<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 10 - K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended MAY 31, 1997
------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-18815
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OUTLOOK GROUP CORP.
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1278569
------------------------ --------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
1180 AMERICAN DRIVE, NEENAH, WISCONSIN 54956
- -------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (920) 722-2333
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01
PAR VALUE
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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of August 22, 1997, 4,655,382 shares of Common Stock were outstanding, and
the aggregate market value of the Common Stock (based upon the $4.75 last sale
price on that date on The NASDAQ Stock Market) held by non-affiliates (excludes
a total of 533,283 shares reported as beneficially owned by directors and
executive officers -- does not constitute an admission as to affiliate status)
was approximately $19.5 million.
DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-K INTO WHICH
DOCUMENT PORTIONS OF DOCUMENTS ARE INCORPORATED
-------- --------------------------------------
Proxy Statement for 1997 Annual Part III
Meeting of Shareholders
<PAGE> 2
PART I
ITEM 1. BUSINESS.
RECENT DEVELOPMENTS
Outlook Group Corp. (the "Company") announced on August 29, 1997 that
it had signed a letter of intent to be acquired by an affiliate of Goldner Hawn
Johnson & Morrison Incorporated ("Goldner Hawn") of Minneapolis, Minnesota.
The letter of intent provides for Goldner Hawn to acquire all outstanding
shares of the Company at $8.25 in cash per share. Goldner Hawn intends,
following the acquisition, to maintain the Company's headquarters in Neenah,
Wisconsin. The transaction remains subject to further due diligence reviews by
Goldner Hawn, execution of a definitive agreement and other customary
conditions. The transaction is scheduled to close in the fourth calendar
quarter of 1997, although there can be no assurance.
In addition, the Company also announced execution of a letter of intent
relating to the disposition of its food processing operations. See below.
GENERAL
The Company is a graphic services company offering a variety of
related services including specialty printing, converting and packaging, and
distribution. Founded as a Wisconsin corporation in 1977, the Company
initially concentrated on bulk mailing and commercial printing projects. Over
the years, the Company's business has expanded to include printing related
services, particularly converting and packaging. In fiscal 1993, the Company's
business expanded to include food products production and packaging, although
the Company announced in fiscal 1997 its intention to divest its food
production segment.
In 1984, the Company began offering converting services to produce
cards for board games. During 1986, the Company first offered packaging
services by overwrapping, in plastic, recipe cards printed by the Company.
Such services were subsequently expanded to collectible sports picture cards.
Management believes that the Company's historical success was largely
attributable to its entry into these more profitable converting and packaging
services. These services in turn developed customer demand for higher quality
specialty printing, and at the same time reduced the Company's dependence on
commercial printing.
During fiscal 1995, the Company's sports and collectible picture card
business was negatively affected by the unexpectedly lengthy duration of the
national baseball strike, which reduced the demand for and production of
collectible cards. The baseball strike not only reduced demand for baseball
cards, but also negatively affected the sports card industry in general. Since
then, such business was further negatively affected by the continuing weakness
of the sports card industry and the decision of Fleer/Skybox Corp. ("Fleer"),
then a major Company customer, to outsource primarily through another supplier.
In fiscal 1997, approximately 2% of the Company's net sales from continuing
operations related to sports picture cards, as compared to 16% and 36% in
fiscal 1996 and 1995, respectively. The Company expects the percentage of its
business related to the collectible cards to remain low in fiscal 1998 as a
result of the above and other factors.
In December 1992, the Company purchased certain assets of the
Oconomowoc, Wisconsin manufacturing facility of Nestle Beverage Company (with
its affiliated companies, "Nestle"). The assets that were purchased formed the
nucleus of the Company's wholly-owned subsidiary Outlook Foods, Inc. ("Foods")
and the Company's food processing segment, which currently produces dry food
products, such as malted milk powder, cocoa mix, cappuccino mix and other drink
mixes. In 1996, the Company's contract to produce sauces and gravies for
Nestle was not renewed because of Nestle's desire to bring the work in-house.
(See "Customers and Marketing".) In September 1996, the Company announced its
intention to divest Foods, although no agreements have yet been made, and there
can be no assurance that the Company will be able to divest Foods on acceptable
terms. Due to the Company's announced intention to divest Foods, the Company
is now accounting for its food processing operations as a discontinued
operation. In August 1997, the Company entered into a letter of intent to sell
the assets of Foods to S&J Food Management Corporation ("S&J"). The
transaction remains subject to further due diligence reviews, execution of a
definitive agreement and other customary conditions.
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<PAGE> 3
In February 1995, the Company purchased Barrier Films Corporation
("Barrier"), a Sparks, Nevada based manufacturer of multi-layer packaging
films. Barrier's operations were included in the "other" class of services
within the Company's graphics services segment. In May 1997, the Company sold
Barrier, and the Company no longer produces films.
As a result of its performance during recent fiscal years, the Company
has considered, and continues to consider, a variety of options for
restructuring its business and operations in order to position the Company for
strengthened future performance. The Company has divested itself of its
publishing operations and Barrier, as it determined that those operations did
not complement its other continuing market lines, and announced a letter of
intent to divest Foods. The Company is continuing to consider divestiture
strategies to the extent that the Company believes such actions would enhance
its ability to achieve successful operations. In addition, the Company will
also consider appropriate acquisitions to strengthen continuing operations.
There can be no assurances, however, that the Company will be able to
successfully implement such strategies or complete those transactions.
