarketing the Bonds on a best
efforts basis for not less than the outstanding principal and accrued interest.
In the event the Bonds are not able to be remarketed and the letters of credit
are exercised, the lender is committed to providing financing for up to 458
days. These letters of credit expire July 31, 2000.
<PAGE> 22
22
(4) EMPLOYEE BENEFIT PLANS
(a) The Company has a defined benefit plan covering former hourly employees
at its former Cincinnati facility who met certain age and service requirements.
The Company's funding policy is to contribute the recommended actuarially
determined contribution. Pension costs are based on length of service after May
1, 1985 using the unit credit method.
As the Company has sold the Cincinnati facility (see Note 2(g)), this
plan will be terminated in the near future. There is no curtailment gain or loss
to be recognized at March 28, 1999.
Effective March 30, 1998, the Company adopted Statement of Financial
Accounting Standards No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits ("SFAS 132"). SFAS 132 revises employers' disclosures
about pensions and other post retirement benefit plans. As required, disclosures
for 1998 and 1997 have been restated for comparative purposes.
The change in the Company's benefit obligation is computed as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Projected benefit obligation at beginning of year $ 2,468,988 $ 2,449,063 $ 2,232,996
Service cost 39,624 98,871 140,074
Interest cost 164,322 163,113 158,341
Actual (gain) (158,784) (159,506) (18,982)
Benefits paid (103,376) (82,553) (63,366)
Change in assumptions 164,450 -- --
- ------------------------------------------------------------------------------------------------
Projected benefit obligation at end of year $ 2,575,224 $ 2,468,988 $ 2,449,063
================================================================================================
</TABLE>
The change in the Plan's assets is computed as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fair value of plan assets at beginning of year $ 2,837,343 $ 2,447,700 $ 1,967,460
Actual return on plan assets 123,502 382,935 375,606
Employer contribution -- 89,261 168,000
Benefits paid (103,376) (82,553) (63,366)
- ---------------------------------------------------------------------------------------------
Fair value of plan assets at end of year $ 2,857,469 $ 2,837,343 $ 2,447,700
=============================================================================================
</TABLE>
The following table sets forth the Plan's funded status and amounts recognized
on the Company's accompanying balance sheets:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Funded status $ 282,245 $ 368,355 $ (1,363)
Unrecognized net actuarial (gain) loss (168,198) (277,116) 45,682
Unrecognized prior service cost 1,221 2,427 3,633
- --------------------------------------------------------------------------------
Prepaid benefit cost $ 115,268 $ 93,666 $ 47,952
================================================================================
</TABLE>
The weighted-average actuarial assumptions used were:
<TABLE>
<CAPTION>
As of MARCH 28, 1999 March 29, 1998 March 30, 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 6.75% 7.25% 7.25%
Expected return on plan assets 7.50% 9.00% 9.00%
</TABLE>
Net periodic pension cost includes the following components:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 39,624 $ 98,871 $ 140,074
Interest cost 164,322 163,113 158,341
Expected return on plan assets (208,398) (219,643) (183,821)
Amortization of prior service cost 1,206 1,206 1,206
Recognized net actuarial (gain) loss (18,356) - 1,320
- --------------------------------------------------------------------------------
Net periodic pension cost $ (21,602) $ 43,547 $ 117,120
================================================================================
</TABLE>
(b) The Company has established a profit sharing/401(k) retirement savings
plan which covers those employees who meet certain service requirements and are
not participants in the Company retirement plan discussed above. The plan
provides for voluntary contributions by the Company's employees up to a
specified maximum percentage of gross pay. At the discretion of the Company's
Board of Directors, the Company will contribute a specified matching percentage
of the employee contributions.
<PAGE> 23
23
Company contributions in 1999, 1998 and 1997 approximated $147,000, $147,000 and
$124,000, respectively, which represent one-half of the employee contributions
not exceeding 6% of gross pay.
(c) The Company previously entered into deferred compensation agreements
with certain officers and management employees. Amounts due under deferred
compensation agreements with current officers are classified as long-term
liabilities at March 28, 1999 and March 29, 1998. Amounts due under deferred
compensation agreements with former officers are classified as short-term
liabilities at March 28, 1999. Interest on the long-term deferred amounts which
are included in the balances due were accrued at 9 3/4%, 10 1/2% and 10 1/4% in
1999, 1998 and 1997, respectively. Expenses in 1999, 1998 and 1997 approximated
$80,000, $93,000 and $88,000, respectively.
(d) The Company allows retirees between the ages of 62 and 65 to continue
to participate in its health plan. The retirees reimburse the Company a
stipulated premium amount so the net cost to the Company is immaterial. The
Company offers no other programs requiring recognition of the cost of
postretirement or postemployment benefits under the Financial Accounting
Standards Board statements on accounting for postretirement and postemployment
benefits.
(e) During 1992 the Company established a supplemental retirement program
for key executives which allows a maximum of $300,000 in loans to such employees
with a maximum of $100,000 to any one individual. At March 28, 1999 and March
29, 1998 a $100,000 loan at no interest was outstanding under this program from
a former officer (Note 8).
(f) The Company has an employee stock purchase plan whereby eligible
employees may purchase up to 1,000 shares of Company stock per year through
payroll deductions. The Company will contribute one bonus share for every four
shares purchased up to a maximum of twenty bonus shares per year to any one
employee; however, in 1999, 1998 and 1997 the Company contributed cash rather
than stock.
(5) INCOME TAXES
The provision (credit) for income taxes includes the following components:
<TABLE>
<CAPTION>
1999 1998 1997
=========================================================================================
<S> <C> <C> <C>
Currently payable (receivable)
Federal $ 684,000 $ -- $ 1,151,000
State and local 121,000 -- 107,000
Benefit of operating loss carryforwards (805,000) -- (1,258,000)
- -----------------------------------------------------------------------------------------
-- -- --
- -----------------------------------------------------------------------------------------
Deferred
Federal 9,000 103,000 7,000
State and local (9,000) (103,000) (7,000)
$ -- $ -- $ --
=========================================================================================
</TABLE>
The following is a reconciliation between the statutory federal income
tax rate and the effective rate shown above:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------
<S> <C> <C> <C>
Computed provision (credit) for federal
income taxes at the statutory rate 34% (34%) 34%
State and local income taxes, net of
federal income tax benefit 5% (2%) (6%)
Valuation allowance (61%) (49%) (43%)
Changes in estimates for deferred
components, primarily net operating
loss carryforward 9% (17%) --
EPA fines 11% 2% --
Other 2% 2% 3%
- ------------------------------------------------------------------
Effective tax rate -- -- --
==================================================================
</TABLE>
<PAGE> 24
24
At year end the net deferred tax components consisted of the following:
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities
Tax depreciation over book depreciation $(2,489,702) $(2,879,393)
- --------------------------------------------------------------------------------
Other (13,600) (15,543)
- --------------------------------------------------------------------------------
$(2,503,302) $(2,894,936)
================================================================================
Deferred tax assets:
Asset impairment loss $ 191,014 $ 472,135
Deferred compensation 294,059 266,911
Ohio EPA fine -- 96,118
Inventory reserves -- 36,977
Other 209,277 232,050
AMT credit carryforward 131,115 89,855
Tax credit carryforward 42,019 142,215
State deferred tax asset, net of
federal benefit 96,431 117,861
Net operating loss carryforward 4,370,234 5,168,896
- --------------------------------------------------------------------------------
5,334,149 6,623,018
Valuation allowance (2,830,847) (3,728,082)
- --------------------------------------------------------------------------------
$ 2,503,302 $ 2,894,936
- --------------------------------------------------------------------------------
Net deferred tax components $ -- $ --
================================================================================
</TABLE>
For tax reporting purposes, the Company has approximately $131,000 of
alternative minimum tax (AMT) credits available for an indefinite period. The
regular tax net operating loss of approximately $12,855,000 can be carried
forward and used to reduce future taxable income in addition to tax credits of
approximately $42,000, which can be carried forward through the following
expiration dates:
<TABLE>
<CAPTION>
Year Net Operating Losses Tax Credits
----------------------------------------------------------------------------------------------
<S> <C> <C>
2009 $ 5,390,000 $ -
2010 5,204,000 -
2011 612,000 9,000
2012 - 33,000
2013 1,649,000 -
----------------------------------------------------------------------------------------------
$12,855,000 $42,000
==============================================================================================
</TABLE>
The valuation allowance, which decreased by approximately $897,000 in
1999, is required due to the uncertainty of realizing the net deferred tax asset
through future operations.
(6) MAJOR CUSTOMERS
During 1999, 1998 and 1997, sales to three companies and their related
subsidiaries and divisions approximated 57%, 54% and 51%, respectively, of the
Company's net sales individually presented as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------------------------------------------
<S> <C> <C>
30% 26% 27%
15% 14% 13%
12% 14% 11%
--------------------------------------------------------------------
57% 54% 51%
====================================================================
</TABLE>
In addition, the year end accounts receivable balances of these
companies approximated 43%, 44%, and 43% of the Company's total accounts
receivable balance at year end 1999, 1998, and 1997, respectively.
The loss or substantial reduction of the business of any of the major
customers would have a material adverse effect on the Company.
<PAGE> 25
25
(7) STOCK OPTIONS
As of March 28, 1999, 88,500 of the authorized but unissued common
shares were reserved for issuance to key employees and directors under the
Company's qualified and non-qualified stock option plans. Stock options granted
under the plans enable the holder to purchase common stock at an exercise price
not less than the market value on the date of grant. To the extent not
exercised, options will expire not more than ten years after the date of grant.
The applicable options vest immediately or ratably over a three to five year
period. A summary of the changes in the options outstanding during 1999, 1998,
and 1997 is set forth below:
<TABLE>
<CAPTION>
Options Price
Number of Weighted Average Range
Shares Exercise Price (Per Share)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oustanding at March 31, 1996 312,800 $6.82 $2.63-$11.00
Granted 42,500 6.12 6.00-6.25
Exercised (1,250) 2.63 2.63
Cancelled (5,000) 9.25 9.25
Expired (20,000) 11.00 11.00
- ---------------------------------------------------------------------------------------------------------------------
Outstanding at March 30, 1997 329,050 $6.47 $2.63-$11.00
Granted 150,000 6.53 6.41-6.77
Exercised (2,450) 3.62 2.63-4.65
Cancelled (228,050) 6.79 2.63-9.25
Expired (2,500) 8.95 7.75-9.25
- ---------------------------------------------------------------------------------------------------------------------
Outstanding at March 29, 1998 246,050 $6.18 $2.63-$11.00
Granted 261,675 6.47 2.63-7.38
Exercised (13,000) 3.09 2.63-4.65
- ---------------------------------------------------------------------------------------------------------------------
OUTSTANDING AT MARCH 28, 1999 494,725 $6.42 $2.63-$11.00
=====================================================================================================================
</TABLE>
<PAGE> 26
26
The following summarizes options outstanding and exercisable at March
28, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- ------------------------------------
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable at Exercise
Exercise Prices at 3/28/99 Contractual Life Price at 3/28/99 Price
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2.63 to $6.25 170,925 5.30 $5.26 95,350 $4.91
$6.26 to $11.00 323,800 3.91 $7.03 223,800 $7.25
--------------- -----------------
494,725 319,150
=============== =================
</TABLE>
The weighted average fair value at date of grant for options granted
during 1999, 1998 and 1997 was $3.21, $3.27 and $3.17, respectively. The fair
value of options at the date of grant was estimated using the binomial model
with the following weighted average assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected life (years) 5.00 5.00 5.00
Interest rate 5.23% 5.42% 6.04%
Volatility 48.27% 50.19% 51.71%
Dividend yield 0% 0% 0%
</TABLE>
Had compensation cost for the Company's stock option plans been
determined based on the fair value at the grant date for awards in 1999, 1998
and 1997 consistent with the provisions of SFAS No. 123, the Company's net
income (loss) and earnings (loss) per share would have been reduced to the pro
forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income (loss) - as reported $1,483,852 $(4,070,994) $1,627,158
Net income (loss) - pro forma 868,656 $(4,086,937) $1,547,054
Net income (loss) per common and common
equivalent share - as reported
Basic $.53 $(2.00) $.63
Diluted $.50 $(2.00) $.58
Net income (loss) per common and common
equivalent share - pro forma
Basic $.38 $(2.01) $.59
Diluted $.30 $(2.01) $.55
</TABLE>
(8) NOTES RECEIVABLE
The components of notes receivable are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Officer note established under the
supplemental retirement program (Note 4(e)) $100,000 $ 100,000
- -----------------------------------------------------------------------------------------------------------------
Note receivable related to the sale of the
previously owned Lockport facility,
interest at 9%, payable in monthly
installments through July 1999,
secured by a mortgage on the property
and personal guarantees $ 52,943 $ 172,222
- -----------------------------------------------------------------------------------------------------------------
Less-current portion (52,943) (129,709)
- -----------------------------------------------------------------------------------------------------------------
$ - $ 42,513
=================================================================================================================
</TABLE>
<PAGE> 27
27
(9) ACCOUNTS RECEIVABLE
The Company values its trade accounts receivable on the reserve method.
The following table summarizes the activity in the allowance for doubtful
accounts for fiscal 1999, 1998 and 1997.
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 418,669 $ 26,077 $ 35,716
Provision 76,051 555,840 58,654
Accounts written-off (356,753) (163,248) (68,293)
- --------------------------------------------------------------------------------
Balance at end of year $ 137,967 $ 418,669 $ 26,077
================================================================================
</TABLE>
(10) CAPITAL LEASE OBLIGATIONS
The Company has entered into capital leases for certain equipment. The
amount recorded for the equipment and related obligations under the capital
leases amounted to $558,000 at year end 1998. The accumulated depreciation was
$119,766 and $94,450 at year end 1999 and 1998, respectively.
The following is a schedule of future annual minimum lease payments
under the capital leases together with the present value of the net minimum
lease payments, as of March 28, 1999:
<TABLE>
<S> <C>
Total future minimum lease payments $225,389
Less: Interest (24,444)
----------------------------------------------------------------------------------------
Present value of minimum lease payments 200,945
Less: Current portion (115,153)
---------------------------------------------------------------------- -----------------
$ 85,792
========================================================================================
</TABLE>
The following is a schedule of future annual minimum lease payments:
<TABLE>
<S> <C>
2000 $135,063
2001 88,403
2002 1,923
----------------------------------------------------------
$225,389
==========================================================
</TABLE>
(11) MAJORITY-OWNED SUBSIDIARY
In July 1996, the Company started a new entity with Think Laboratories,
Inc. (Think) of Kashiwa, Japan to develop the market for engraving services in
the United States. The new company, Laser Graphic Systems, Incorporated (LGSI),
is owned 80% by the Company. For financial reporting purposes, LGSI's assets,
liabilities and earnings are consolidated with those of the Company, and Think's
interest in the Company is included in the accompanying financial statements as
minority interest.
The Company and Think are subject to a shareholders' agreement. Under
the terms of the agreement, Think sells to LGSI any equipment it requires that
is manufactured by Think at a price no greater than 80% of Think's normal
wholesale price. During 1999, 1998 and 1997, LGSI purchased equipment and other
items from Think totaling $62,558, $174,510 and $422,849, respectively.
Additionally, a royalty of 5% of revenues from cylinders produced by LGSI has
been paid by LGSI to Think beginning July 1, 1997. The parties may agree to
dissolve LGSI upon either party providing 90 days written notice of its desire
to do so.
On May 14, 1999, the Company and Think Laboratories, Inc. (Think)
entered into an agreement whereby the Company will purchase all of Think's
equity interest in LGSI for $500,000. Think will continue to provide
improvements and technology enhancements for the laser engraving process to the
Company. The Company is required to make quarterly payments of $41,668
commencing July 1999 and continuing thereafter until the first business day of
April 2002.