The following table sets forth the approximate amount and percentage
of net sales from continuing operations contributed by each segment and
principal class of service during the last three fiscal years, as well as net
sales from discontinued operations:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
-----------------------------------------------------------------------
1997 1996 1995
--------------------- ----------------------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Graphic Services Segment
Specialty Printing . . . . . . $50,303 70% $56,055 71% $66,817 73%
Converting and Packaging . . . 6,410 9% 10,506 13% 19,141 21%
Other . . . . . . . . . . . . 15,341 21% 12,744 16% 5,662 6%
------- ---- -------- ---- -------- ----
Total Graphic Services Segment . $72,054 100% $79,305 100% $91,620 100%
======= ==== ======== ==== ======== ====
Discontinued Operations/
Food Processing Segment . . . . 16,804 32,051 29,122
-------- --------
Total . . . . . . . . . . $88,858 $111,356 $120,742
======= ======== ========
</TABLE>
GRAPHIC SERVICES SEGMENT
SPECIALTY PRINTING
The Company offers a broad array of specialty printing and related
graphic arts services, including pre-press work, sheeting, printing and
finishing. The Company provides full-color printing and color enhancement,
application of specialized coatings, simultaneous two-sided printing, enhanced
drying and computerized control. The Company focuses on specialty printing
projects such as picture cards, recipe cards, folding cartons, food coupons and
labels, vinyl cards, continuous forms and promotional materials rather than
traditional commercial printing of books, magazines and catalogs. The
specialty printing operations enhance the Company's ability to cross-sell its
other graphic services.
Outlook Graphics. The Company's pre-press staff prepares projects for
printing to customer specifications. These services include preparatory camera
plate-making, layout, typesetting and other related services. Although the
Company does not generally perform design services, it assists designers in
translating a concept into a printed product.
The Company's presses generally use off-set printing processes and can
print on a wide range of media from newsprint and coated paper to heavy
cardboard, including paperboard packaging. The Company currently utilizes
sheet-fed full-color presses of various sizes, the most sophisticated of which
is capable of six-color printing. Certain presses have interchangeable
printing plates which allow the Company significant flexibility in meeting
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<PAGE> 4
customer needs. In 1993, the Company established sheeting capacity, whereby it
can cut paper for printing to particular job size requirements, providing an
additional service to offer customers.
Additionally, the Company provides finishing services for printed
items (whether or not printed by the Company) such as precision trimming,
folding, die-cutting, binding, shrink-wrapping, collating and packaging
products for distribution and fulfillment.
Outlook Label. The Company's Outlook Label Systems, Inc. subsidiary
("Outlook Label") complements the Company's other specialty printing operations
by using different technologies and offering manufacturing capabilities not
otherwise available from the Company, enhancing the Company's ability to
cross-sell services. Outlook Label manufactures items such as coupons,
pressure sensitive specialty labels, printed vinyl cards (such as temporary
credit cards and identification cards), continuous forms, cartons, and
sweepstakes and specialty game pieces. Outlook Label's narrow web presses
generally utilize continuous-feed rolls of paper and flexo- or letter-press
processes. Its most sophisticated machinery permits one-pass, ten-color
printing and lamination of various substrates using an in-line process.
Outlook Packaging. Packaging engages in flexographic printing and
laminating of flexible packaging films. In these processes, Packaging takes
plastic and other flexible packaging materials (which are purchased from
others) and prints and/or laminates to customer specifications and slits the
material. Customer orders may include some or all of Packaging's services.
Packaging specializes in printing packaging materials for the food industry and
is expanding in the industrial and consumer packaging markets. Packaging
prints and laminates materials for pouches, bags, vacuum packages, packets,
security devices and card and food overwraps, and provides them to customers in
convenient rolls of film. The establishment of Packaging, including the
acquisition of assets of Sunrise Packaging, Inc. ("Sunrise") in 1993, was part
of the Company's diversification strategy, and was intended to complement the
Company's other specialty printing operations by allowing the Company to offer
additional technologies, capabilities and customer services, although factors
at Outlook Packaging including pricing which has failed to yield sufficient
recovery of costs, waste and operating efficiencies have affected its
performance.
CONVERTING AND PACKAGING
The Company's converting and packaging services grew rapidly through
fiscal 1992, primarily due to the substantial increase in business relating to
sports picture card converting; however, sales of these services declined in
fiscal 1994, and further significantly declined in fiscal 1996 and 1997.
During fiscal 1997, approximately 2% of the Company's net sales from continuing
operations related to collectible picture cards, as compared to 16% and 36% in
fiscal 1996 and 1995, respectively. The Company expects the percentage of its
business related to collectible cards to remain low.
The Company maintains specialized equipment for cutting, trimming,
sorting, collating and packaging cards, some of which it has designed or
modified to accommodate customer needs, although the Company has sold certain
surplus equipment as a result of the substantial reduction in its collectible
card business and may sell additional surplus equipment in the future.
The Company also has developed paperboard packaging capabilities to
serve its customers' needs and enhance the Company's one-stop marketing
approach. Paperboard packaging consists of utilizing paperboard stock to print
and convert folding cartons, blister cards, pocket folders and other point of
purchase materials. (Certain of these operations are considered by the Company
to be "specialty printing" and are included in that line of business.)
The Company packages other types of items. Examples have included
wrapping toys and other promotional items for insertion in cereal boxes,
overwrapping multiple packages for sale as a single unit, and packaging fabric
softener sheets for laundry room vending machines. Custom designed feeding and
in-line overwrapping systems increase the efficiency of its packaging
operations. The Company also maintains an environmentally controlled work
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<PAGE> 5
area to perform food contact packaging and to provide other packaging services
for which cleanliness and specific quality standards are required.
OTHER
The Company's other services include direct mailing, fulfillment and
films manufacturing. Direct mailing involves inserting, literature
overwrapping, labeling, sorting and shipping printed items for bulk mailing.
The Company's zip code sorting allows it to minimize customer postal charges
by, in many instances, delivering items by common carrier to a post office near
the destination. Direct mailings in fiscal 1997 included catalogs, coupon
packages and promotional materials.
The fulfillment services provided by the Company consist of storing
and distributing items upon customer order. In many cases, fulfillment items
include materials such as forms and booklets that are printed by the Company,
often under standing orders from its customers to replenish supplies. Custom
designed data systems produce reports to assist the Company's customers in
managing their fulfillment programs.
Through Barrier, the Company formerly manufactured flexible plastic
film used for food, medical and electronics packaging through a process called
co-extruded blown film. Films were produced for the Company's use in other
operations, and for outside customers. Barrier's operations were sold in May
1997, as the Company determined they were not consistent with its long-term
direction. The Company has entered into an agreement with the purchasers of
Barrier whereby the purchasers will supply certain of the Company's
requirements for co-extruded film in the future.
DISCONTINUED OPERATIONS/FOOD PROCESSING SEGMENT
In September 1996, the Company announced plans to divest its food
processing segment, and is now accounting for those operations as a
discontinued operation. In August 1997, the Company entered into a letter of
intent to sell the assets of Foods to S&J. The transaction remains subject to
further due diligence reviews, execution of a definitive agreement and other
customary conditions.
The food processing segment was formed in 1992 as a result of the
acquisition of assets from Nestle. This line of business currently consists of
dry-blended food processing and packaging. In this segment, Foods mixes and
blends various raw materials in accordance with customers' formulas. The
resulting products (generally dry mixes or powders) are then packaged according
to customer specifications. The Company has begun to produce products to its
own specifications and engage in the consumer marketing of these products.
Food products produced and packaged by Foods include malted milk
powder and cocoa and other beverage mixes, and previously included powdered
sauce and gravy mixes. Foods entered into two agreements to produce and
package certain Nestle products (specified sauces and gravy mixes and malted
milk powder) in December 1992; see "Customers and Marketing" below regarding
the termination of the agreements relating to sauces and gravies. Sales to
Nestle, including sales in addition to those covered by the production
agreements, represented approximately 67% of this segment's net sales in fiscal
1997, as compared to 94% and 90% in fiscal 1996 and 1995, respectively.
The Company has introduced several proprietary food products, although
these products do not represent a material part of the business, and several
products have been discontinued.
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<PAGE> 6
CUSTOMERS AND MARKETING
Due to the project-oriented nature of the Company's business, sales to
particular customers may vary significantly from year to year depending upon
the number and size of their projects. The identity of those customers also
may change.
During fiscal 1997, sales (primarily in the discontinued operations of
the food processing segment) to Nestle accounted for 13% of the Company's total
net sales for the period. Sales to Nestle were 26% and 22% of the Company's
total net sales in fiscal 1996 and 1995, respectively. During fiscal 1997,
sales (all in the graphic services segment) to Kraft Foods, Inc. (and
affiliates) ("Kraft") accounted for approximately 14% of the Company's total
net sales from continuing operations for the period; sales to Kraft were 13%
and less than 10% of the Company's total net sales from continuing operations
in fiscal 1996 and 1995, respectively.
In connection with the Company's December 1992 acquisition of certain
Nestle assets, Foods and Nestle entered into operational agreements including
(1) a five-year agreement under which Foods packages malted milk products for
Nestle; and (2) a two-year agreement by which Foods packaged certain sauces and
gravies for Nestle. The agreements do not preclude Foods or the Company from
producing or packaging similar products for other customers, and Foods is
producing and packaging for other customers in the food service industry. The
Company's contract to blend sauces and gravies for Nestle, as extended, expired
at the end of fiscal 1996. That contract represented approximately 61% and 65%
of the Company's sales to Nestle in fiscal 1996 and 1995, respectively.
Sales to Kraft represent sales to several Kraft divisions and
subsidiaries. The Company performs various services on behalf of Kraft, such
as production of labels and fulfillment. As with most of its customers, the
Company's sales to Kraft are pursuant to cancellable purchase orders.
The Company expects that it will continue to experience significant
sales concentration given the relatively large size of projects undertaken for
certain customers. Furthermore, the Company's largest customers may vary from
year to year depending on the number and size of the projects completed for
such customers. For example, Fleer was formerly the Company's largest
customer, but work for Fleer has substantially diminished and it is no longer a
significant customer. The loss of business of one or more principal customers
or a change in the number or character of projects for particular customers
could have a material adverse effect on the Company's sales volume and
profitability.
Other than the Nestle agreement described above, customers generally
purchase the Company's services under cancelable purchase orders rather than
long-term contracts, although exceptions sometimes occur when the Company is
required to purchase substantial inventories or special machinery to meet
orders. In past years, the Company rarely experienced cancellations of
purchase orders, although it recently has increasingly experienced such delays
and cancellations. The Company believes that operating without long-term
contracts is consistent with industry practices, although it increases the
Company's vulnerability to significant period to period changes. Because of
the project-oriented nature of the Company's business, the short-term character
of a substantial portion of its projects and the nature of the orders for the
Company's services, the Company does not believe that backlog is material or
meaningful to its business.
The Company markets its services nationally through certain of its
executive officers and the Company's sales group which includes 40 sales and
service employees and a total of 10 manufacturer's representatives. The sales
group is intended to centralize and coordinate sales and marketing activities
among the Company's various operations. The Company generally does not enter
into employment contracts with its officers (other than its CEO and COO) and
employee sales personnel, although it has agreements with its outside
representatives.
RAW MATERIALS
In the graphic services segment, raw materials necessary to the
Company include paper stocks, inks and plastic films, all of which are readily
available from numerous suppliers. The cost of raw materials represented
approximately 48% of the Company's cost of goods sold in continuing operations
during fiscal 1997, as compared
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<PAGE> 7
to 49% in fiscal 1996. In the food processing segment, raw materials include
cheese solids, milk, sugar, barley, flour and starch. The Company has not
experienced difficulties in obtaining materials for the graphic services
segment in the past and does not consider itself dependent on any particular
supplier for raw materials, or for the Company's equipment needs.
COMPETITION
The market for the services provided by the Company is highly
competitive, primarily on the basis of price, quality, production capability,
capacity for prompt delivery and continuing relationships.
The Company's principal competitors, and the scope of the areas in
which the Company competes, vary based upon the services offered. With respect
to specialty printing services, its competitors are numerous and range in size
from very large multi-national companies with substantially greater resources
than the Company to many smaller local companies. Numerous competitors also
exist for other services. While there are fewer competitors offering
converting and packaging services, competition is very strong. The Company
believes that relatively few competitors offer the wide range of services
provided by the Company. Because of the substantial capital requirements for
graphic services equipment, larger companies with greater capital resources may
have an advantage in financing state-of-the-art equipment. See "Management's
Discussion and Analysis of Results of Operations and Financial
Condition--Liquidity and Capital Resources." The Company does not believe
foreign competition is significant at this time.