<PAGE> 28
28
(12) COMMITMENTS AND CONTINGENCIES
(a) OPERATING LEASE AGREEMENTS
The Company has various equipment, office and plant facility leases.
Leases expire on various dates through August 2003. Rent expense during 1999,
1998 and 1997 was approximately $358,000, $451,000, and $256,000, respectively.
The annual future minimum rental obligations as of March 28, 1999 are
as follows:
<TABLE>
<S> <C>
2000 $303,000
2001 208,000
2002 139,000
2003 34,000
2004 11,000
---------------------------------------------------------
Total $695,000
=========================================================
</TABLE>
(b) ENVIRONMENTAL MATTERS
During early January 1998, the Company discovered problems with the
environmental permits relating to the operations of the two newly installed
presses at the Scottsburg, Indiana plant. The Company promptly and appropriately
notified the Indiana Department of Environmental Management (IDEM) and
voluntarily halted production on the involved presses. The Company has
successfully resolved the permitting issues with IDEM, but due to a period of
non-compliance with required regulatory statues, the Company was assessed a
civil penalty of up to $625,000. This amount has been recorded in full at March
28, 1999. The civil penalty may be reduced by up to $225,000 upon completion of
1 of 3 proposed Supplemental Environmental Projects (SEPs). Payment of this
portion of the penalty will be contingent upon which SEP is chosen, if any, by
the Company. The Company is still in the process of evaluating the proposed
SEPs. The remainder of the civil penalty ($400,000) is due in quarterly
installments of $33,000 through September 30, 2001.
On March 8, 1999, the Company reached an agreement with the Director of
the Ohio Environmental Protection Agency concerning certain alleged violations
of environmental laws at the Company's Cincinnati facility which included a
civil penalty of $100,000. The Company accrued and expensed the penalty as of
March 29, 1998.
(c) SALE/LEASEBACK OF SCOTTSBURG, INDIANA PLANT
In February 1999, the Company entered into an agreement to sell its
Scottsburg, Indiana plant to a third party for $1,900,000. The sale will occur
upon completion of an approximately 56,000 square foot addition to the plant by
the purchaser and is expected to take place during the second quarter of fiscal
2000. Concurrent with the sale, the Company will enter into a lease agreement
with the third party to lease the plant for a period of 20 years. Monthly lease
payments will be $46,200. The lease will be classified as a capital lease.
(d) LITIGATION
Litigation is instituted from time to time against the Company which
involves routine matters incident to the Company's business. In the opinion of
management, the ultimate disposition of pending litigation will not have a
material adverse effect upon the Company's financial statements.
(13) PREFERRED STOCK
On May 2, 1996, the Company sold to Label Venture Group LLC 52,500
shares of a newly created issue of Series A Convertible Preferred Stock for
$2,432,000. Each share of Series A Convertible Preferred Stock is immediately
convertible, at the option of the shareholder, into ten shares of the Company's
Common Stock and may be redeemed by the Company starting in May 1998. The Series
A Convertible Preferred Stock bears a preferred dividend of $4.25 per share and
has a liquidation value of $50 per share, plus unpaid dividends. The Company's
lenders required $1,000,000 of the proceeds to be deposited into the Company's
Sinking Fund Deposit account (Note 3). The remaining proceeds were used to
support capital expansion plans.
Effective March 31, 1996, 13,242 shares of Series B Convertible
Preferred Stock were issued upon conversion of the entire outstanding balance,
including accrued interest, of Subordinated Convertible Notes that were issued
in October 1995. The Series B Convertible Preferred Stock was issued at $40 per
share and also has a liquidation value of $40 per share, plus unpaid dividends.
These shares are immediately convertible, at the option of the shareholders,
into 132,420 shares of Common Stock and may be redeemed by the Company starting
in May 1998.
In fiscal 1999, 1,324 shares of Series B Convertible Preferred Stock
were converted into 13,240 shares of Common Stock.
<PAGE> 29
29
The Company is currently prohibited from paying all preferred dividends
on its outstanding preferred stock under the terms of the credit agreement until
certain performance covenants are met. The amount of accrued but unpaid
preferred dividends was $345,034 at March 28, 1999. The credit agreement
currently prohibits redemption of the preferred stock. Beginning in May 1999,
the Company was allowed to pay $35,000 in dividends per quarter to the holders
of preferred stock (representing approximately 50% of the required quarterly
payment).
(14) RESTRUCTURING PLAN
The Company implemented a restructuring plan in fiscal year 1998 which
resulted in a pre-tax charge to operating results of $314,599 primarily related
to reducing operations at the Cincinnati plant. The restructuring charge
included severance pay, employee insurance and certain other costs. These costs
were paid in full in fiscal 1998.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Part III (except for certain information relating to Executive Officers
included in Part 1) is omitted. The Company intends to file with the Securities
and Exchange Commission within 120 days of the close of the fiscal year ended
March 28, 1999 a definitive proxy statement containing such information pursuant
to Regulation 14A of the Securities Exchange Act of 1934 and such information
shall be deemed to be incorporated herein by reference from the date of filing
such document.
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following consolidated financial statements of Multi-Color
Corporation, the related notes, and the Report of Independent
Certified Public Accountant are incorporated herein.
Consolidated Statements of Operations for the years ended
March 28, 1999, March 29, 1998 and March 30, 1997.
Consolidated Balance Sheets as of March 28, 1999 and March 29,
1998.
Consolidated Statements of Shareholders' Investment for the
years ended March 28, 1999, March 29, 1998 and March 30, 1997.
Consolidated Statements of Cash Flows for the years ended
March 28, 1999, March 29, 1998 and March 30, 1997.
Notes to Consolidated Financial Statements
Report of Grant Thornton LLP, Independent Certified Public
Accountants
(a)(2) Financial Statement Schedules
All schedules have been omitted because either they are not
required or the information is included in the financial
statements and notes thereto.
<PAGE> 30
30
(a)(3) List of Exhibits
<TABLE>
<CAPTION>
Exhibit Filing
Numbers Description of Exhibit Status
------- ---------------------- ------
<S> <C> <C>
3 (i) Amended and Restated Articles of Incorporation a
3 (ii) Amendment to Amended and Restated Articles of Incorporation a
3 (iii) Amended and Restated Code of Regulations b
10.1 Irrevocable Letter of Credit dated July 19, 1994 from PNC Bank, Ohio, National c
Association covering $5,750,000 City of Scottsburg, Indiana Economic
Development Revenue Bonds
10.2 Trust Indenture securing City of Scottsburg, Indiana Economic Development d
Revenue Series 1989 dated as of October 1, 1989
10.3 Bond Purchase Agreement for $5,750,000 City of Scottsburg, Indiana Economic d
Development Revenue Bonds Series 1989
10.4 Remarketing Agreement dated October 1, 1989 by and among d
the Company, The Ohio Company and The PNC Bank (Formerly
The Central Trust Company, N.A).
10.5 First Refusal Agreement among the Company's shareholders b
10.6 Loan Agreement between City of Scottsburg, Indiana and Multi-Color dated d
October 1, 1989 for $5,750,000
10.7 Trust Indenture securing County of Boone, Kentucky Industrial Building Revenue Bonds, d
Series 1989 dated as of December 1, 1989
10.8 Loan Agreement between County of Boone, Kentucky and Multi-Color for $3,250,000 d
dated as of December 1, 1989
10.9 Remarketing Agreement dated as of December 1, 1989 by and d
among the Company, The Ohio Company and The PNC Bank
(Formerly The Central Trust Company, N.A.)
10.10 Remarketing Agreement dated October 1, 1989 by and among the Company, The Ohio d
Company and The PNC Bank (Formerly The Central Trust Company, N.A.)
10.11 Irrevocable Letter of Credit dated July 19, 1994 from PNC Bank, Ohio, National c
Association covering $3,250,000 County of Boone, Kentucky Industrial Building
Revenue Bonds
10.12 Bond Purchase Agreement for $3,250,000 County of Boone, Kentucky Industrial c
Building Revenue Bonds Series 1989
10.14 Loan Agreement between the Company and City of Scottsburg, Indiana, dated e
as of April 1, 1997 for $3,000,000
10.15 Third Amended and Restated Credit, Reimbursement and Security Agreement, original j
dated as of July 15, 1994, restated as of June 22, 1998 among Multi-Color Corporation
and PNC Bank, National Association and Comerica Bank
10.16 Amendment, Consent and Waiver Agreement dated April 16, 1999, original dated as of f
July 15, 1994, restated as of June 22, 1998 among Multi-Color Corporation and PNC
Bank, National Association and Comerica Bank.
10.17 Second Amendment to Credit Agreement dated May 1, 1999, original dated as of July 15, f
1994, restated as of June 22, 1998, amended as of April 16, 1999 among Multi-Color
Corporation and PNC Bank, National Association and Comerica Bank
MANAGEMENT CONTRACTS AND COMPENSATION PLANS
10.18 1987 Stock Option Plan b
10.19 1992 Directors' Stock Option Plan b
10.20 Profit Sharing/401(k) Retirement Savings Plan and Trust b
10.21 Deferred Compensation Rabbi Trust Agreement a
10.22 Multi-Color Employee Stock Purchase Plan as g
amended and restated dated March 4, 1992
10.23 1997 Stock Option Plan h
10.24 1998 Non-Employee Director Stock Option Plan of Multi-Color Corporation i
10.25 Employment Agreement entered into March 16, 1998 by and between the Company f
and Steven G. Mulch
10.26 Employment Agreement entered into March 16, 1998 by and between the Company f
and Francis D. Gerace
10.27 Amendment to Employment Agreement dated May 18, 1999, to employment agreement f
dated as of March 16, 1998 among Multi-Color Corporation and Francis D. Gerace
10.28 Purchase Agreement to Sell dated February 26, 1999 by and between the f
Company and Indiana Properties, LLC
</TABLE>
<PAGE> 31
31
<TABLE>
<S> <C> <C>
27 Financial Data Schedule f
</TABLE>
a Filed as an exhibit to the Form 10-K for the 1996 fiscal year and
incorporated herein by reference.
b Filed as an exhibit to Registration Statement #33-51772 and
incorporated herein by reference.
c Filed as an exhibit to the Form 10-K for the 1994 fiscal year and
incorporated herein by reference.
d Filed as an exhibit to the Form 10-K for the 1990 fiscal year and
incorporated herein by reference.
e Filed as an exhibit to the Form 10-K for the 1997 fiscal year and
incorporated herein by reference.
f Filed herewith.
g Filed as an exhibit to the Form 8-K filed on March 16, 1992.
h Filed as an exhibit to the 1997 Proxy Statement and incorporated
herein by reference.
i Filed with the Company's definitive Proxy Statement for the annual
meeting held October 15, 1998.
j Filed as an exhibit to the Form 10-K for the 1998 fiscal year and
incorporated herein by reference.
<PAGE> 32
32
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
MULTI-COLOR CORPORATION
Dated: June 24, 1999 (Registrant)
-------------------
/s/ Francis D. Gerace
--------------------------------
Francis D. Gerace
President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Name Capacity Date
<S> <C> <C>
/s/ Francis D. Gerace President and Director June 24, 1999
- ----------------------------------
Francis D. Gerace
/s/ William R. Cochran Vice President, June 24, 1999
- ---------------------------------- Chief Financial Officer, Secretary
William R. Cochran (Principal Financial Officer
and Principal Accounting
Officer)
/s/ Louis M. Perlman Chairman of the June 24, 1999
- ---------------------------------- Board of Directors
Louis M. Perlman
/s/ Gordon B. Bonfield Director June 24, 1999
- ----------------------------------
Gordon B. Bonfield
/s/ Charles B. Connolly Director June 24, 1999
- ----------------------------------
Charles B. Connolly
/s/ Lorrence T. Kellar Director June 24, 1999
- ----------------------------------
Lorrence T. Kellar
/s/ Burton D. Morgan Director June 24, 1999
- ----------------------------------
Burton D. Morgan
/s/ David H. Pease, Jr. Director June 24, 1999
- ----------------------------------
David H. Pease, Jr.
</TABLE>
<PAGE> 1
Exhibit 10.16
AMENDMENT, CONSENT AND WAIVER AGREEMENT
MULTI-COLOR CORPORATION, an Ohio corporation (the "Company"), PNC BANK,
NATIONAL ASSOCIATION and COMERICA BANK (each individually a "Lender" and
collectively the "Lenders") and PNC BANK, NATIONAL ASSOCIATION, as agent for the
Lenders (the "Agent"), hereby agree as follows effective as of April 20, 1999
("Effective Date"):
1. RECITALS.
1.1 On June 22, 1998, the Company, the Lenders and the Agent entered
into a Third Amended and Restated Credit, Reimbursement and Security
Agreement, which amended and fully restated a Credit, Reimbursement
and Security Agreement dated as of July 15, 1994 (as amended and
restated, the "Credit Agreement"). Capitalized terms used herein and
not otherwise defined herein will have the meanings given such terms
in the Credit Agreement.
1.2 The Company has requested that the Lenders (i) amend certain
provisions of the Credit Agreement as provided herein; (ii) waive
the Excess Cash Flow recapture provision of the Credit Agreement for
the Fiscal Year ending March 31, 1999; (iii) consent to the sale and
leaseback of the Company's Scottsburg, Indiana facility; (iv)
consent to certain uses of the funds in the Construction Account, as
provided herein, and (v) consent to the Company's purchase from
Think Laboratory Co., Ltd. of its equity interest in Laser Graphic
Systems, Inc., and the Lenders are willing to do so subject to and
in accordance with the terms of this Amendment, Consent and Waiver
Agreement (this "Agreement").
2. AMENDMENTS.
2.1 The final sentence of Section 1.1.46 of the Credit Agreement
(definition of Eligible Inventory) is hereby deleted in its entirety
and replaced with the following: "Notwithstanding item (d) above, up
to $500,000 of plastic film inventory will be included in Eligible
Inventory if such Inventory otherwise satisfies the definition of
Eligible Inventory contained in this Section."
2.2 Section 10.2 of the Credit Agreement is hereby deleted in its
entirety and replaced with the following:
"10.2 LEASES. Enter into or permit to remain in effect any rental or
lease agreement (whether an operating lease or a capital lease) for
real or personal property whose term, including renewal options,
exceeds five (5) years (except for the term of the Lease dated as of
February 26, 1999 (the "Scottsburg Lease") between the Company and
Indiana Properties, LLC) or if aggregate annual rental payments
under all lease agreements (whether operating leases or capital
leases) for real and personal property on an annual basis would,
when combined with the annual rental payments of Laser Graphic
Systems, Incorporated, exceed $1,200,000."
<PAGE> 2
2.3 Section 10.12 of the Credit Agreement is hereby deleted in its
entirety and replaced with the following:
"10.12 DIVIDENDS. Declare or pay dividends of any kind on any shares
of capital stock now or hereafter outstanding or make any other
distribution of cash or property to its shareholders, or authorize
or set aside any funds or other property for any such purpose;
PROVIDED, HOWEVER, that if and for so long as the Company's net
income (as determined in accordance with GAAP, but without reducing
net income by any recorded liabilities to the Indiana Department of
Environmental Management) is greater than the amount set forth under
"Cumulative Net Income" below for the four immediately preceding
Fiscal Quarters, then the Company may pay quarterly dividends in an
aggregate amount not to exceed the amount set forth under "Aggregate
Quarterly Dividends" below:
<TABLE>
<CAPTION>
Cumulative Net Income Aggregate Quarterly Dividends
--------------------- -----------------------------
<S> <C>
$2,000,000 $34,000
$2,500,000 $51,000
$3,000,000 $68,000
</TABLE>
In addition, if (A) the Company's net income (as determined in
accordance with GAAP, but without reducing net income by any
recorded liabilities to the Indiana Department of Environmental
Management) is greater than $3,500,000 for the four immediately
preceding Fiscal Quarters and (B) the Company's ratio of total
liabilities to Tangible Net Worth (as described in Section 10.6
hereof) is 3.5 or less, then the Company may pay accrued and unpaid
dividends on preferred stock in an aggregate amount not to exceed
$300,000 in any Fiscal Year. No dividend may be paid if at the time
of making or declaring such dividend and after giving effect thereto
any Default or Event of Default exists and no dividend may be paid
if a Default or Event of Default has been waived by the Lenders, but
not cured by the Company."
2.4 The address for Comerica Bank set forth in Section 16.2 (Notices) of
the Credit Agreement is hereby deleted in its entirety and replaced
with the following:
"Comerica Bank
c/o Harold Dalton, Vice President
240 Halidonhill Lane
Cincinnati, Ohio 45238
Telecopier No.: (513) 451-4484
2
<PAGE> 3
with a copy to:
Larry Somers, Esq.
Comerica Tower at Detroit Center
33rd Floor
500 Woodward Avenue
Detroit, Michigan 48226
Telecopier No. (313) 222-3977"
3. WAIVER.
3.1 The Lenders waive the requirements of Section 9.26 (Excess Cash
Flow) of the Credit Agreement with respect to the Fiscal Year ending
March 31, 1999 only. For the Fiscal Year ending March 31, 2000 and
thereafter, the Company shall comply with the provisions of Section
9.26 of the Credit Agreement.
3.2 The waiver set forth in Section 3.1, above, will relate only to the
specific matter covered by such Section and in no event will the
Lenders be under any obligation to provide additional waivers with
regard to such matter or any other provision of the Credit Agreement
or the other Loan Documents.
4. CONSENTS.
4.1 The Lenders consent to the sale and leaseback of the Company's
Scottsburg, Indiana facility, pursuant to the terms and conditions
of the Purchase Agreement dated as of February 26, 1999 between the
Company and Indiana Properties, LLC and the Lease dated as of
February 26, 1999 between the Company and Indiana Properties, LLC.
The Company acknowledges and agrees that not less than $1,900,000 of
the proceeds from the sale of the Scottsburg, Indiana facility (the
"Minimum Sale Proceeds") will be used to redeem Bonds pursuant to
the optional redemption provisions thereof, and the Lenders hereby
request the Company to so redeem Bonds. At the closing of the sale
of the Scottsburg, Indiana facility, the Company will deposit the
Minimum Sale Proceeds into the Sinking Fund Account and the Lenders
will release of record the Open-End Mortgage dated July 13, 1994
granted by the Company in favor of the Lenders with respect to
certain real property located in Scott County, Indiana.
4.2 The parties acknowledge and agree that the funds in the Construction
Account as of the Effective Date will be disbursed as follows: (i)
$1,000,000 of such funds will be used to redeem Bonds as required by
Section 5.1, below, and (ii) the remainder of such funds will be
made available to the Company for the Company's working capital and
general corporate purposes.
4.3 The Lenders consent to the Company's purchase from Think Laboratory
Co., Ltd., a Japanese corporation ("Think"), of Think's equity
interest in Laser Graphic Systems, Inc. pursuant to an agreement
substantially in the form of the draft
3
<PAGE> 4
agreement delivered by the Company's counsel to the Agent's counsel
on March 31, 1999.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. To induce the
Lenders and the Agent to enter into this Agreement, the Company represents,
warrants and covenants as follows:
5.1 By May 1, 1999, the Company will notify the Trustee, in accordance
with the requirements of the Bond Documents, that the Company
desires to redeem not less than $1,500,000 of outstanding Bonds
pursuant to the optional redemption provisions thereof using the
funds in the Sinking Fund Account and $1,000,000 of the funds in the
Construction Account, and the Company will take the necessary steps
to so redeem Bonds by June 1, 1999.
5.2 The representations and warranties of the Company contained in
Section 8 of the Credit Agreement are deemed to have been made again
on and as of the date of execution of this Agreement and are true
and correct as of the date of execution of this Agreement.
5.3 No Event of Default (as such term is defined in Section 11 of the
Credit Agreement) or event or condition which with the lapse of time
or giving of notice or both would constitute an Event of Default
exists on the date hereof.
5.4 The person executing this Agreement is a duly elected and acting
officer of the Company and is duly authorized by the Board of
Directors of the Company to execute and deliver this Agreement on
behalf of the Company.
5.5 The Company and each of its Subsidiaries have reviewed the areas
within each of its businesses and operations that could be adversely
affected by, and have developed or are developing a detailed plan
and timeline to address in a timely manner the risk that certain
computer applications used by the Company or any of its Subsidiaries
(or any of their respective material suppliers, customers or
vendors) may be unable to recognize and perform properly date
sensitive functions involving dates prior to and after December 31,
1999 (the "Year 2000 Problem"). To the Company's knowledge, the Year
2000 Problem will not result in any material adverse change to the
Company or any of its Subsidiaries.
6. CLAIMS AND RELEASE OF CLAIMS BY THE COMPANY. The Company represents and
warrants that the Company does not have any claims, counterclaims, setoffs,
actions or causes of actions, damages or liabilities of any kind or nature
whatsoever whether at law or in equity, in contract or in tort, whether now
accrued or hereafter maturing (collectively, "Claims") against the Lenders
or the Agent, their respective direct or indirect parent corporations or
any direct or indirect affiliates of such parent corporation, or any of the
foregoing's respective directors, officers, employees, agents, attorneys
and legal representatives, or the successors or assigns of any of them
(collectively, "Lender Parties"), that directly or indirectly arise out of,
are based upon or are in any manner connected with any Prior Related Event.
As an inducement to the Lenders and the Agent
4
<PAGE> 5
to enter into this Agreement, the Company on behalf of itself, and all of
its successors and assigns hereby knowingly and voluntarily releases and
discharges all Lender Parties from any and all Claims, whether known or
unknown, that directly or indirectly arise out of, are based upon or are in
any manner connected with any Prior Related Event. As used herein, the term
"Prior Related Event" means any transaction, event, circumstance, action,
failure to act, occurrence of any sort or type, whether known or unknown,
which occurred, existed, was taken, permitted or begun at any time prior to
the Effective Date or occurred, existed, was taken, was permitted or begun
in accordance with, pursuant to or by virtue of any of the terms of the
Credit Agreement or any documents executed in connection with the Credit
Agreement or which was related to or connected in any manner, directly or
indirectly, to any of the Notes or Letters of Credit.
7. CONDITIONS. The Lenders' and Agent's obligations pursuant to this Agreement
are subject to the following conditions:
7.1 The Agent shall have received, for the account of the Lenders, an
amendment fee of $3,000, to be shared by the Lenders based on their
Ratable Portion of the aggregate Commitment.
7.2 The Agent shall have been furnished copies, certified by the
Secretary of the Company, of resolutions of the Company's Board of
Directors authorizing the execution of this Agreement and all other
documents executed in connection herewith.
7.3 The representations and warranties of the Company in Section 5,
above, shall be true.
7.4 The Company shall pay all expenses and attorneys fees reasonably
incurred by the Lenders in connection with the preparation,
execution and delivery of this Agreement and the related documents.
8. GENERAL.
8.1 Except as expressly modified herein, the Credit Agreement is and
remains in full force and effect.
8.2 Except as specifically provided in Section 3, above, nothing
contained herein will be construed as waiving any Default or Event
of Default under the Credit Agreement or will affect or impair any
right, power or remedy of the Lenders or the Agent under or with
respect to the Credit Agreement or any agreement or instrument
guaranteeing, securing or otherwise relating to the Credit
Agreement.
8.3 This Agreement will be binding upon and inure to the benefit of the
Company, the Lenders and the Agent and their respective successors
and assigns.
8.4 All representations, warranties and covenants made by the Company
herein will survive the execution and delivery of this Agreement.
8.5 This Agreement may be executed in one or more counterparts, each of
which will be deemed an original and all of which together will
constitute one and the same instrument.
<PAGE> 6
8.6 This Agreement will in all respects be governed and construed in
accordance with the laws of the State of Ohio.
Executed as of the Effective Date.
MULTI-COLOR CORPORATION,
as Company
By:
-------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
PNC BANK, NATIONAL ASSOCIATION,
on its own behalf as Lender and as Agent
By:
-------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
COMERICA BANK,
as Lender
By:
-------------------------------------
Print Name:
------------------------------
Title:
-----------------------------------
<PAGE> 7
CERTIFICATE OF THE SECRETARY
OF
MULTI-COLOR CORPORATION
The undersigned, Secretary of Multi-Color Corporation (the
"Corporation"), hereby certifies to PNC Bank, National Association, as Agent, as
follows:
1. The following Resolution was duly adopted and is a binding
resolution of the Corporation:
RESOLVED, that the Corporation enter into an Amendment,
Consent and Waiver Agreement with respect to the Third Amended and
Restated Credit, Reimbursement and Security Agreement dated as of June
22, 1998 (the "Credit Agreement") by and between the Corporation and
PNC Bank, National Association, as Agent and Lender, and Comerica Bank,
as Lender, and that the President, any Vice President or the Chief
Financial Officer be, and they each hereby are, authorized to execute
any and all documents to effect the same, which documents shall contain
such terms, conditions, releases and other agreements as any one of
such officers in his or her sole discretion deems appropriate.
FURTHER RESOLVED, that all documents or agreements heretofore
executed and acts or things heretofore done to effectuate the purposes
of these resolutions are hereby ratified, confirmed and approved in all
respects as the act or acts of the Corporation.
2. The following is a complete and accurate list of the officers of the
Corporation as of April _____, 1999:
President....................... Gordon B. Bonfield
Vice President & CFO............ William R. Cochran
Secretary.......................
------------------------------
Secretary
<PAGE> 1
Exhibit 10.17
SECOND AMENDMENT TO CREDIT AGREEMENT
MULTI-COLOR CORPORATION, an Ohio corporation (the "Company"), PNC BANK,
NATIONAL ASSOCIATION and COMERICA BANK (each individually a "Lender" and
collectively the "Lenders") and PNC BANK, NATIONAL ASSOCIATION, as agent for the
Lenders (the "Agent"), hereby agree as follows effective as of May 1, 1999
("Effective Date"):
1. RECITALS.
---------
1.1 On June 22, 1998, the Company, the Lenders and the Agent
entered into a Third Amended and Restated Credit,
Reimbursement and Security Agreement, which amended and fully
restated a Credit, Reimbursement and Security Agreement dated
as of July 15, 1994 (as amended by the Amendment, Consent and
Waiver Agreement made effective as of April 20, 1999, the
"Credit Agreement"). Capitalized terms used herein and not
otherwise defined herein will have the meanings given such
terms in the Credit Agreement.
1.2 The Company has requested that the Lenders amend certain
provisions of the Credit Agreement as provided herein and the
Lenders are willing to do so subject to and in accordance with
the terms of this Second Amendment to Credit Agreement (this
"Agreement").
2. AMENDMENTS.
-----------
2.1 Section 1.1.10 of the Credit Agreement is hereby deleted in
its entirety and replaced with the following:
"1.1.10 "Applicable Margin" will mean:
(a) As to any Base Rate Advance:
<TABLE>
<CAPTION>
Leverage Ratio Applicable Margin
-------------- -----------------
<S> <C>
less than or equal to 2.50x 0.00%
greater than 2.50x less than or equal to 3.50x 0.00%
greater than 3.50x less than or equal to 4.25x 0.50%
greater than 4.25x 0.75%
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
(b) As to any Eurodollar Rate Advance:
Leverage Ratio Applicable Margin
-------------- -----------------
<S> <C>
less than or equal to 2.50x 2.00%
greater than 2.50x less than or equal to 3.50x 2.125%
greater than 3.50x less than or equal to 4.25x 2.50%
greater than 4.25x 2.75%
</TABLE>
Effective as of June 1, 1999, but subject to adjustment based
upon the Leverage Ratio after the Agent has received the
Company's financial statements for the quarter ending
September 30, 1999, the Applicable Margin will be 0.00% for
Base Rate Advances and 2.125% for Eurodollar Rate Advances."
2.2 The table set forth in Section 2.13.2(b) (Commitment Fee) of
the Credit Agreement is hereby deleted in its entirety and
replaced with the following:
<TABLE>
<CAPTION>
Leverage Ratio Commitment Fee
-------------- --------------
<S> <C>
less than or equal to 2.50x 0.25%
greater than 2.50x less than or equal to 3.50x 0.25%
greater than 3.50x less than or equal to 4.25x 0.50%
greater than 4.25x 0.50%
</TABLE>
2.3 The following sentence is hereby added to the end of Section
2.13.2(b) (Commitment Fee) of the Credit Agreement: "Effective
as of June 1, 1999, but subject to adjustment based upon the
Leverage Ratio after the Agent has received the Company's
financial statements for the quarter ending September 30,
1999, the Commitment Fee will be 0.25%."
2.4 The reference to "$20,000" in Section 2.13.2(d) (Agency Fees)
of the Credit Agreement is hereby deleted and replaced with
"$5,000."
2.5 The following sentence is hereby added to the end of Section
2.13.2(e) (Letter of Credit and Standby Letter of Credit Fees)
of the Credit Agreement: "Effective as of May 1, 1999, but
subject to adjustment based upon the Leverage Ratio after the
Agent has received the Company's financial statements for the
quarter ending September 30, 1999, the Letter of Credit Fees
will be 1.75%."
2.6 The reference to "$250,000" in Section 4.1 (Deposits to
Sinking Fund Account) of the Credit Agreement is hereby
deleted and replaced with "$200,000."
2
<PAGE> 3
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. To induce the
Lenders and the Agent to enter into this Agreement, the Company represents,
warrants and covenants as follows:
3.1 The representations and warranties of the Company contained in
Section 8 of the Credit Agreement are deemed to have been made
again on and as of the date of execution of this Agreement and
are true and correct as of the date of execution of this
Agreement.
3.2 No Event of Default (as such term is defined in Section 11 of
the Credit Agreement) or event or condition which with the
lapse of time or giving of notice or both would constitute an
Event of Default exists on the date hereof.
3.3 The person executing this Agreement is a duly elected and
acting officer of the Company and is duly authorized by the
Board of Directors of the Company to execute and deliver this
Agreement on behalf of the Company.
4. CLAIMS AND RELEASE OF CLAIMS BY THE COMPANY. The Company represents and
warrants that the Company does not have any claims, counterclaims, setoffs,
actions or causes of actions, damages or liabilities of any kind or nature
whatsoever whether at law or in equity, in contract or in tort, whether now
accrued or hereafter maturing (collectively, "Claims") against the Lenders or
the Agent, their respective direct or indirect parent corporations or any
direct or indirect affiliates of such parent corporation, or any of the
foregoing's respective directors, officers, employees, agents, attorneys and
legal representatives, or the successors or assigns of any of them
(collectively, "Lender Parties"), that directly or indirectly arise out of,
are based upon or are in any manner connected with any Prior Related Event.
As an inducement to the Lenders and the Agent to enter into this Agreement,
the Company on behalf of itself, and all of its successors and assigns hereby
knowingly and voluntarily releases and discharges all Lender Parties from any
and all Claims, whether known or unknown, that directly or indirectly arise
out of, are based upon or are in any manner connected with any Prior Related
Event. As used herein, the term "Prior Related Event" means any transaction,
event, circumstance, action, failure to act, occurrence of any sort or type,
whether known or unknown, which occurred, existed, was taken, permitted or
begun at any time prior to the Effective Date or occurred, existed, was
taken, was permitted or begun in accordance with, pursuant to or by virtue of
any of the terms of the Credit Agreement or any documents executed in
connection with the Credit Agreement or which was related to or connected in
any manner, directly or indirectly, to any of the Notes or Letters of Credit.