ENVIRONMENTAL MATTERS
The Company and the industry in which it operates are subject to
environmental laws and regulations concerning emissions into the air,
discharges into waterways and the generation, handling and disposal of waste
materials. These laws and regulations are constantly evolving, and it is
impossible to predict accurately the effect they may have upon the capital
expenditures, earnings and competitive position of the Company in the future.
The Company's past expenditures relating to environmental compliance have not
had a material effect on the Company. Growth in the Company's production
capacity with a resultant increase in discharges and emissions could require
significant capital expenditures for environmental control facilities in the
future.
EMPLOYEES
At July 31, 1997, the Company had 688 employees, substantially all of
whom were employed on a full-time basis. (Of these employees, 101 were
employed by Foods.) The Company contracts for and/or hires temporary and
intermittent employees to increase the number of personnel in certain
operations as project commitments require; approximately 27 of the employees at
July 31, 1997 were intermittent. Approximately 86 production and maintenance
employees of Foods are covered by two union contracts. The Company considers
its relationship with its employees to be good. Wages and employee benefits in
continuing operations represented approximately 29% of the Company's cost of
goods sold during each of fiscal 1997 and 1996.
ITEM 2. PROPERTIES.
The Company's offices and main production and distribution facilities
are located in the Town of Menasha, Wisconsin in a facility owned by the
Company. The 345,000 square foot facility (of which approximately 25,000
square feet are used for offices) was built in stages from 1980 to 1992. The
Company also owns approximately five acres of land adjacent to this facility to
provide for future expansion.
The Company owns an 83,000 square foot facility in Neenah, Wisconsin
in which Outlook Label's office and production facilities are located; this
facility includes a 63,000 square foot addition completed in December 1990.
This addition provides capacity for future expansion of Outlook Label as well
as for other operations of the Company.
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<PAGE> 8
The Company owns a 164,000 square foot facility in Oconomowoc,
Wisconsin in which Foods' office and production facilities are located. The
several adjacent buildings constituting this facility were built from
approximately 1916 to 1918, with additions constructed in 1963 and 1981. These
buildings were purchased from Nestle in 1992. In connection with the letter of
intent to divest Foods, the Company expects to arrange a disposition of the
facility.
The Company owns an 81,000 square foot facility in Oak Creek,
Wisconsin in which Packaging's office and production facilities are located,
and an additional 38,000 square foot facility in Wichita, Kansas in which
additional Packaging production facilities were located. These buildings were
constructed in 1990 and 1970, respectively, and were purchased from Sunrise and
its affiliates in 1993. The Wichita facility has been closed and is being
offered for sale by the Company.
The Company leases an approximately 166,000 square foot facility in
Neenah, Wisconsin which is currently used for certain mailing operations and
warehouse space. The lease for this facility expires on March 30, 2002. The
Company must provide six months notice of its intention to vacate or the lease
shall continue on a year-to-year basis. The Company is negotiating with the
landlord of this facility for a reduction of the space used at this facility
and/or the lease term.
The Company also leases an approximately 37,500 square foot facility
in Neenah, Wisconsin for its sheeting operations and other warehouse space.
The Company occupied the facility in 1993. The lease is for a ten year term,
with one five year option to renew.
In July 1995, the Company occupied a newly-constructed 150,000 square
foot facility in Oshkosh, Wisconsin for fulfillment and distribution services.
In addition to land and buildings, the Company maintains significant
equipment to perform its various graphic services. The equipment includes
presses, machinery dedicated to converting and packaging, and other machinery
described above in Item 1. Certain of the equipment is leased by the Company;
see Note G of Notes to Consolidated Financial Statements in the 1997 Annual
Report, which is incorporated herein by reference, for a description of
equipment lease transactions.
The Company uses complex and specialized equipment in the provision of
its services, and the manufacture of its products. Therefore, the Company is
dependent upon the functioning of such machinery and equipment, and its ability
to acquire and maintain appropriate equipment. Among other factors, the
Company may be affected by equipment malfunctions, training and operational
needs relating to the equipment, which may delay its utilization, maintenance
requirements, and technological or mechanical obsolescence. Because of the
substantial capital requirements for graphic services equipment in particular,
larger companies with greater capital resources may have an advantage in
financing state-of-the-art equipment.
The Company believes that all of its facilities are in good condition
and suited for their present purpose. The Company believes that the property
and equipment currently utilized by it is sufficient for its currently
anticipated needs but that expansion of the Company's business or offering new
services could require the Company to obtain additional equipment or
facilities.
As a result of the diminution of certain lines of business
(particularly relating to collectible cards), the Company has sold certain
surplus equipment in recent years, and will consider further sales in the
future. The Company also regularly evaluates facility needs, and would sell or
terminate leases to other facilities if appropriate.
Substantially all of the Company's assets are pledged as collateral
under certain financing agreements. See Note C of Notes to Consolidated
Financial Statements, which is incorporated herein by reference, for a
description of financing secured by mortgages on the properties and equipment
owned by the Company and its subsidiaries.
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ITEM 3. LEGAL PROCEEDINGS.
In the opinion of management, the Company is not a party to any legal
proceedings other than routine litigation which is not material to its
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1997.
EXECUTIVE OFFICERS OF THE REGISTRANT.
Certain information as to each of the executive officers of the
Company is set forth in the following table. Officers are elected annually by
the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
David L. Erdmann . . . . . . . 54 Chairman of the Board and Chief Executive Officer; Director
Joseph J. Baksha . . . . . . . 45 President and Chief Operating Officer
Jeffry H. Collier . . . . . . . 44 Executive Vice President; Vice President and General Manager of
Graphics Group; Director
Thomas C. Aschenbrenner . . . . 44 Chief Financial Officer and Secretary
James W. Buhl . . . . . . . . . 51 Vice President-Human Resources
John F. Hofmann . . . . . . . . 47 Executive Vice President-Sales and Marketing
</TABLE>
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David L. Erdmann served as Chief Executive Officer of the Company
since its inception in 1977, and as Chairman of the Board since 1990. Mr.