5. CONDITIONS. The Lenders' and Agent's obligations pursuant to this Agreement
are subject to the following conditions:
5.1 The Agent shall have been furnished copies, certified by the Secretary of
the Company, of resolutions of the Company's Board of Directors
authorizing the execution of this Agreement and all other documents
executed in connection herewith.
3
<PAGE> 4
5.2 The representations and warranties of the Company in Section 3, above,
shall be true.
5.3 The Company shall pay all expenses and attorneys fees reasonably incurred
by the Lenders in connection with the preparation, execution and delivery
of this Agreement and the related documents.
6. GENERAL.
- -----------
6.1 Except as expressly modified herein, the Credit Agreement is and remains
in full force and effect.
6.2 Nothing contained herein will be construed as waiving any Default or
Event of Default under the Credit Agreement or will affect or impair any
right, power or remedy of the Lenders or the Agent under or with respect
to the Credit Agreement or any agreement or instrument guaranteeing,
securing or otherwise relating to the Credit Agreement.
6.3 This Agreement will be binding upon and inure to the benefit of the
Company, the Lenders and the Agent and their respective successors and
assigns.
6.4 All representations, warranties and covenants made by the Company herein
will survive the execution and delivery of this Agreement.
6.5 This Agreement may be executed in one or more counterparts, each of which
will be deemed an original and all of which together will constitute one
and the same instrument.
6.6 This Agreement will in all respects be governed and construed in
accordance with the laws of the State of Ohio.
Executed as of the Effective Date.
MULTI-COLOR CORPORATION,
as Company
By:_______________________________
Print Name:_______________________
Title:____________________________
4
<PAGE> 5
PNC BANK, NATIONAL ASSOCIATION,
on its own behalf as Lender and as Agent
By:___________________________
Print Name:___________________
Title:________________________
COMERICA BANK,
as Lender
By:___________________________
Print Name:___________________
Title:________________________
5
<PAGE> 6
CERTIFICATE OF THE SECRETARY
OF
MULTI-COLOR CORPORATION
The undersigned, Secretary of Multi-Color Corporation (the
"Corporation"), hereby certifies to PNC Bank, National Association, as Agent, as
follows:
1. The following Resolution was duly adopted and is a binding
resolution of the Corporation:
RESOLVED, that the Corporation enter into a Second Amendment
to Credit Agreement with respect to the Third Amended and Restated
Credit, Reimbursement and Security Agreement dated as of June 22, 1998
(as amended, the "Credit Agreement") by and between the Corporation and
PNC Bank, National Association, as Agent and Lender, and Comerica Bank,
as Lender, and that the President, any Vice President or the Chief
Financial Officer be, and they each hereby are, authorized to execute
any and all documents to effect the same, which documents shall contain
such terms, conditions, releases and other agreements as any one of
such officers in his or her sole discretion deems appropriate.
FURTHER RESOLVED, that all documents or agreements heretofore
executed and acts or things heretofore done to effectuate the purposes
of these resolutions are hereby ratified, confirmed and approved in all
respects as the act or acts of the Corporation.
2. The following is a complete and accurate list of the officers of the
Corporation as of May 1, 1999:
President............................ Frank Gerace
Vice President & CFO................. William R. Cochran
Secretary............................
_____________________________
Secretary
<PAGE> 1
Exhibit 10.25
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Multi-Color Corporation, an Ohio corporation
(the "Company") and Steven G. Mulch (the "Executive"), dated as of the 16th day
of March, 1998 and until the employment is terminated as set forth in this
Agreement.
A. DEFINITIONS. For the purposes of this Agreement, any
amendments and, where applicable, any attachments, the following terms shall
have the meanings set forth.
1. "Annual Base Salary" shall mean one year of salary at
the then-current rate for the Executive, as set from time to time by
the Board of Directors.
2. "Board of Directors" or "Board" shall mean the duly
elected and serving directors of the Company.
3. "Bonus" shall mean the payment due to Executive over
and above Executive's salary and other benefits as calculated pursuant
to Section C(2)(b).
4. "Cause", with respect to Executive's termination from
employment, shall mean:
(a) the Executive's failure to cure the
Executive's material breach of this Agreement within sixty
(60) days after the Company gives the Executive written notice
of the breach;
(b) the Executive's appropriation of a material
business opportunity of the Company, including securing any
material personal profit in connection with any transaction
entered into on behalf of the Company. This provision shall
not include opportunities communicated by the Executive to the
Company which were rejected or on which the Company took no
timely action.
(c) the Executive's misappropriation of any of
the Company's funds or property; or
(d) the Executive's conviction of, or entering
of a guilty plea or a plea of no contest with respect to, a
felony, or any other crime which materially and adversely
affects the business of Company or Executive's ability to
carry out his duties hereunder and with respect to which
imprisonment for a term in excess of six (6) months is a
possible punishment.
5. "Change of Control," with respect to the termination
from employment of Executive shall be deemed to have occurred if:
(a) any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, other than (i) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company; or
(ii) John C. Court or
<PAGE> 2
any member of his family; or (iii) Louis M. Perlman and his
affiliates; or (iv) Burton D. Morgan or his affiliates,
becomes the "beneficial owner" as defined in Rule 13d-3 under
such Act, directly or indirectly, of securities of the Company
representing 35% or more of the combined voting power of the
Company's then outstanding securities;
(b) during any period of one year after
January 1, 1997, individuals, other than John C. Court and
John Littlehale, who at the beginning of such period
constitute the Board of Directors and any new directors who
are elected pursuant to provisions of the Articles of
Incorporation entitling holders of Preferred Stock of the
Company to elect directors and any new director whose election
by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds
(2/3) of the Directors then still in office who either were
Directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof;
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners of the outstanding
Company common stock immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 50% of the then-outstanding shares of common stock of the
corporation resulting from such Business Combination and (ii)
at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination
were members of the Board of the Company at the time of the
execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company.
6. "Commencement Date" shall mean March 16, 1998.
7. "Company" shall mean Multi-Color Corporation, Ohio
Corporate Charter Number 652876, and its successors.
8. "Date of Termination" means (i) if the Executive's
employment is terminated by the Company for Cause, or by the Executive
for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the
Executive's employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be the date on which
the Company notifies the Executive of such termination, (iii) if the
Company notifies the Executive of Non-renewal under Section B, the Date
of Termination shall be the end of the Term then in effect, (iv) if the
Executive's
2
<PAGE> 3
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the
Disability Commencement Date, and (v) if a Change of Control occurs,
the Date of Termination shall be the date on which such Change of
Control occurred, or the date of the subsequent actual cessation of
Executive's duties under terminations occurring thereafter pursuant to
Sections E(1) and E(2), as the case may be.
9. "Disability" shall have the meaning set forth in the
Company's long-term disability plan, if any; and if none then it shall
mean Executive's continued inability for a period of six months to
perform at least 50% of the duties he was performing immediately prior
to his injury or illness which triggered the disability.
10. "Disability Commencement Date" shall be the 30th day
after notice is received by Executive pursuant to Section D(1) that he
is under an extended Disability, provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties.
11. "Good Reason" with respect to the termination from
employment of Executive shall mean:
(a) the Company's failure to cure the Company's
material breach of this Agreement within sixty (60) days after
the Executive gives the Company written notice of the breach;
(b) the Company either filing for bankruptcy or
being placed in receivership or in an involuntary bankruptcy
proceeding;
(c) any purported termination by the Company of
the Executive's employment otherwise than as expressly
permitted by this Agreement;
(d) the Company materially altering the
Executive's authority, duties or responsibilities without his
consent; or
(e) the Company's requiring Executive to be
based at any office or location more than 25 miles from
Cincinnati, Ohio.
12. "Non-renewal" shall mean the Company's timely
notification to Executive that it does not desire to have the Agreement
automatically extended under Section B.
13. "Notice of Termination" shall mean a written notice
which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision
so indicated and (iii) if the Date of Termination is other than the
date of receipt of such notice, specifies the termination date (which
date shall be not more than thirty days after the giving of such
notice). The
3
<PAGE> 4
failure by a party to set forth in the Notice of Termination specific
facts or circumstances as required above shall not be deemed to waive
any rights hereunder.
14. "Term" shall mean the period of employment set forth
in Section B, as extended as set forth therein.
B. EMPLOYMENT. The Company hereby agrees to employ the Executive,
the Executive hereby agrees to remain in the employ of the Company subject to
the terms and conditions of this Agreement. The initial Term of this Agreement
shall be from its date through September 30, 2000, or until the employment is
terminated as set forth in this Agreement. The Term will be extended
automatically for successive one year periods unless either party gives the
other written notice no less than three (3) months prior to the completion of
the then current Term that it does not desire such automatic extension.
C. TERMS OF EMPLOYMENT.
1. POSITION AND DUTIES.
(a) During the Executive's employment, the
Executive shall serve as Vice President of Sales and Business
Development at the Company's headquarters in Cincinnati, Ohio.
(b) During the Executive's employment, and
excluding any periods of vacation and sick leave to which the Executive
is entitled, the Executive agrees to devote full attention and time
during normal business hours to the business and affairs of the Company
and to use the Executive's reasonable best efforts to perform such
responsibilities in a professional manner. It shall not be a violation
of this Agreement for the Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as
an employee of the Company in accordance with this Agreement.
2. COMPENSATION.
(a) BASE SALARY. During the employment of
Executive, the Executive shall receive an Annual Base Salary.
The beginning Annual Base Salary of Executive shall be
$150,000.00. The Annual Base Salary shall be adjusted annually
each April 1 based upon Executive's performance but shall not
be adjusted below $150,000.00. The Annual Base Salary shall be
paid no less frequently than in equal bi-weekly installments.
(b) BONUS. Beginning April 1, 1998 and during
the Executive's employment, the Executive shall be paid a
bonus (the "Bonus"). It shall be based
4
<PAGE> 5
upon the Executive Incentive Compensation Plan adopted by the
Compensation Committee of the Board in April 1998, as amended.
(c) STOCK OPTIONS. The Executive shall receive a
grant of the option for 50,000 shares of common stock pursuant
to the Company's 1997 Stock Option Plan. The option shall vest
one-third on the first anniversary of the date of grant, an
additional one-third on the second anniversary of the date of
grant and a final one-third on the third anniversary of the
date of grant. The term of the option shall be five years from
the date of grant, i.e. the Commencement Date. During the
Executive's employment, Executive shall receive additional
stock options, as determined by the Board or its committees
from time to time. All grants shall provide that if the
Company shall terminate the Executive's employment other than
for Cause during the Executive's employment, or upon the
Executive's death or Disability, or if the Executive shall
terminate employment for Good Reason or if a Change of Control
shall occur at any time during the Executive's employment,
such options shall, if not previously vested, become
immediately vested.
(d) SAVINGS AND RETIREMENT PLANS. During the
Executive's employment, the Executive shall be eligible to
participate in all savings and retirement plans, practices,
policies and programs to the extent applicable generally to
other executives of the Company, including, without
limitation, 401(k) profit sharing retirement savings,
supplemental retirement and deferred compensation plans.
(e) WELFARE AND OTHER BENEFIT PLANS. During the
Executive's employment, the Executive and/or the Executive's
family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare,
fringe, incentive, vacation and other similar benefit plans,
practices, policies and programs provided by the Company
(including, without limitation, medical, prescription drug,
dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to the
extent applicable generally to other executives of the
Company.
(f) EXPENSES. During the Executive's employment,
the Executive shall be entitled to receive prompt
reimbursement for all reasonable business expenses incurred by
the Executive and documented as required by regulations of the
Internal Revenue Service.
(g) FRINGE BENEFITS. During the Executive's
employment the Executive shall be entitled to a car allowance
of $600.00 per month.
(h) VACATION. During the Executive's employment,
the Executive shall be entitled to paid vacation in accordance
with the vacation policy of the Company, but in no event less
than four weeks per year.
5
<PAGE> 6
(i) INDEMNITY. The Executive shall be
indemnified and saved harmless by the Company against claims
arising in connection with the Executive's status as an
employee, officer, director or agent of the Company. Such
indemnification shall be established to the level of the
greatest indemnification permitted by Ohio law for corporate
employees, officers or directors. In furtherance of this
protection, the Company shall continue to expend for officers'
and directors' liability insurance covering Executive at least
the amount spent in fiscal 1998 for such purposes and in any
event provide at least as much coverage for the Executive as
the Company provides for its other executives.
D. TERMINATION OF EMPLOYMENT.
1. DEATH OR DISABILITY. The Executive's employment shall
terminate automatically upon the Executive's death during the
Executive's employment. If the Company determines in good faith that
the Disability of the Executive has occurred during the Executive's
employment, it may give to the Executive written notice in accordance
with this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company
shall terminate effective on the Disability Commencement Date.
2. BY THE COMPANY. At any time during the term hereof,
the Company may terminate the Executive's employment for Cause, as
defined herein, or without Cause.
3. BY THE EXECUTIVE. At any time during the term hereof,
the Executive's employment may be terminated by the Executive for Good
Reason, as defined herein, or without Good Reason, or upon a Change of
Control.
4. NOTICE OF TERMINATION. Any termination by the Company
or by the Executive shall be communicated by Notice of Termination to
the other party hereto given in accordance with this Agreement.
E. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
1. GOOD REASON; OTHER THAN FOR CAUSE. If the Company
terminates the Executive's employment for any reason other than for
Cause, death or Disability, or notifies Executive of Non-renewal of the
Term under Section B, or if the Executive terminates employment for
Good Reason, or if the Executive terminates employment for any reason
within one year of a Change of Control (but prior to the expiration of
the Term as it may be extended from time to time):
(a) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination
the aggregate of:
6
<PAGE> 7
(i) Executive's Annual Base Salary
through the Date of Termination to the extent not
previously paid;
(ii) a bonus of 50% of Annual Base Salary
prorated through the Date of Termination;
(iii) any compensation previously deferred
by the Executive and any other non-qualified benefit
plan balances to the extent not previously paid; and
(iv) an amount equal to 1.0 times
Executive's Annual Base Salary paid over a two year
period in 24 equal monthly installments;
(b) all stock option awards that were vested
immediately prior to the Date of Termination may be exercised
by Executive within 90 days of the Date of Termination;
(c) for one year after the Date of Termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company
shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have
been provided to them in accordance with the welfare plans,
programs, practices and policies described in Section B 2(f)
of this Agreement if the Executive's employment had not been
terminated; and
(d) to the extent not previously paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is entitled to receive under
any plan, program, policy or practice or contract or agreement
of the Company.
2. CHANGE OF CONTROL. If a Change of Control occurs and
Executive's position is eliminated thereby, or thereafter the Company,
or its successor, as the case may be, terminates Executive's employment
under this Agreement prior to the end of the Term (as it may be
extended from time to time) other than for Cause, the Company shall
have all of the obligations set forth in the preceding paragraph (1)
except that a) the amount in 1(a)(iv) shall be paid in a lump sum and
b) paragraph (b) shall read: "all stock option awards that were
outstanding immediately prior to the Date of Termination shall, if not
previously vested, become immediately vested and/or exercisable, as the
case may be with no further restrictions on sale other than those
mandated by law or by the agreement creating the Change of Control, if
applicable, and all stock option awards that were vested immediately
prior to the Date of Termination may be exercised by Executive within
90 days of the Date of Termination."
3. CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment shall be terminated by the Company for Cause or the
Executive terminates employment without
7
<PAGE> 8
Good Reason during the Executive's employment, this Agreement shall
terminate without further obligations to the Executive other than
all of the following:
(a) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination
the aggregate of:
(i) Executive's Annual Base Salary
through the Date of Termination to the extent not
previously paid;
(ii) any compensation previously deferred
by the Executive and any other non-qualified benefit
plan balances to the extent not previously paid; and
(b) to the extent not previously paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is entitled to receive under
any plan, program, policy or practice or contract or agreement
of the Company.
4. DEATH. If the Executive's employment is terminated by
reason of the Executive's death, this Agreement shall terminate without
further obligations to the Executive's legal representatives under this
Agreement, other than all of the following:
(a) the Company shall pay to the Executive's
legal representative in a lump sum in cash within 30 days
after the Date of Termination the aggregate of:
(i) Executive's Annual Base Salary
through the Date of Termination to the extent not
previously paid;
(ii) a Bonus of 50% of Annual Base Salary
prorated through the Date of Termination; and
(iii) any compensation previously
deferred by the Executive and any other non-qualified
benefit plan balances to the extent not previously
paid;
(b) all stock option awards that were
outstanding immediately prior to the Date of Termination shall
become immediately vested and/or exercisable, as the case may
be with no further restrictions on sale other than those
mandated by law and all stock option awards that were vested
immediately prior to the Date of Termination may be exercised
by Executive's legal representative within 90 days of the Date
of Termination;
(c) for one year after the Date of Termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy,
8
<PAGE> 9
the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would
have been provided to them in accordance with the welfare
plans, programs, practices and policies described in Section B
2(f) of this Agreement if the Executive's employment had not
been terminated;
(d) to the extent not previously paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is entitled to receive under
any plan, program, policy or practice or contract or agreement
of the Company; and
(e) any other death benefits then in effect for
Company employees or executives and their beneficiaries.
5. DISABILITY. If the Executive's employment is
terminated by reason of the Executive's Disability, the Company shall
have all of the obligations set forth in the preceding paragraph (4)
except that subparagraph (e) shall read: "any other long-term
disability benefits then in effect for Company employees or executives
and their beneficiaries."
F. CONFIDENTIAL INFORMATION; NON-COMPETITION.
1. CONFIDENTIAL MATERIALS AND INFORMATION. The Executive
acknowledges that as a leader in the highly-competitive businesses of
printing labels, including inmold labels, and manufacturing and selling
gravure cylinders, the Company has developed, acquired and implemented
confidential, proprietary strategies and programs, which it has taken
steps to protect as trade secrets and which include expansion plans,
market research, sales systems, marketing programs, product development
strategies, budgets, pricing strategies, identity and requirements of
accounts, and other non-public proprietary information regarding
customers and the employees of the Company or of its customers
(collectively "Confidential Materials and Information"). In performing
duties for the Company, the Executive regularly will be exposed to and
work with the Company's Confidential Materials and Information. The
Executive acknowledges that such Confidential Materials and Information
are critical to the Company's success and that the Company has invested
substantial money in developing the Company's Confidential Materials
and Information. While the Executive is employed by the Company, and
after such employment ends for any reason, the Executive will not
reproduce, publish, disclose, use, reveal, show, or otherwise
communicate to any person or entity any Confidential Materials and
Information of the Company unless specifically assigned or directed by
the Company to do so or unless it shall have become public knowledge
(other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). The covenant in this
Paragraph (1) has no temporal, geographical or territorial restriction
or limitation, and it applies wherever the Executive may be located.
2. NON-SOLICITATION OF THE COMPANY'S EMPLOYEES. For a
period of twelve (12) months after the termination of his employment,
the Executive will not actively solicit, either
9
<PAGE> 10
directly or indirectly through any third person, any other executive of
the Company to terminate his or her employment with the Company without
the written consent of the Chairman of the Board of Directors.
3 COVENANT AGAINST UNFAIR COMPETITION. While the
Executive is employed by the Company, and for twenty-four (24) months
after such employment ends for any reason, the Executive will not,
either directly or indirectly, (a) be employed by, consult for, engage
in any business for, or have any ownership interest in any inmold label
manufacturer, or in any gravure cylinder manufacturer which is using
Think System(TM) technology; or (b) call on, solicit or communicate
with any of the Company's customers or prospects for the purpose of
obtaining such inmold label or gravure cylinder business other than for
the benefit of the Company. As used in this Agreement, the term
"customer" means a business entity (including representatives of such
business entity) to which the Company provided goods or services at any
time in the prior twenty-four (24) months, and the term "prospect"
means a business entity (including representatives of such business
entity) to which, at any time in the previous twenty-four (24) months,
the Company made a proposal, or had under active consideration for
making a proposal, for providing goods or services. Ownership, for
personal investment purposes only, of not in excess of 2% of the voting
stock of any publicly held corporation shall not constitute a violation
hereof.
4. RETURN OF CONFIDENTIAL MATERIALS AND INFORMATION. The
Executive agrees that whenever the Executive's employment with the
Company ends for any reason, all documents containing or referring to
the Company's Confidential Materials and Information as may be in the
Executive's possession, or over which the Executive may have control,
will be delivered by the Executive to the Company immediately, with no
request being required.
5 IRREPARABLE HARM. The Executive agrees that a breach
of any covenant in this Section F will cause the Company irreparable
injury and damage for which the Company has no adequate monetary
remedy, and the Executive further agrees that if the Company claims a
breach of any such covenant, the Company will be entitled to seek an
immediate restraining order and injunction to prevent, pending or
following arbitration under Section I below, such violation or
continued violation.
G. FULL SETTLEMENT. In the event of a Change of Control, the
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and such amounts shall not be reduced whether or
not the Executive obtains other employment. The Company agrees to pay as
incurred, to the full extent permitted by law, all legal fees and expenses which
the Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a
10
<PAGE> 11
result of any contest by the Executive about the amount of any payment pursuant
to this Agreement), plus in each case interest on any delayed payment at the
applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
H. SUCCESSORS.
1. This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
2. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
3. The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
I. MISCELLANEOUS.
1. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to
principles of conflict of laws, and any legal action concerning this
Agreement shall be brought and maintained only in the Court of Common
Pleas of Hamilton County, Ohio. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors
and legal representatives.
2. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Steven G. Mulch
2944 Turpin Woods Court
Cincinnati, OH 45244
11
<PAGE> 12
If to the Company:
Multi-Color Corporation
Attn: President
205 West Fourth Street
Cincinnati, OH 45202
or to such other address as either party shall have furnished to the
other in writing in accord herewith. Notice and communications shall be
effective when actually received by the addressee.
3. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement.
4. The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or
regulation.
5. This Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Steven G. Mulch
------------------------
Steven G. Mulch
MULTI-COLOR CORPORATION
By: /s/ Gordon B. Bonfield 10/26/98
-----------------------------------
Gordon B. Bonfield, III, President
12
<PAGE> 1
Exhibit 10.26
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT by and between Multi-Color Corporation, an Ohio corporation
(the "Company") and Frank D. Gerace (the "Executive"), dated as of the 16th day
of March, 1998 and until the employment is terminated as set forth in this
Agreement.
A. DEFINITIONS. For the purposes of this Agreement, any
amendments and, where applicable, any attachments, the following terms shall
have the meanings set forth.
1. "Annual Base Salary" shall mean one year of salary at
the then-current rate for the Executive, as set from time to time by
the Board of Directors.
2. "Board of Directors" or "Board" shall mean the duly
elected and serving directors of the Company.
3. "Bonus" shall mean the payment due to Executive over
and above Executive's salary and other benefits as calculated pursuant
to Section C(2)(b).
4. "Cause", with respect to Executive's termination from
employment, shall mean:
(a) the Executive's failure to cure the
Executive's material breach of this Agreement within sixty
(60) days after the Company gives the Executive written notice
of the breach;
(b) the Executive's appropriation of a material
business opportunity of the Company, including securing any
material personal profit in connection with any transaction
entered into on behalf of the Company. This provision shall
not include opportunities communicated by the Executive to the
Company which were rejected or on which the Company took no
timely action.
(c) the Executive's misappropriation of any of
the Company's funds or property; or
(d) the Executive's conviction of, or entering of
a guilty plea or a plea of no contest with respect to, a
felony, or any other crime which materially and adversely
affects the business of Company or Executive's ability to
carry out his duties hereunder and with respect to which
imprisonment for a term in excess of six (6) months is a
possible punishment.
5. "Change of Control," with respect to the termination
from employment of Executive shall be deemed to have occurred if:
(a) any "person," as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, other than (i) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company; or
(ii) John C. Court or any member of his family; or (iii) Louis
M. Perlman and his affiliates; or
<PAGE> 2
(iv) Burton D. Morgan or his affiliates, becomes the
"beneficial owner" as defined in Rule 13d-3 under such Act,
directly or indirectly, of securities of the Company
representing 35% or more of the combined voting power of the
Company's then outstanding securities;
(b) during any period of one year after
January 1, 1997, individuals, other than John C. Court and
John Littlehale, who at the beginning of such period
constitute the Board of Directors and any new directors who
are elected pursuant to provisions of the Articles of
Incorporation entitling holders of Preferred Stock of the
Company to elect directors and any new director whose election
by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds
(2/3) of the Directors then still in office who either were
Directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for
any reason to constitute a majority thereof;
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals
and entities who were the beneficial owners of the outstanding
Company common stock immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 50% of the then-outstanding shares of common stock of the
corporation resulting from such Business Combination and (ii)
at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination
were members of the Board of the Company at the time of the
execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(d) Approval by the shareholders of the Company
of a complete liquidation or dissolution of the Company.
6. "Commencement Date" shall mean March 16, 1998.
7. "Company" shall mean Multi-Color Corporation, Ohio
Corporate Charter Number 652876, and its successors.
8. "Date of Termination" means (i) if the Executive's
employment is terminated by the Company for Cause, or by the Executive
for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the
Executive's employment is terminated by the Company other than for
Cause or Disability, the Date of Termination shall be the date on which
the Company notifies the Executive of such termination, (iii) if the
Company notifies the Executive of Non-renewal under Section B, the Date
of Termination shall be the end of the Term then in effect, (iv) if the
Executive's employment is terminated by reason of death or Disability,
the Date of Termination shall be the date of death of the Executive or
the Disability Commencement Date, and (v) if a Change of Control
occurs, the Date of Termination shall be the date on which such Change
of
2
<PAGE> 3
Control occurred, or the date of the subsequent actual cessation of
Executive's duties under terminations occurring thereafter pursuant to
Sections E(1) and E(2), as the case may be.
9. "Disability" shall have the meaning set forth in the
Company's long-term disability plan, if any; and if none then it shall
mean Executive's continued inability for a period of six months to
perform at least 50% of the duties he was performing immediately prior
to his injury or illness which triggered the disability.
10. "Disability Commencement Date" shall be the 30th day
after notice is received by Executive pursuant to Section D(1)
that he is under an extended Disability, provided that, within
the 30 days after such receipt, the Executive shall not have
returned to full-time performance of the Executive's duties.
11. "Good Reason" with respect to the termination from
employment of Executive shall mean:
(a) the Company's failure to cure the Company's
material breach of this Agreement within sixty (60) days after
the Executive gives the Company written notice of the breach;
(b) the Company either filing for bankruptcy or
being placed in receivership or in an involuntary bankruptcy
proceeding;
(c) any purported termination by the Company of
the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(d) the Company materially altering the
Executive's authority, duties or responsibilities without his
consent.
12. "Non-renewal" shall mean the Company's timely
notification to Executive that it does not desire to have the Agreement
automatically extended under Section B.
13. "Notice of Termination" shall mean a written notice
which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision
so indicated and (iii) if the Date of Termination is other than the
date of receipt of such notice, specifies the termination date (which
date shall be not more than thirty days after the giving of such
notice). The failure by a party to set forth in the Notice of
Termination specific facts or circumstances as required above shall not
be deemed to waive any rights hereunder.
14. "Term" shall mean the period of employment set forth
in Section B, as extended as set forth therein.
3
<PAGE> 4
B. EMPLOYMENT. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to remain in the employ of the Company subject
to the terms and conditions of this Agreement. The initial Term of this
Agreement shall be from its date through June 30, 2000, or until the employment
is terminated as set forth in this Agreement. The Term will be extended
automatically for successive one year periods unless either party gives the
other written notice no less than three (3) months prior to the completion of
the then current Term that it does not desire such automatic extension.
C. TERMS OF EMPLOYMENT.
1. POSITION AND DUTIES.
(a) During the Executive's employment, the
Executive shall serve as Vice President of Operations.
(b) During the Executive's employment, and
excluding any periods of vacation and sick leave to which the Executive
is entitled, the Executive agrees to devote full attention and time
during normal business hours to the business and affairs of the Company
and to use the Executive's reasonable best efforts to perform such
responsibilities in a professional manner. It shall not be a violation
of this Agreement for the Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage
personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as
an employee of the Company in accordance with this Agreement.
2. COMPENSATION.
(a) BASE SALARY. During the employment of
Executive, the Executive shall receive an Annual Base Salary.
The beginning Annual Base Salary of Executive shall be
$140,000.00. The Annual Base Salary shall be adjusted annually
each April 1 based upon Executive's performance but shall not
be adjusted below $140,000.00. The Annual Base Salary shall be
paid no less frequently than in equal bi-weekly installments.
(b) BONUS. Beginning April 1, 1998 and during
the Executive's employment, the Executive shall be paid a
bonus (the "Bonus"). It shall be based upon the Executive
Incentive Compensation Plan adopted by the Compensation
Committee of the Board in April 1998, as amended.
(c) STOCK OPTIONS. The Executive shall receive a
grant of the option for 50,000 shares of common stock pursuant
to the Company's 1997 Stock Option Plan. The option shall vest
one-third on the first anniversary of the date of grant, an
additional one-third on the second anniversary of the date of
grant and a final one-third on the third anniversary of the
date of grant. The term of the option shall be five
4
<PAGE> 5
years from the date of grant, i.e. the Commencement Date.
During the Executive's employment, Executive shall receive
additional stock options, as determined by the Board or its
committees from time to time. All grants shall provide that if
the Company shall terminate the Executive's employment other
than for Cause during the Executive's employment, or upon the
Executive's death or Disability, or if the Executive shall
terminate employment for Good Reason or if a Change of Control
shall occur at any time during the Executive's employment,
such options shall, if not previously vested, become
immediately vested.
(d) SAVINGS AND RETIREMENT PLANS. During the
Executive's employment, the Executive shall be eligible to
participate in all savings and retirement plans, practices,
policies and programs to the extent applicable generally to
other executives of the Company, including, without
limitation, 401(k) profit sharing retirement savings,
supplemental retirement and deferred compensation plans.
(e) WELFARE AND OTHER BENEFIT PLANS. During the
Executive's employment, the Executive and/or the Executive's
family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare,
fringe, incentive, vacation and other similar benefit plans,
practices, policies and programs provided by the Company
(including, without limitation, medical, prescription drug,
dental, disability, employee life, group life, accidental
death and travel accident insurance plans and programs) to the
extent applicable generally to other executives of the
Company.
(f) EXPENSES. During the Executive's employment,
the Executive shall be entitled to receive prompt
reimbursement for all reasonable business expenses incurred by
the Executive and documented as required by regulations of the
Internal Revenue Service.
(g) FRINGE BENEFITS. During the Executive's
employment the Executive shall be entitled to a car allowance
of $600.00 per month.
(h) VACATION. During the Executive's employment,
the Executive shall be entitled to paid vacation in accordance
with the vacation policy of the Company, but in no event less
than four weeks per year.
(i) INDEMNITY. The Executive shall be
indemnified and saved harmless by the Company against claims
arising in connection with the Executive's status as an
employee, officer, director or agent of the Company. Such
indemnification shall be established to the level of the
greatest indemnification permitted by Ohio law for corporate
employees, officers or directors. In furtherance of this
protection, the Company shall continue to expend for officers'
and directors' liability insurance covering Executive at least
the amount spent in fiscal 1998 for such purposes and in any
event provide at least as much coverage for the Executive as
the Company provides for its other executives.
5
<PAGE> 6
D. TERMINATION OF EMPLOYMENT.
1. DEATH OR DISABILITY. The Executive's employment shall
terminate automatically upon the Executive's death during the
Executive's employment. If the Company determines in good faith that
the Disability of the Executive has occurred during the Executive's
employment, it may give to the Executive written notice in accordance
with this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company
shall terminate effective on the Disability Commencement Date.