Erdmann also served as President from 1977 until December 1996.
Joseph J. Baksha has served as President and Chief Operating Officer
since December 1996, after having served as Vice President of the Company and
President of the Company's Packaging Group since June 1996. Previously, Mr.
Baksha served as Executive Vice President and Chief Operating Officer of
Washburn International--(a manufacturer and distributor of musical instruments)
from 1994 to 1996, and previously as Executive Vice President and Chief
Operating Officer of Alusuisse Flexible Packaging (a flexible packaging
company). The Company's Packaging Group consists of Outlook Packaging and
Outlook Label, and prior to May 1997 included Barrier.
Jeffry H. Collier has served as Executive Vice President of the
Company since 1994, President of the Company's Graphics Group since 1996 and a
Vice President of the Company since 1990. Previously, Mr. Collier was employed
by the Company as its plant manager and General Manager of Outlook Label. (The
Company's Graphics Group consists of the specialty printing, converting and
packaging, and mailing and distribution operations of Outlook Group Corp.)
Thomas C. Aschenbrenner became the Company's Chief Financial Officer
in May 1997 and Secretary in August 1997. Previously, Mr. Aschenbrenner
served as Vice President and Chief Financial Officer of Xymox
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<PAGE> 10
Technologies, Inc. from 1993 to 1996, Treasurer of Bowthorpe Holdings US group
of companies and Vice President of Finance of Tyton Corporation (one of the
Group's subsidiaries) from 1979 to 1993, and senior auditor for Arthur Young
and Co. prior thereto.
James W. Buhl has served as the Company's Vice President-Human
Resources since 1992.
John F. Hofmann has served as the Company's Executive Vice
President-Sales and Marketing since 1996. Previously, Mr. Hofmann was Senior
Vice President-Sales and Marketing of Lefebvre Intergraphics from 1995 to 1996,
Senior Vice President and General Manager of Nationwide Retail Packaging from
1994 to 1995, and Senior Vice President-Sales and Marketing of Midwest Films
Corp. prior thereto.
* * * * *
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
The discussions in this report on Form 10-K, and in the documents
incorporated herein by reference, and oral presentations made by or on behalf
of the Company contain or may contain various forward-looking statements
(particularly those referring to expectations as to potential future
transactions, future business and/or operations, in the future tense, or using
terms such as "believe", "anticipate," "expect" or "intend") that involve risks
and uncertainties. The Company's actual future results could differ materially
from those discussed, due to the factors which are noted in connection with the
statements and other factors. The factors that could cause or contribute to
such differences include, but are not limited to, those in Items 1 and 2 above
in this report and in the "Management's Discussion and Analysis" (particularly
in "Results of Operations-- Fiscal 1997 Compared to Fiscal 1996") in Item 7
hereof. In particular, consummation of each of the various announced
transactions is subject to a number of conditions, as described above.
Therefore, as with any transaction, completion cannot be assured. The Company
intends to make no further announcements concerning the status of negotiations
as to definitive agreements until they either have been reached, which cannot
be assured, or negotiations have terminated.
Shareholders, potential investors and other readers are urged to consider these
factors carefully in evaluating forward-looking statements.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The company's common stock is quoted on the NASDAQ Stock Market. The following
table sets forth high and low sales prices as reported on NASDAQ for the
indicated fiscal year.
- --------------------------------------------------------------------------------
FISCAL 1997 High Low
- --------------------------------------------------------------------------------
First quarter $5 3/4 $4
Second quarter 6 1/2 4
Third quarter 6 4
Fourth quarter 6 1/4 3 7/8
- --------------------------------------------------------------------------------
Fiscal 1996
- --------------------------------------------------------------------------------
First quarter $9 1/2 $7 3/4
Second quarter 8 1/2 6 3/4
Third quarter 7 7/8 4 3/4
Fourth quarter 5 3/4 4 1/4
- --------------------------------------------------------------------------------
The company has not paid any cash dividends since its inception. The company
presently intends to employ its earnings in the continued development and
expansion of its business and does not expect to pay any cash dividends in the
foreseeable future. For a description of contractual dividend restrictions,
see Note C to the consolidated financial statements and the discussion in
Management's Discussion and Analysis.
As of August 14, 1997, there were approximately 591 registered shareholders of
record.
-9-
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA.
The following selected financial data of Outlook Group Corp. (the "company")
has been derived from the company's audited consolidated financial statements
and should be read in conjunction with the consolidated financial statements,
related notes and Management's Discussion and Analysis contained in this
report. Information for years prior to 1997 has been restated to reflect the
company's subsidiary, Outlook Foods, Inc., as a discontinued operation - see
Note M to the consolidated financial statements.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MAY 31,
(in thousands, except share and per share amounts) 1997 1996 1995(1) 1994(2) 1993
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EARNINGS STATEMENT DATA:
Net sales $ 72,054 $79,305 $91,620 $74,020 $75,969
Cost of goods sold 61,168 74,683 77,046 62,222 60,392
- -------------------------------------------------------------------------------------------------------------
Gross profit 10,886 4,622 14,574 11,798 15,577
Selling, general and administrative expenses 9,904 13,347 13,303 9,087 7,756
- -------------------------------------------------------------------------------------------------------------
Operating profit (loss) 982 (8,725) 1,271 2,711 7,821
Other income (expense):
Interest expense (2,778) (2,506) (1,930) (687) (846)
Other income 746 1,609 959 991 461
Gain on sale of subsidiary 556 -- -- -- --
- -------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations
before income taxes (494) (9,622) 300 3,015 7,436
Income tax expense (benefit) 58 (3,659) 118 1,002 3,208
- -------------------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations (552) (5,963) 182 2,013 4,228
Discontinued Operations:
Earnings (loss) from discontinued
operations before income taxes (1,492) 658 1,829 4,547 1,954
Income tax expense (benefit) (574) 253 726 1,772 714
- -------------------------------------------------------------------------------------------------------------
Earnings (loss) from discontinued operations (918) 405 1,103 2,775 1,240
- -------------------------------------------------------------------------------------------------------------
Net earnings (loss) $ (1,470) $(5,558) $ 1,285 $ 4,788 $ 5,468
- -------------------------------------------------------------------------------------------------------------
Net earnings (loss) per common share
Continuing operations $ (.12) $ (1.28) $ .03 $ .40 $ .83
Discontinued operations (.20) .09 .23 .55 .24
- -------------------------------------------------------------------------------------------------------------
Total $ (.32) $ (1.19) $ .26 $ .95 $ 1.07
- -------------------------------------------------------------------------------------------------------------
Weighted average number of common shares
outstanding 4,649,382 4,661,882 4,884,607 5,039,799 5,097,371
- -------------------------------------------------------------------------------------------------------------
BALANCE SHEET DATA (AT FISCAL YEAR END):
Working capital $11,368 $23,700 $24,206 $23,109 $17,042
Total assets 67,620 77,853 83,373 70,582 57,270
Long-term debt, less current maturities 16,156 30,859 24,991 14,762 7,748
Shareholders' equity 33,471 34,941 41,386 42,574 38,875
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes the results of operations of the company's subsidiary, Barrier
Films Corp. ("Barrier"), from February 11, 1995.