2. BY THE COMPANY. At any time during the term hereof,
the Company may terminate the Executive's employment for Cause, as
defined herein, or without Cause.
3. BY THE EXECUTIVE. At any time during the term hereof,
the Executive's employment may be terminated by the Executive for Good
Reason, as defined herein, or without Good Reason, or upon a Change of
Control.
4. NOTICE OF TERMINATION. Any termination by the Company
or by the Executive shall be communicated by Notice of Termination to
the other party hereto given in accordance with this Agreement.
E. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
1. GOOD REASON; OTHER THAN FOR CAUSE. If the Company
terminates the Executive's employment for any reason other than for
Cause, death or Disability, or notifies Executive of Non-renewal of the
Term under Section B, or if the Executive terminates employment for
Good Reason, or if the Executive terminates employment for any reason
within one year of a Change of Control (but prior to the expiration of
the Term as it may be extended from time to time):
(a) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination
the aggregate of:
(i) Executive's Annual Base Salary
through the Date of Termination to the extent not
previously paid;
(ii) a bonus of 50% of Annual Base Salary
prorated through the Date of Termination;
(iii) any compensation previously deferred
by the Executive and any other non-qualified benefit
plan balances to the extent not previously paid; and
(iv) an amount equal to 1.0 times
Executive's Annual Base Salary paid over a two year
period in 24 equal monthly installments;
6
<PAGE> 7
(b) all stock option awards that were vested
immediately prior to the Date of Termination may be exercised
by Executive within 90 days of the Date of Termination;
(c) for one year after the Date of Termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company
shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have
been provided to them in accordance with the welfare plans,
programs, practices and policies described in Section B 2(f)
of this Agreement if the Executive's employment had not been
terminated; and
(d) to the extent not previously paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is entitled to receive under
any plan, program, policy or practice or contract or agreement
of the Company.
2. CHANGE OF CONTROL. If a Change of Control occurs and
Executive's position is eliminated thereby, or thereafter the Company,
or its successor, as the case may be, terminates Executive's employment
under this Agreement prior to the end of the Term (as it may be
extended from time to time) other than for Cause, the Company shall
have all of the obligations set forth in the preceding paragraph (1)
except that a) the amount in 1(a)(iv) shall be paid in a lump sum and
b) paragraph (b) shall read: "all stock option awards that were
outstanding immediately prior to the Date of Termination shall, if not
previously vested, become immediately vested and/or exercisable, as the
case may be with no further restrictions on sale other than those
mandated by law or by the agreement creating the Change of Control, if
applicable, and all stock option awards that were vested immediately
prior to the Date of Termination may be exercised by Executive within
90 days of the Date of Termination."
3. CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment shall be terminated by the Company for Cause or the
Executive terminates employment without Good Reason during the
Executive's employment, this Agreement shall terminate without further
obligations to the Executive other than all of the following:
(a) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination
the aggregate of:
(i) Executive's Annual Base Salary
through the Date of Termination to the extent not
previously paid;
(ii) any compensation previously deferred
by the Executive and any other non-qualified benefit
plan balances to the extent not previously paid; and
7
<PAGE> 8
(b) to the extent not previously paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is entitled to receive under
any plan, program, policy or practice or contract or agreement
of the Company.
4. DEATH. If the Executive's employment is terminated by
reason of the Executive's death, this Agreement shall terminate without
further obligations to the Executive's legal representatives under this
Agreement, other than all of the following:
(a) the Company shall pay to the Executive's
legal representative in a lump sum in cash within 30 days
after the Date of Termination the aggregate of:
(i) Executive's Annual Base Salary
through the Date of Termination to the extent not
previously paid;
(ii) a Bonus of 50% of Annual Base Salary
prorated through the Date of Termination; and
(iii) any compensation previously deferred
by the Executive and any other non-qualified benefit
plan balances to the extent not previously paid;
(b) all stock option awards that were
outstanding immediately prior to the Date of Termination shall
become immediately vested and/or exercisable, as the case may
be with no further restrictions on sale other than those
mandated by law and all stock option awards that were vested
immediately prior to the Date of Termination may be exercised
by Executive's legal representative within 90 days of the Date
of Termination;
(c) for one year after the Date of Termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company
shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have
been provided to them in accordance with the welfare plans,
programs, practices and policies described in Section B 2(f)
of this Agreement if the Executive's employment had not been
terminated;
(d) to the extent not previously paid or
provided, the Company shall timely pay or provide to the
Executive any other amounts or benefits required to be paid or
provided or which the Executive is entitled to receive under
any plan, program, policy or practice or contract or agreement
of the Company; and
(e) any other death benefits then in effect for
Company employees or executives and their beneficiaries.
5. DISABILITY. If the Executive's employment is
terminated by reason of the Executive's Disability, the Company shall
have all of the obligations set forth in the preceding
8
<PAGE> 9
paragraph (4) except that subparagraph (e) shall read: "any other
long-term disability benefits then in effect for Company employees or
executives and their beneficiaries."
F. CONFIDENTIAL INFORMATION; NON-COMPETITION.
1. CONFIDENTIAL MATERIALS AND INFORMATION. The Executive
acknowledges that as a leader in the highly-competitive businesses of
printing labels, including inmold labels, and manufacturing and selling
gravure cylinders, the Company has developed, acquired and implemented
confidential, proprietary strategies and programs, which it has taken
steps to protect as trade secrets and which include expansion plans,
market research, sales systems, marketing programs, product development
strategies, budgets, pricing strategies, identity and requirements of
accounts, and other non-public proprietary information regarding
customers and the employees of the Company or of its customers
(collectively "Confidential Materials and Information"). In performing
duties for the Company, the Executive regularly will be exposed to and
work with the Company's Confidential Materials and Information. The
Executive acknowledges that such Confidential Materials and Information
are critical to the Company's success and that the Company has invested
substantial money in developing the Company's Confidential Materials
and Information. While the Executive is employed by the Company, and
after such employment ends for any reason, the Executive will not
reproduce, publish, disclose, use, reveal, show, or otherwise
communicate to any person or entity any Confidential Materials and
Information of the Company unless specifically assigned or directed by
the Company to do so or unless it shall have become public knowledge
(other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). The covenant in this
Paragraph (1) has no temporal, geographical or territorial restriction
or limitation, and it applies wherever the Executive may be located.
2. NON-SOLICITATION OF THE COMPANY'S EMPLOYEES. For a
period of twelve (12) months after the termination of his employment,
the Executive will not actively solicit, either directly or indirectly
through any third person, any other executive of the Company to
terminate his or her employment with the Company without the written
consent of the Chairman of the Board of Directors.
3 COVENANT AGAINST UNFAIR COMPETITION. While the
Executive is employed by the Company, and for twenty-four (24) months
after such employment ends for any reason, the Executive will not,
either directly or indirectly, (a) be employed by, consult for, engage
in any business for, or have any ownership interest in any inmold label
manufacturer, or in any gravure cylinder manufacturer which is using
Think System(TM) technology; or (b) call on, solicit or communicate
with any of the Company's customers or prospects for the purpose of
obtaining such inmold label or gravure cylinder business other than for
the benefit of the Company. As used in this Agreement, the term
"customer" means a business entity (including representatives of such
business entity) to which the Company provided goods or services at any
time in the prior twenty-four (24) months, and the term "prospect"
means a business entity (including representatives of such business
entity) to which, at any time in the previous twenty-four (24) months,
the Company made a proposal, or had under active consideration for
making a proposal, for providing goods or services. Ownership, for
personal investment
9
<PAGE> 10
purposes only, of not in excess of 2% of the voting stock of any
publicly held corporation shall not constitute a violation hereof.
4. RETURN OF CONFIDENTIAL MATERIALS AND INFORMATION. The
Executive agrees that whenever the Executive's employment with the
Company ends for any reason, all documents containing or referring to
the Company's Confidential Materials and Information as may be in the
Executive's possession, or over which the Executive may have control,
will be delivered by the Executive to the Company immediately, with no
request being required.
5 IRREPARABLE HARM. The Executive agrees that a breach
of any covenant in this Section F will cause the Company irreparable
injury and damage for which the Company has no adequate monetary
remedy, and the Executive further agrees that if the Company claims a
breach of any such covenant, the Company will be entitled to seek an
immediate restraining order and injunction to prevent, pending or
following arbitration under Section I below, such violation or
continued violation.
G. FULL SETTLEMENT. In the event of a Change of Control, the
Company's obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against the Executive or others. In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement and such amounts shall not be reduced whether or
not the Executive obtains other employment. The Company agrees to pay as
incurred, to the full extent permitted by law, all legal fees and expenses which
the Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
H. SUCCESSORS.
1. This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
2. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
3. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company
to assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to
perform it if no such
10
<PAGE> 11
succession had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
I. MISCELLANEOUS.
1. This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio, without reference to
principles of conflict of laws, and any legal action concerning this
Agreement shall be brought and maintained only in the Court of Common
Pleas of Hamilton County, Ohio. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written
agreement executed by the parties hereto or their respective successors
and legal representatives.
2. All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Frank D. Gerace
1105 Blackhorse Run Drive
Loveland, OH 45150
If to the Company:
Multi-Color Corporation
Attn: President
205 West Fourth Street
Cincinnati, OH 45202
or to such other address as either party shall have furnished to the
other in writing in accord herewith. Notice and communications shall be
effective when actually received by the addressee.
3. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
4. The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes as
shall be required to be withheld pursuant to any applicable law or
regulation.
11
<PAGE> 12
5. This Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
/s/ Frank D. Gerace
------------------------------------------------
Frank D. Gerace 11/9/98
MULTI-COLOR CORPORATION
By: /s/ Gordon B. Bonfield, III, President
--------------------------------------------
Grodon B. Bonfield, III, President 10/26/98
12
<PAGE> 1
Exhibit 10.27
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT ("Amendment") to the employment agreement is made
and entered into as of the 18th day of May, 1999 between Multi-Color
Corporation, an Ohio corporation ("Multi-Color"), and Frank Gerace ("Employee").
R E C I T A L S:
A. Multi-Color and Employee entered into an employment agreement
(the "Employment Agreement") as of the 16th day of March, 1998.
B. Multi-Color has determined that it is in the best interests of
Multi-Color and its shareholders to amend the Employment Agreement.
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained in this Amendment and the Employment Agreement and for good and
valuable consideration, the receipt of which is mutually acknowledged,
Multi-Color and the Employee agree to modify and amend the Employment Agreement
as follows:
1. Section 1 of the Employment Agreement entitled "Positions and
Duties" shall be amended by deleting Vice President of Operations and inserting
in lieu thereof, President.
2. Section 2, "Compensation", shall be amended by deleting $140,000
and inserting in lieu thereof $175,000.
3. The terms of the Employment Agreement amended hereto shall be
effective May 18, 1999. All terms of the Employment Agreement not specifically
amended herein shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
MULTI-COLOR CORPORATION
By: /s/ William R. Cahrew, VP/CFO
------------------------------------
Secretary
/s/ Frank Gerace
----------------------------------------
FRANK GERACE
<PAGE> 1
Exhibit 10.28
PURCHASE AGREEMENT
------------------
THIS AGREEMENT, entered into at Youngstown, Ohio, this ________ day of
February, 1999, by and between MULTI-COLOR CORPORATION, an Ohio corporation, of
205 West Fourth Street, Suite 1140, Cincinnati, Ohio 45202 (hereinafter called
the SELLER), and INDIANA PROPERTIES, LLC, an Indiana Limited Liability Company,
of 1155 Meadowbrook Avenue, Youngstown, Ohio 44512 (hereinafter called the
PURCHASER).
W I T N E S S E T H:
PURCHASER agrees to purchase from the SELLER the premises described on
Exhibit "A" (sometimes hereinafter referred to as the Demised Premises) attached
hereto and made a part hereof, for a sale price of ONE MILLION NINE HUNDRED
THOUSAND DOLLARS ($1,900,000.00).
SELLER agrees to sell the Demised Premises to PURCHASER for said sum of
ONE MILLION NINE HUNDRED THOUSAND DOLLARS ($1,900,000.00) under the terms and
conditions hereinafter set forth.
SELLER shall convey to PURCHASER a Warranty Deed conveying the Demised
Premises, free and clear of all encumbrances except taxes and special
assessments, if any, zoning ordinances, easements, covenants, conditions and
restrictions of record which shall be prorated to the date of delivery of the
Deed. Upon execution of the Deed, the Deed will be placed in escrow with a title
company agreed upon by the parties with escrow instructions to record the same
<PAGE> 2
when the addition to the building, as hereinafter set forth, is completed in
accordance with the plans and specifications. Upon completion of the addition,
the PURCHASER will transfer the purchase price of ONE MILLION NINE HUNDRED
THOUSAND DOLLARS ($1,900,000.00) to the SELLER.
As a further consideration of the PURCHASER purchasing the Demised
Premises, SELLER agrees to enter into a twenty (20) year Lease for the Demised
Premises, a copy of said Lease is marked Exhibit "B" attached hereto and made a
part hereof. After the execution of said Lease PURCHASER agrees to construct the
addition to the existing building, comprising approximately 60,000 square feet.
SELLER agrees to immediately execute the aforementioned Lease at the time it
executes and delivers the Warranty Deed to the PURCHASER.
During the construction period, as contemplated herein, SELLER shall
add PURCHASER as an additional insured to its builders risk policy.
In the event the Demised Premises are destroyed by fire or other
casualty, the PURCHASER shall have the option to accept the insurance proceeds,
not to exceed the purchase price, or terminate this Agreement upon thirty (30)
days notice of the destruction of the property.
The SELLER, at its expense, shall pay for a commitment of title in the
full amount of the purchase price, prepared by a corporate title company.
PUR-CHASER shall pay the premium for said title insurance policy, which will be
free
2
<PAGE> 3
and clear of all encumbrances except taxes and special assessments, if any,
zoning ordinances, covenants, conditions, restrictions and easements of record.
The title company shall furnish a preliminary title report and in the event any
title problems are set forth in said preliminary report, beyond the permitted
exceptions hereinbefore described, the SELLER agrees to remedy the same. In the
event SELLER cannot remedy said title defects to the satisfaction of PURCHASER,
PURCHASER, in its sole discretion, shall have the right to terminate this
Agreement and both parties released of any further obligation hereunder.
The PURCHASER shall obtain, at its expense, a location survey of the
Demised Premises. In the event said survey reveals any encroachments or problems
with the Demised Premises, PURCHASER shall so advise SELLER immediately. If the
location survey reveals a problem that SELLER cannot correct, then in that event
PURCHASER may terminate this Agreement, at its sole discretion.
The SELLER acknowledges that there is now pending litigation with the
Indiana Department of Environmental Management and the Ohio Environmental
Protection Agency involving the Demised Premises. SELLER shall be solely
responsible for any lien arising out of said litigation and agrees to hold the
PUR-CHASER harmless therefrom, and take all steps necessary to release any lien
that may attach to the Demised Premises growing out of said litigation.
3
<PAGE> 4
SELLER shall be responsible for any conveyance fee or tax assessed by local
governmental authorities in connection with the sale of the Demised Premises and
the transfer of title to the PURCHASER.
This Agreement shall be binding upon and inure to the benefit of the
successors of the parties hereto.
IN WITNESS WHEREOF, MULTI-COLOR CORPORATION has hereunto set its hands at
Cincinnati, Ohio, on the _________ day of February, 1999, and INDIANA
PROPERTIES, LLC, has hereunto set its hands at Youngstown, Ohio, this _______
day of February, 1999.
Signed and acknowledged MULTI-COLOR CORPORATION,
in the Presence of: an Ohio Corporation
___________________________ By________________________
___________________________ And_______________________
SELLER
INDIANA PROPERTIES, LLC,
an Indiana Limited Liability Co.
___________________________ By________________________
David D. Davis, Manager
___________________________ And_______________________
Douglas M. Lumsden, Mgr.
PURCHASER
4
<PAGE> 5
STATE OF OHIO )
) SS:
COUNTY OF )
Before me, a Notary Public, in and for said County and State,
personally appeared the above named MULTI-COLOR CORPORATION, an Ohio
corpo-ration, by _______________________________, its _________________ and
________________________________, its ______________________, who acknowledged
that they did sign the foregoing instrument, and that the same is the free act
and deed of said Corporation, and the free act and deed of each of them
personally and as such officers.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Cincinnati, Ohio, this ________ day of February, 1999.
--------------------------
NOTARY PUBLIC
STATE OF OHIO )
) SS:
COUNTY OF MAHONING )
Before me, a Notary Public in and for said County and State, personally
appeared the above named INDIANA PROPERTIES, LLC, an Indiana Limited Liability
Company, by DAVID D. DAVIS and DOUGLAS M. LUMSDEN, its Managers, who
acknowledged that they did sign the foregoing instrument, and that the same is
the free act and deed of said Company and the free act and deed of each of them
personally and as such Managers.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Youngstown, Ohio, this _________ day of February, 1999.
--------------------------
NOTARY PUBLIC
5
<PAGE> 6
LEASE
-----
ARTICLE I
---------
THIS INSTRUMENT OF LEASE WITNESSETH: INDIANA PROPER-TIES, LLC, an
Indiana Limited Company of 1155 Meadowbrook Avenue, Youngstown, Ohio 44512
(hereinafter called the LESSOR), in consideration of the rents and covenants
hereinafter stipulated to be paid and performed by MULTI-COLOR CORPORATION, an
Ohio corporation of 205 West Fourth Street, Suite 1140, Cincinnati, Ohio 45202
(hereinafter called the LESSEE), does hereby grant, demise, let and lease unto
the said LESSEE the real estate described on Exhibit "A" (Demised Premises)
attached hereto and made a part hereof.
ARTICLE II
----------
TO HAVE AND TO HOLD THE SAME, with the appurtenances thereunto
belonging but subject to all legal highways, easements, reservations, oil and
gas leases and conditions of record and zoning ordinances, unto the LESSEE, for
a period of twenty (20) years commencing July 15, 1999, and terminating July 14,
2019. It is the intention of the LESSOR and LESSEE that this Lease shall be for
a full term of twenty (20) years and shall commence from the date the LESSEE
takes lawful possession of the Demised Premises or when the addition to the
building, to be constructed by the LESSOR as hereinafter provided, is
substan-tially completed, whichever event first occurs, and a short form
memorandum,
<PAGE> 7
executed by the LESSOR and the LESSEE shall confirm the commencement date of the
term of this Lease. ("Commencement Date"). Parties acknowledge that time is of
the essence.
ARTICLE III
-----------
RENT
----
(1) LESSEE covenants and agrees to pay to LESSOR as rent for the
Demised Premises, the sum of FORTY-SIX THOUSAND TWO HUNDRED DOLLARS ($46,200.00)
per month. Said rent shall be due and payable commencing on the Commencement
Date as hereinbefore set forth, provided that if the Commencement Date is
delayed because of a delay in completion of the building addition described
under Article IV, the payment of rent shall be adjusted and/or delayed
accordingly. Said rent shall be payable each consecutive month thereafter for
the balance of the term of the Lease.
(2) All such Rent shall be payable at 1155 Meadowbrook Avenue,
Youngstown, Ohio 44512, or such other place as the LESSOR may, from time to time
designate in writing.
(3) LESSEE will also pay, as additional rent, all sums, costs, expenses
and other payments which LESSEE in any of the provisions of this Lease assumes
or agrees to pay and, in the event of any non-payment thereof, LESSOR shall have
(in addition to all other rights and remedies) all the rights and remedies
provided for herein or by law in the case of non-payment of the Rent.
2
<PAGE> 8
In connection with the construction of the proposed addition, the
LESSOR and LESSEE agree that the electrical and sprinkler work will be
considered an allowance. The electrical allowance is $180,000.00 and the
sprinkler allowance is $200,000.00. The allowance will be adjusted based upon
the actual costs of the electrical and sprinkler construction. LESSEE shall have
the option to pay the adjustment of the allowance directly to LESSOR or to
adjust its Lease pay-ments. A percentage of $10.88 per $1,000.00 will be the
computation formula for any adjustments, for credit in the base rent.
ARTICLE IV
----------
COVENANT TO BUILD
-----------------
The LESSOR covenants and agrees to erect, at its own expense, an
addition to the existing building upon the Demised Premises pursuant to the
terms and conditions of the AIA 191 Standard Form of Agreement between Owner and
Design/Builder involving the LESSOR and LESSEE and in accordance with the plans
and specifications prepared by LESSOR, copies of which, approved and initialed
by the parties hereto, are by reference made a part of this Lease. The LESSOR
covenants to begin and prosecute the erection of said addition to the existing
building promptly and diligently, and to complete the same in a good workmanlike
manner and shall have the Demised Premises ready for lawful occupancy on or
before July 15, 1999, time being of the essence; delays occasioned by causes
beyond the reasonable control of the LESSOR such as, but not limited to,
strikes, misunderstandings with employees
3
<PAGE> 9
and subcontractors, scarcity of materials and Acts of God excepted, and provided
further that the failure of the LESSOR to substantially complete the addition to
said building by July 15, 1999, shall be no cause for the LESSEE to avoid this
Lease, provided such delay is the result of the conditions hereinbefore set
forth. LESSEE shall have the right to approve the drawings and specifications
for the building addition and to approve the quality of work and material, as
well as other aspects of the construction of the addition. All aspects of the
construction shall be satisfactory to LESSEE in its discretion. The parties
acknowledge that time is of the essence.
ARTICLE V
---------
COVENANTS OF THE LESSEE
-----------------------
The LESSEE hereby covenants and agrees with the LESSOR as follows:
(1) The LESSEE will pay said Rent at the time and place and in the
manner aforesaid.
(2) The LESSEE will pay all charges and bills for water, gas, sewer
and electricity which may be assessed or charged against the
occupant of said premises during said term or any extension
thereof.
(3) Except as otherwise specifically provided in this Lease, LESSEE
shall pay and discharge, before any fine, penalty, interest or
cost may be added thereto for the non-payment thereof, all taxes,
assessments for the balance of the term of this Lease, and other
governmental charges of any kind or nature whatsoever, foreseen
and unforeseen, which at any time during the term of this Lease
may be assessed, levied, confirmed or imposed upon, or become a
lien on the Demised Premises, or any part thereof or any
appurtenances thereto, and any use or occupation of the Demised
Premises; PROVIDED, HOWEVER, that when a part of a fiscal period
of a taxing authority is included within the term of this Lease,
and a part thereof is included in a period of time before the
beginning of or after the termination of this Lease,
4
<PAGE> 10
the amount of any tax, assessment or governmental charge relating
to such fiscal period shall be adjusted between LESSOR and LESSEE
as of the date of the beginning of this Lease or of such
termination, as the case may be, so that the LESSEE shall bear the
cost only for that portion thereof which the term of this Lease
bears to the entire such period and so that the LESSOR shall bear
the cost only for that portion thereof which the part of such
period excluded from the term of this Lease bears to the entire
such period.
(4) Nothing herein shall require LESSEE to pay any franchise, capital
levy or transfer tax of LESSOR, or any income, excess profits or
revenue tax or any other tax, assessment, charge or levy upon the
Rent paid or payable under this Lease.
(5) The LESSEE will use and occupy said premises in a careful, safe
and proper manner; will carefully control and guard all fires that
may be operated therein; and will keep all sewer connections free
from obstructions.
(6) The LESSEE will not commit or suffer any waste therein.
(7) The LESSEE will not use or occupy said premises for any unlawful
purposes, and the LESSEE will conform to and obey all present and
future ordinances and laws of any governmental authority.
(8) LESSEE shall put, keep and maintain all portions of the Demised
Premises and all streets, all alleys, sidewalks, curbs,
passageways and spaces adjacent thereto in a clean and orderly
condition, free of dirt, rubbish and unlawful obstructions,
reasonable wear and tear excepted.
(9)(a) LESSEE shall, at its expense, insure and/or keep insured during
the term of this Lease the Demised Premises against loss or damage
by fire (including fire following explosion), and also against
loss or damage by windstorm, cyclone, tornado, hail, explosion,
riot and civil commotion, vandalism, malicious mischief, damage
from aircraft, vehicles and smoke, and such other casualties and
events as may be procurable now or hereafter under extended
coverage, for the full insurable value thereof, but in no event
less than FIVE MILLION DOLLARS ($5,000,000.00). Said insurance
policy shall have endorsed thereon a "uniform standard replacement
cost endorsement".
5
<PAGE> 11
(b) LESSEE shall also procure, at its expense, and/or maintain
insur-ance during the term of this Lease against public
liability, including that from personal injury or property
damage in or about the Demised Premises or adjacent property or
streets, resulting from the occupation, use or operation of the
Demised Premises. Such insurance shall be in the amount of not
less than $5,000,000.00 in respect to one accident or disaster
and in the amount of not less than $5,000,000.00 in respect to
injuries to any one person and property damage in the amount of
$1,000,000.00.
(c) All insurance policies provided for in (9) (a) above shall name
the LESSOR as an additional insured and the loss, if any, under
such policies to be payable to the LESSOR, and such policy
shall be endorsed with a standard mortgage loss payable clause,
if required. All insurance policies provided for in (9)(b)
above shall name the LESSEE as an additional named insured.
(d) All insurance provided for in Paragraphs (9)(a) and (b) above
shall be effected under valid and enforceable policies issued
by insurers of recognized responsibility which are well rated
by national rating organizations, which have been approved by
LESSOR. LESSOR covenants and agrees that such approval will not
be unreasonably withheld. Certificates of the insurers
satisfactory to LESSOR evidencing the above coverage and
payment of premiums shall be delivered by LESSEE to LESSOR upon
the execution of the within Lease.
All said insurance policies shall provide that the LESSOR must
be notified in writing of any cancellation of said policies
thirty (30) days prior to the effective date of any
cancellation.
(10) The LESSEE will not assign the within Lease nor sublet nor
underlet said premises, nor any part thereof, without the prior
written consent of said LESSOR, which consent shall not be
unreasonably withheld, conditioned or delayed, nor shall this
Lease be assigned or assign- able by operation of law; PROVIDED
FURTHER, HOWEVER, such assignment or subletting or underletting
of said premises or any part thereof shall not release the
LESSEE from its obligations under this Lease.
(11) The LESSEE shall be without right to record or file in any
public record any mortgage, lien or encumbrance against the
Demised Premises without first obtaining written consent of the
LESSOR
6
<PAGE> 12
which consent shall not be unreasonably withheld, conditioned or
delayed.
(12) The LESSEE agrees that it will not permit the unlawful discharge
of any hazardous waste or otherwise violate any of the EPA Rules
and Regulations, whether federal, state or municipal, and that
it hereby agrees to indemnify and save harmless the LESSOR from
any claims or litigation growing out of any violations of the
aforesaid Regulations which may arise as a result of the
negligence of the LESSEE, and to pay any fines or judgments,
including any reason-able attorney fees applicable thereto.
(13) LESSOR shall permit the LESSEE to make alterations to the
Demised Premises so long as they do not diminish the value of
the Demised Premises; PROVIDED, HOWEVER, that no major
alterations or additions in and to said premises shall be made
without the written consent of LESSOR which shall not be
unreasonably withheld, conditioned or delayed. LESSOR shall not
be required to remove the alterations at the termination of the
Lease.
(14) The LESSEE will permit said LESSOR, or agents of the LESSOR, to
enter upon said premises at all reasonable times, to examine the
condition of the same, with 24 hour notice except in an
emergency; entry by the LESSOR or its agents, employees or
representatives will not interfere with the operation of
business.
(15) The LESSEE will surrender and deliver up said premises at the
end of said term in as good order and condition as the same now
are, or may be put by said LESSEE, reasonable use and natural
wear and tear thereof and damage by fire or unavoidable casualty
excepted.
(16) Any failure of the LESSOR to enforce rights or seek remedies
upon any default of the LESSEE with respect to the obligations
of the LESSEE hereunder, or any of them, shall not prejudice or
affect the rights or remedies of the LESSOR in the event of any
subsequent default of the LESSEE.
(17) Every demand for rent made after the same falls due shall have
the same effect in law as if made on the day and at the time the
same is due, any law to the contrary notwithstanding.
(18) The LESSEE further covenants and agrees that it will indemnify
and hold harmless the LESSOR, together with its agents,
servants, successors and assigns against loss from any and all
claims,
7
<PAGE> 13
demands and actions in law or in equity that may hereafter arise by
reason of or in any way growing out of the negligent occupancy or use
of the Demised Premises by LESSEE, its agents, employees,
representatives and invitees.
(19) The LESSEE shall, at its own expense, keep said building in repair
including, but not limited to, water and sewer connections, sewage
disposal system, tap-in charges, sewer rental, windows and other
glass, heating plant and accessories, plumbing, water sewers, gas and
electric fixtures, pipes, wires and conduit in, on or in connection
with the Demised Premises; LESSOR shall not be required to furnish any
services or facilities to make any repairs to or replacements or
alterations of the Demised Premises. The LESSEE hereby assumes the
full and sole responsibility for the condition, operation, repair,
replacement, maintenance and management of the Demised Premises.
Notwithstanding the foregoing, LESSOR shall guaranty the roof,
exterior walls and floor of the Demised Premises for a period of one
(1) year after completion. The roofing manufacturer shall provide a
warranty guarantee for nine (9) additional years after the building
has been completed and LESSOR shall assign the warranty to LESSEE as
provided in Article VI infra. In addition thereto, LESSOR shall be
responsible for all structural repairs during the term of the Lease
due to any design problems associated with the structure of the
building. LESSOR shall not be responsible for any damages done to the
structure due to the negligence of the LESSEE or its agents, employees
and invitees.
ARTICLE VI
----------
COVENANTS OF THE LESSOR
-----------------------
The said LESSOR hereby covenants and agrees with said LESSEE:
(1) The LESSOR agrees upon the closing of the transaction to assign
to the LESSEE any guaranties or warranties covering any of the
material and equipment which are assignable by the LESSOR, but
this assign-ment shall be limited to all of the terms and
conditions in any such guaranties or warranties.
(2) The LESSEE, paying the rents and keeping and performing the
covenants of this Lease on the part of the LESSEE to be kept and
performed, said LESSEE shall peaceably and quietly hold, occupy
and enjoy said premises during said term, without any let,
hindrance or
8
<PAGE> 14
molestation by said LESSOR or any person or persons lawfully
claiming under said LESSOR.
(3) LESSOR agrees to assign to LESSEE any and all manufacturers
warranties that are concomitant with purchases made by LESSOR in
connection with the construction contemplated herein.