(2) Includes the results of operations of the company's subsidiary, Outlook
Packaging, Inc. ("Outlook Packaging"), from October 18, 1993.
-10-
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following section presents a discussion and analysis of the company's
results and operations during the past three fiscal years, and its financial
condition at fiscal year end. Statements that are not historical facts (such
as statements in future terms or using terms such as "believe", "expect" or
"anticipate") may be forward-looking statements that involve risks and
uncertainties. The company's actual future results could materially differ
from those discussed. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in the following
sections, particularly under "General Factors" in "Results of Operations -
Fiscal 1997 Compared to Fiscal 1996".
In September 1996, the company announced that it intended to divest its food
processing operations. As a consequence, beginning in the second quarter of
fiscal 1997, the company began accounting for the food processing segment as a
discontinued operation. Information prior to that time has been restated to
reflect this change in accounting, unless specifically indicated otherwise.
On August 29, 1997, the company announced the execution of separate letters of
intent providing for the acquisitions of the company and for the sale of assets
of its food processing segment. All such transactions remain subject to
further due diligence reviews, execution of definitive agreements and other
customary conditions, and consummation cannot be assured. Effects of the
proposed transactions, if any, will be reflected in future periods.
RESULTS OF OPERATIONS
The following table shows, for the fiscal years indicated, certain items from
the company's consolidated statements of operations expressed as a percentage
of net sales.
-11-
<PAGE> 13
<TABLE>
<CAPTION>
YEAR ENDED MAY 31, Percentage of Net Sales
- -------------------------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 84.9 94.2 84.1
- -------------------------------------------------------------------------------------
Gross profit 15.1 5.8 15.9
Selling, general and
administrative expenses 13.7 16.8 14.5
- -------------------------------------------------------------------------------------
Operating profit (loss) 1.4 (11.0) 1.4
Other income (expense):
Interest expense (3.9) (3.1) (2.1)
Other income 1.0 2.0 1.0
Gain on sale of subsidiary .8
- -------------------------------------------------------------------------------------
Earnings (loss) from continuing operations
before taxes (.7) (12.1) .3
Income tax expense (benefit) .1 (4.6) .1
- -------------------------------------------------------------------------------------
Earnings (loss) from continuing operations (.8) (7.5) .2
Discontinued operations:
Earnings (loss) from discontinued
operations before income taxes (2.1) .8 2.0
Income tax expense (benefit) (.8) .3 .8
- -------------------------------------------------------------------------------------
Earnings (loss) from discontinued operations (1.3) .5 1.2
- -------------------------------------------------------------------------------------
Net earnings (loss) (2.0)% (7.0)% 1.4%
- -------------------------------------------------------------------------------------
</TABLE>
FISCAL 1997 COMPARED TO FISCAL 1996
Outlook Group net sales from continuing operations (graphics services segment)
were $72.1 million for fiscal 1997, a decrease of $7.3 million or 9% from
fiscal 1996 sales of $79.3 million. The major factor for this decline is the
loss of sales to the sports and collectible picture card market, which
decreased $10.0 million compared to last year. In total, sales to this market
declined to 2% of continuing operation's net sales in fiscal 1997 versus 16%
in fiscal 1996 and 36% in fiscal 1995. This is reflected in sales reductions
for the specialty printing and the converting and packaging classes of
services, and results from the factors discussed in "General Factors" below.
The company was able to offset part of the loss of this revenue resulting from
its efforts to focus on new markets for its core manufacturing competencies.
Net sales in the "Other" category in the graphic services segment increased by
$2.6 million to $15.3 million in fiscal 1997. Gains were posted primarily in
the company's mailing and fulfillment centers. In addition, in May 1997, the
company sold its Barrier Films Corp. ("Barrier") subsidiary. Barrier's net
sales in fiscal 1997 were $6.6 million, as compared to $5.3 million in fiscal
1996, and are included in the company's sales from continuing operations during
the year.
Gross profit as a percentage of net sales improved to 15.1% in fiscal 1997 from
5.8% in fiscal 1996. Gross profit of $10.9 million improved $6.3 million over
1996. Of the improvement, approximately $5.0 million resulted from more
efficient utilization of material, personnel reductions, the closing of a
redundant production facility and two underutilized warehouses, and other
overhead reductions. Reduced material costs resulted from programs developed at
the company's Outlook Label and Outlook Packaging subsidiaries to more
effectively utilize material and reduce scrap. Personnel reductions were made
throughout the company, but primarily at the company's Outlook Graphics
operation which is where the largest decline in sales occurred. Surplus
equipment that had previously been utilized primarily for the sports and
collectible picture card market was sold. Lease agreements were renegotiated
resulting in
-12-
<PAGE> 14
significant savings to the company. Further contributions to
improve gross margin were the closing of an Outlook Packaging production
facility and two Outlook Graphic's warehouses. Inventory write offs were
reduced to $500,000 in fiscal 1997, which was a $1.3 million improvement from
$1.8 million in fiscal 1996. Management has developed a program to further
reduce inventory but does not currently believe that such inventory dispositions
will have a material effect on continuing operations. However, actual results
will be determined by the ability to attract buyers or use materials in the
normal course of business.