ARTICLE VII
-----------
MUTUAL COVENANTS
----------------
It is mutually agreed by and between the parties hereto:
(1) That notwithstanding any law nor in force or hereafter enacted,
this Lease shall not terminate or be affected in any manner by
reason of the damage to or total or substantial destruction of
the buildings now or hereafter erected on the Demised Premises,
or by reason of untenantability of the Demised Premises, or of
any part thereof, except as hereinafter provided:
(a) If the Demised Premises or any buildings or improvements now
or hereafter erected thereon shall, during the term hereof,
be destroyed or damaged, in whole or in part, by fire, act
of God, or any cause (the same shall be promptly repaired,
rebuilt and replaced by the LESSOR, at its own expense),
except that in the event said building is totally or
substantially destroyed or damaged to such extent as to
render it necessary or desirable, in the judgment of the
LESSOR not to rebuild or substantially rebuild the same,
then, within thirty (30) days after said destruction, the
LESSOR may, by notice to the LESSEE, elect to rebuild or not
to rebuild; in the event the LESSOR elects not to rebuild,
this Lease shall thereupon terminate and the Rent
apportioned and paid up to the date of destruction. If, and
only in the event that no notice of election is given by the
LESSOR to the LESSEE, then the LESSEE may, during a
subsequent period of thirty (30) days (not later than sixty
(60) days) after the date of destruction, elect to terminate
this Lease by notice to the LESSOR, in which event Rent
shall be apportioned and paid as aforesaid, otherwise this
Lease shall continue in effect. In the event that the LESSOR
elects not to rebuild said building as hereinbefore
provided, then the insurance money which the LESSOR receives
shall be the property of the LESSOR free of any claims of
the LESSEE.
9
<PAGE> 15
(b) That in the event the said building or any part thereof
shall be made untenantable as determined by LESSEE and
LESSOR as a result of such fire, damage or destruction, the
Rent payable by the LESSEE shall be abated in the proportion
to and for the period of such untenantability.
(2) That if any person or corporation, public or private or
otherwise, shall at any time during the term hereby demised, take
in appropriation proceedings by any right of eminent domain, any
part or all of said Demised Premises, such taking or
appropriation shall not render this Lease void, except that if
the entire or a substantial portion of the building, as
determined by LESSOR and LESSEE, is so taken, then this Lease
shall become void from the time when possession thereof is taken
as a result of such proceedings, and the LESSEE shall pay all
rents and perform and observe all other covenants hereof up to
the time when possession is taken.
In the event that only part of the premises are taken as a result
of said proceedings, the LESSOR, with all reasonable dispatch,
shall repair the remaining portion of the building, so as to
restore said remaining portion as a building complete in itself
and so as to put the premises into condition to be used by the
LESSEE as a completed building, and the Rent payable by the
LESSEE shall be abated in proportion to the size of the building
and lot remaining; PROVIDED, HOWEVER, that if any such
proceedings shall result in a taking which shall render the
premises substantially unusable, then LESSEE, by notice to LESSOR
in writing, may elect to declare this Lease terminated as of the
date of such taking. A taking shall be deemed to render the
premises substantially unusable if it results in LESSEE'S
inability to use the premises in the manner in which and for the
purposes for which it has been used or can be used under this
Lease. Notwithstanding anything to the contrary in the foregoing,
a taking which involves only a widening of the street in front of
the premises, or a temporary taking or temporary use of the whole
or any part of the premises shall not give LESSEE a right to
declare this Lease terminated.
In no event shall the LESSEE be entitled to any part of the award
of compensation or damages for such taking of the buildings or
lands, but the LESSOR shall receive the entire amount thereof
free of any estate or interest of the LESSEE.
Nothing herein contained shall interfere with the right of the
LESSEE to maintain its separate action for payment of its damages
by reason
10
<PAGE> 16
of the loss of its leasehold arising out of any such
appropriation proceedings.
(3) Any realty improvements, additions or alterations made by the
LESSEE shall, at the termination of this Lease, be and remain the
property of the LESSOR.
(4) This Lease shall be subject to and subordinate to any mortgage or
mortgages that may be hereafter placed upon said premises, and to
all renewals, modifications and extensions thereof, and the
recordings of such mortgage or mortgages shall have preference to
and be superior in lien to this Lease irrespective of the date of
the recording of this Lease and said mortgage or mortgages; and
the LESSEE agrees, upon the request of the LESSOR, to acknowledge
and deliver any accurate information pertaining to the Lease
terms, which may be deemed necessary or desirable by the LESSOR
further to effect the subordi-nation of this Lease to any such
mortgage or mortgages and to accomplish that end. Provided
further that if and when such mortgage or mortgages are placed,
the mortgagee shall agree, for itself and for every subsequent
holder or owner of the mortgage and for any receiver or purchaser
of the premises, in the event of foreclosure, LESSEE'S quiet
possession of the premises will not be disturbed on account of
said mortgage or by reason of anything done thereunder, so long
as LESSEE pays the Rent and keeps the other covenants of this
Lease on its part to be performed.
LESSOR agrees that in the event a mortgage is placed on the
premises and a collateral assignment of this Lease is given as
security for the loan, LESSEE will be furnished with a copy of
such collateral assignment.
(5) LESSOR and LESSEE agree that in the event the building or other
improvements on the leased premises, or their contents, are
damaged or destroyed by any of the perils covered by fire and/or
extended coverage insurance or other insurance policies of the
parties, the rights, if any, of any party against the other, its
officers, agents, servants and employees, with respect to such
damage or destruction are hereby waived, notwithstanding the fact
that said damage or destruction shall be due to the negligence of
any or all of the parties in whose favor this Lease operates. The
release in favor of the LESSOR contained herein is in addition
to, and not in substitution for, or in diminution of the hold
harmless and indemnification hereof, as provided in Article V,
Paragraph (16) of the within Lease.
11
<PAGE> 17
ARTICLE VIII
------------
TERMINATION
-----------
In the event that any installment of Rent shall be and remain unpaid
for a period of thirty (30) days after the same becomes due, or in the event
LESSEE shall at any time be in default in the observance or performance of any
of the other covenants, obligations, terms or conditions assumed by or imposed
upon LESSEE hereunder and such default continues for a period of fifteen (15)
days after written notice to LESSEE of such default, or if any waste be
committed or unnecessary damage done upon or to the Demised Premises, or if a
temporary or permanent receiver or trustee of LESSEE'S property be appointed by
any court, or if LESSEE shall make any assignment for the benefit of creditors,
or if any execution or attachment shall be issued against LESSEE or LESSEE'S
leasehold interest hereunder which shall not be discharged within forty-five
(45) days, or if LESSEE shall commence proceedings in a court of bankruptcy or
insolvency, or if LESSEE shall be declared or adjudicated bankrupt or insolvent
according to law, or if any proceedings are commenced against LESSEE in a court
of bankruptcy or insolvency which shall not be discharged within forty-five (45)
days, then and in any one or more of such events, LESSOR shall be entitled, at
its election, to exercise concurrently or successively, any one or more or all
of the following rights and remedies:
(a) Without waiving such default, to pay any sum required to be paid by
LESSEE to others than LESSOR and which LESSEE has failed to
12
<PAGE> 18
pay, and to perform any obligation required to be performed by LESSEE
for the account of LESSEE and any amount so paid by LESSOR shall bear
interest thereon at the rate of ten percent (10%) per annum from the
date of payment.
Any amount or amounts paid by LESSOR for the account of LESSEE for the
performance of any obligations required to be performed by LESSEE
shall be treated as additional rental due hereunder and LESSOR may
exercise concurrently or successively any one or more of the rights
and remedies contained in this Lease for the enforce- ment of the
payment of Rent.
(b) To enjoin any breach or threatened breach by LESSEE of the covenants
hereof.
(c) To bring suit for the collection of the Rent or other amounts for
which LESSEE may be in default, or for the performance of any other
covenant devolving upon LESSEE for performance, or damages therefor,
all without entering into possession or terminating this Lease.
(d) To reenter the Demised Premises by summary proceedings or otherwise
and take possession thereof, without thereby terminating this Lease,
and thereupon to expel all persons and remove all property therefrom,
either peaceably or by force, without becoming liable to prosecution
therefor, and relet the Demised Premises making reasonable efforts
therefor, for such periods and upon such terms according to LESSOR'S
sole discretion, and receive the Rent there-from, applying the same
first to the payment of the reasonable expenses of such reentry and
the cost of such reletting including, but not limited to, the expense
of such decorations, alterations and remodeling as shall be incident
to such reletting, and then to the payment of the Rent and other sums
accruing hereunder, the balance, if any, to be retained by LESSOR as a
security deposit against LESSEE'S defaults during the remainder of the
term of this Lease, and LESSEE, whether or not the Demised Premises
are relet, shall remain liable for any deficiency, which deficiency
shall be paid by LESSEE to LESSOR periodically, upon which the Rent
hereunder is payable.
It is agreed that the commencement and prosecution of any action by
LESSOR in forcible entry and detainer, ejectment or otherwise, or the
appointment of a receiver, or any execution of any decree obtained in
13
<PAGE> 19
any action to recover possession of the Demised Premises or any
reentry, shall not be construed as an election to terminate this Lease
unless LESSOR shall, in writing, expressly exercise its election to
declare the term hereunder ended and to terminate this Lease, and such
reentry or entry by LESSOR, whether had or taken under sum- mary
proceedings or otherwise, shall not be deemed to have absolved or
discharged LESSEE from any of its obligations and liabilities for the
remainder of the term of this Lease.
(e) To terminate this Lease, reenter the Demised Premises and take
possession thereof, wholly discharged from this Lease.
In the event LESSOR shall elect to terminate this Lease, as aforesaid,
all rights and obligations of LESSEE shall cease and terminate except
that LESSOR shall have and retain full right to sue for and collect
all Rents and other amounts for the payment of which LESSEE shall then
be in default and all other damages to LESSOR by reason of such
breach, and LESSEE shall surrender and deliver up the Demised Premises
to LESSOR, together with all improvements and additions thereto, and
upon any default by LESSEE in so doing, LESSOR shall have the right to
recover possession by summary proceedings or otherwise, and to obtain
a receiver and other ancillary relief in such action, and again to
have and enjoy the Demised Premises fully and completely, as if this
Lease had never been made.
LESSEE hereby expressly waives any and all rights of redemption
granted by or under any present or future laws in the event of LESSEE
being evicted or dispossessed for any cause, or in the event LESSOR
obtains possession of the Demised Premises by reason of the breach or
violation by LESSEE of any of the covenants and conditions in this
Lease contained or otherwise.
All rights and remedies granted LESSOR herein and any other rights or
remedies which LESSOR may have at law or in equity are hereby declared to be
cumulative and not exclusive, and the fact that LESSOR may have exercised any
remedy without terminating this Lease shall not impair LESSOR'S rights hereafter
to terminate or to exercise any other remedy herein granted or to which it may
be otherwise entitled.
14
<PAGE> 20
ARTICLE X
---------
OPTION TO PURCHASE
------------------
Provided that LESSEE is current in its Rent payments and all
obligations hereunder, LESSEE may purchase the Demised Premises for the sum of
FOUR MILLION TWO HUNDRED FIFTY THOUSAND DOLLARS ($4,250,000.00) commencing the
fifth (5th) year of the Lease term.
LESSEE shall receive a credit against the purchase price in the amount
of FIFTY THOUSAND DOLLARS ($50,000.00) for each lease year commencing with the
fourth (4th) year of the Lease term and each year thereafter, providing LESSEE
is current in its Rent payments and all obligations hereunder and the purchase
price under this option to purchase shall be reduced accordingly. In addition,
the purchase price shall be subject to adjustments as provided for in Article
III regarding the electrical and sprinkler allowances.
ARTICLE XI
----------
NOTICE
------
Any notice to be given under this Lease shall be sent to the LESSOR,
INDIANA PROPERTIES, LLC, an Indiana Limited Liability Company, of 1155
Meadowbrook Avenue, Youngstown, Ohio 44512, and MULTI-COLOR CORPORATION, an Ohio
corporation, of 205 West Fourth Street, Suite 1140, Cincinnati, Ohio 45202, by
Certified Mail, or such other place as the LESSOR may from time to time
designate in writing.
ARTICLE XII
-----------
15
<PAGE> 21
It is further mutually covenanted and agreed by and between the parties
hereto that this Lease and all the covenants, terms, provisions and conditions
herein contained shall inure to the benefit of and be binding upon the
successors and assigns, as the case may be, of the parties hereto; PROVIDED,
HOWEVER, that no assignment by, from, through or under the LESSEE in violation
of the covenants, provisions, terms and conditions hereof, or any of them, shall
vest in the assigns any right, title or interest whatsoever.
IN WITNESS WHEREOF, INDIANA PROPERTIES, LLC, has hereunto set its hands
at Youngstown, Ohio, on the ______ day of February 1999, and MULTI-COLOR
CORPORATION has hereunto set its hands at Cincinnati, Ohio, this _____ day of
February, 1999.
Signed and acknowledged INDIANA PROPERTIES, LLC
in the Presence of: an Indiana Limited Liability Co.
________________________ By________________________
David D. Davis, Manager
________________________ And_______________________
Douglas M. Lumsden, Mgr.
LESSOR
MULTI-COLOR CORPORATION,
an Ohio Corporation
________________________ By________________________
________________________ And_______________________
LESSEE
STATE OF OHIO )
16
<PAGE> 22
) SS:
COUNTY OF MAHONING )
Before me, a Notary Public, in and for said County and State,
personally appeared the above-named INDIANA PROPERTIES, LLC, an Indiana Limited
Liability Company, by DAVID D. DAVIS and DOUGLAS M. LUMSDEN, its Managers, who
acknowledged that they did sign the foregoing instrument, and that the same is
the free act and deed of said Company, and the free act and deed of each of them
personally and as such Managers.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Youngstown, Ohio, this ______ day of February, 1999.
--------------------------
NOTARY PUBLIC
STATE OF OHIO )
) SS:
COUNTY OF )
Before me, a Notary Public, in and for said County and State,
personally appeared the above-named MULTI-COLOR CORPORATION, an Ohio
corpo-ration, by ___________________________, its ______________________ and
______________________________, its ___________________________, who
acknowledged that they did sign the foregoing instrument, and that the same is
the free act and deed of said Corporation and the free act and deed of each of
them personally and as such officers.
IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal at
Cincinnati, Ohio, this ________ day of February, 1999.
--------------------------
NOTARY PUBLIC
17
<PAGE> 23
EXHIBIT "A"
-----------
A part of the Northwest Quarter of Section 32, Township 3 North, Range
7 East, Scott County, Indiana, described as follows:
Beginning at the Northwest corner of the Northwest Quarter of said
Section 32, thence South with the center of U.S. Highway No. 31 a distance of
810.55 feet, thence North 89 degrees 30 minutes 33 seconds East 50.00 feet to a
steel rod in the East right-of-way line of said highway and the TRUE POINT OF
BEGINNING, thence North 89 degrees 30 minutes 33 seconds East 902.34 feet to a
steel rod in the West right-of-way line of the Conrail Railroad, thence South 00
degrees 53 minutes 38 seconds East with said railroad right-of-way 122.56 feet
to a steel rod in the center of Buck Run Branch, thence South 89 degrees 32
minutes 38 seconds West with the center of Buck Run Branch 921.36 feet to a
steel rod in the East right-of-way line of U. S. Highway No. 31, thence due
North with the East right-of-way of said highway 1226.01 feet to the place of
beginning, containing 25.668 acres, subject to all legal highways and easements
of record.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-28-1999
<PERIOD-END> MAR-28-1999
<CASH> 10,000
<SECURITIES> 0
<RECEIVABLES> 4,567,000
<ALLOWANCES> 0
<INVENTORY> 4,444,000
<CURRENT-ASSETS> 9,592,000
<PP&E> 29,809,000
<DEPRECIATION> 12,095,000
<TOTAL-ASSETS> 29,781,000
<CURRENT-LIABILITIES> 11,461,000
<BONDS> 11,000,000
0
2,895,000
<COMMON> 9,600,000
<OTHER-SE> (6,484,829)
<TOTAL-LIABILITY-AND-EQUITY> 29,781,000
<SALES> 49,786,000
<TOTAL-REVENUES> 49,786,000
<CGS> 42,857,000
<TOTAL-COSTS> 47,621,000
<OTHER-EXPENSES> (216,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,122,000
<INCOME-PRETAX> 1,259,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 224,000
<NET-INCOME> 1,484,000
<EPS-BASIC> 0.53
<EPS-DILUTED> 0.50
</TABLE>