Selling, general and administrative expenses decreased to 13.7% of net sales
for fiscal 1997 compared to 16.8% in the prior year, or $3.4 million. Of this
amount, $2.5 million results from reduction of the provision for doubtful
accounts to $500,000 from the unusually high provision in fiscal 1996.
Approximately $900,000 of additional savings was generated by personnel
reductions, primarily at Outlook Graphics and Outlook Packaging.
Interest expense as a percent of net sales increased to 3.9% in fiscal 1997
versus 3.1% in fiscal 1996. Although total debt at fiscal 1997 year end was
lower than fiscal 1996 year end, interest expense increased $300,000 primarily
due to a higher cost of funds.
Other income decreased $900,000 to 1.0% of net sales versus 2.0% in the prior
year. Fiscal 1997 other income reflects sales of non-strategic equipment, most
of which was previously utilized for the production of sports and collectible
picture cards. In addition, fiscal 1997 includes a $600,000 gain realized on
the sale of the company's former Barrier subsidiary, which was partially
financed by the company.
The above factors resulted in a $9.1 million improvement in pretax earnings
from continuing operations compared to fiscal 1996. Losses from continuing
operations were reduced to 0.7% of sales in fiscal 1997 from 12.1% in fiscal
1996. As a result, the company recorded an income tax expense equal to only
0.1% of net sales. The tax provision for fiscal 1997 includes a valuation
allowance to reserve for the possible limitation of the company realizing
various state tax benefits.
The food processing segment, now accounted for as a discontinued operation,
posted net sales of $16.8 million, a decrease of $15.2 million, or 48% under
prior year levels. In total, 67% of fiscal 1997 sales in this segment were to
Nestle Beverage Company and its affiliates ("Nestle"), as compared to 94% in
fiscal 1996. As previously disclosed and further described below under "General
Factors", the company's contract to blend sauces and gravies for Nestle expired
in fiscal 1996.
The $900,000 loss from discontinued operations is $1.3 million below fiscal
1996's performance of earnings of $405,000. The loss is primarily due to the
food processing segment's loss in net sales described above.
In summary, fiscal 1997 yielded a net loss of $1,470,000, comprised of $0.12
per share from continuing operations and $0.20 per share from discontinued
operations. Fiscal 1996 generated a net loss of $5,558,000, comprised of $1.28
per share from continuing operations and a gain of $0.09 per share from
discontinued operations.
General Factors
Because of the project-oriented nature of the company's business, the company's
largest customers have historically tended to vary from year to year depending
on the number and size
-13-
<PAGE> 15
of the projects completed for these customers: However, during previous fiscal
years, the company substantially depended upon sales to Fleer and Nestle. As
indicated below, both of those customers have taken actions which reduced the
project volume in fiscal 1996 and 1997 and which are expected to affect fiscal
1998 and beyond. In fiscal 1997, sales to Kraft Foods and affiliates
represented 14% of net sales from continuing operations compared to 13% in
fiscal 1996.
The company has experienced a significant decline in net sales relating to the
sports and other picture card business. In fiscal 1997, sales relating to the
sports and collectible cards were 2% of net sales from continuing operations
as compared to 16% in fiscal 1996 and 36% in fiscal 1995. During fiscal
1996, Fleer Corp., the company's former largest customer in the sports and
collectible card market, selected a vendor other than the company for its
outsourced work. The company has also experienced the continuing effects of the
downward trend in overall demand in the sports and collectible picture card
market, strong competition for collectible card projects and competitive
pricing pressures. These factors have affected both the volume and pricing of
the company's services relating to collectible cards. The company expects
the percentage of its business related to collectible cards to remain low in
fiscal 1998 as a result of these factors.
As previously disclosed, Outlook Foods, which the company is seeking to divest,
had a contract to blend sauces and gravies for Nestle which expired in December
1995. The contract was not renewed because of Nestle's desire to bring the
work in-house in order to utilize its excess capacity. The company was able to
extend this contract through the end of fiscal 1996. In total, sauces and
gravies yielded $18.5 million in sales in fiscal 1996 and no business in fiscal
1997. This represented 61% of sales to Nestle in fiscal 1996 and 65% in fiscal
1995. The company continues to manufacture malted milk products for Nestle
under a separate contract which expires in December 1997. In addition, Nestle
purchases other products on a non-contractual basis. Discussions have also been
held with Nestle regarding potential new contractual business in the future.
However, there can be no assurances and the announced divestiture of Outlook
Foods could adversely affect the operations of the food segment, as could a
decision by Nestle not to renew the malted milk contract.
Changes in the company's project mix and timing of projects make predictability
of the company's future results very difficult. Other than under Nestle's
agreement, customers generally purchase the company's services under
cancelable purchase orders rather than long-term contracts, although exceptions
sometimes occur when the company is required to purchase substantial
inventories or special machinery to meet orders. The company believes that
operating without long-term contracts is consistent with industry practices,
although it increases the company's vulnerability to losses of business and
significant period-to-period changes.
The company uses complex and specialized equipment to provide its services.
Therefore, the company is dependent upon the functioning of such machinery,
and its ability to acquire and maintain appropriate equipment.
FISCAL 1996 COMPARED TO FISCAL 1995
Outlook Group net sales from continuing operations for fiscal 1996 were $79.3
million, a decrease of $12.3 million, or 13.4% from fiscal 1995 sales of $91.6
million. The major factor
-14-
<PAGE> 16
in this decline was a $20.1 million reduction in sales to the sports and
collectible picture card market. The reduction resulted from the factors
described above, and was experienced primarily in the third and fourth fiscal
quarters of fiscal 1996. In total, sales to this market declined to 16%
of Outlook Group net sales versus 36% in 1995.
Net sales in the "Other" category in the graphic services segment
increased by $7.0 million to $12.7 million in fiscal 1996. Gains were posted
in the company's mailing and fulfillment centers. In addition, the company
reflected the first full year of sales activity at Barrier which was acquired
in February 1995. Outlook Publishing, sold in the first month of fiscal 1996,
had posted sales of $0.7 million in fiscal 1995.
Gross profit as a percent of net sales declined to 5.8% in fiscal 1996
from 15.9% in fiscal 1995. Several factors contributed to this decline,
including significantly lower sales volumes at Outlook Graphics; numerous
operating issues at Outlook Packaging including pricing, waste and operating
inefficiencies; high development costs at Barrier; and fourth quarter
provisions totaling $1.8 million for inventory obsolescence.
Selling, general and administrative expenses increased to 16.8% of net
sales for fiscal 1996 as compared to 14.5% in the prior year. Significant
savings were achieved through administrative staffing reductions and the sale
of Outlook Publishing. However, increases in expenses were generated primarily
by $3.0 million in accounts receivable write-offs and reserves of which $2.5
million related to one customer in the trading card market. Generally, lower
sales levels also contributed to the increased percentage.
Interest expense as a percent of sales increased to 3.1% in fiscal 1996
versus 2.1% in fiscal 1995. The increase primarily resulted from increased
borrowings.
Other income increased to 2.0% of net sales versus 1.0% in the prior year.
Additional income was generated by the gains on the sale of Outlook Publishing
as well as sales of certain non-strategic equipment.
The above mentioned factors combined to generate a pre-tax loss from
continuing operations of 12.1% of net sales. As a result, the company recorded
an income tax benefit equal to 4.6% of net sales. This will generate a tax
refund as nearly half of the tax losses are carried back. The balance will be
carried forward.
The food processing segment, now accounted for as a discontinued
operation, posted sales of $32.1 million, an increase of $3.0 million, or 10.3%
over prior year levels. In total, 94% of fiscal 1996 sales in this segment
were to Nestle, as compared to 90% in fiscal 1995.
As previously disclosed and further described above under "General
Factors", the company's contract to blend sauces and gravies for Nestle expired
in fiscal 1996. The $405,000 earnings from discontinued operations was
$698,000 below fiscal 1995's earnings of $1.1 million. The loss is primarily
due to reduced margins on the Nestle gravies and sauces contract.
In summary, fiscal 1996 yielded a net loss of $5,558,000, comprised of a
loss of $1.28 per share from continuing operations and a gain of $0.09 per
share from discontinued operations. This included fourth quarter adjustments
totaling $0.63 per share, primarily relating to the write-offs and reserves for
accounts receivable and inventory. Fiscal 1995 results produced net income of
$1,285,000, comprised of $0.03 per share from continuing operations and $0.23
per share from discontinued operations. Average shares outstanding declined
due to stock repurchases of 250,000 in fiscal 1995 and an additional 100,000
shares
-15-
<PAGE> 17
in fiscal 1996.
Liquidity and Capital Resources
As shown on the Consolidated Statements of Cash Flows, fiscal 1997 cash
provided from operating activities, net of the effect of the disposition of
Barrier, was $6.9 million as compared to cash used in operating activities of
$1.9 million in fiscal 1996. The company's cash position was further enhanced
by an additional $1.2 million being generated by investing activities. The cash
generated from these sources was used to pay down the company's debt by a net
$8.5 million.
In addition to cash generated as a result of improved operations, the company's
operating cash benefited by $2.0 million as a result of reduced trade
receivables and inventories. The company reduced these balances in response to
declining sales and its continuing evaluation of inventory usage and the credit
worthiness of its customers. During fiscal 1997, the company provided $1.1
million for additional reserves and write-downs of receivables and inventory as
compared to $4.8 million in fiscal 1996. The company believes that a portion of
its inventories remain in excess of current requirements. Management has
developed a program to reduce inventories to desired levels over the near term
but does not currently believe that such inventory dispositions will have a
material effect on continuing operations. At May 31, 1997, 28% of the accounts
receivable balance pertain to Kraft and Nestle, the company's two largest
customers, both of which maintain current balances. No other customer accounted
for 10% or more of the company's accounts receivable balance. The net
deferred income tax liability increased by $321,000 over fiscal 1996. The
biggest components of this change were a decreased deferred tax liability
resulting from the sale of various assets, an increased deferred tax liability
from refinancing various leased assets, and a reduced deferred tax asset from
realizing tax benefits from the disposal of obsolete inventories. During the
year, the company benefited from tax refunds that resulted from tax loss
carrybacks to prior years. Reduced cash from accrued liabilities primarily
reflects the impact of personnel reductions and less interest accrued for
reduced loan balances. Cash used for "Other" assets includes investment in art
and engraving and changes in other receivables.
Cash from investing activities recognizes the benefit of $5.5 million from
sales of various assets partially offset by $4.3 million of current year
investments in plant and equipment. The sale of the company's Barrier Films
subsidiary was the largest asset transaction of the year. Other significant
assets that were sold this year were previously utilized for the production of
product for the sports and collectible picture card market.
Net cash used in financing activities was $8.5 million, which represents the
company's net reduction of debt. The company was able to reduce its debt as a
result of cash available from various asset sales described above, and improved
management of operations and working capital.
The company entered into a new bank credit facility in November 1996. The
facility provides for a maximum revolving credit commitment of $25.0 million
less $5.6 million to be used for standby letters of credit. A term loan in the
amount of $4.9 was also obtained. Interest on the debt varies with the
company's selection to have the debt be based upon margins over the bank
determined reference rate or a LIBOR rate. The company's actual rate is
dependent upon the company's performance against a specific ratio as measured
against a predetermined performance chart. In
-16-
<PAGE> 18
addition to the new bank facility, the company continued a previously existing
$11 million term note which extends through the year 2004.
During fiscal 1997, the company did not satisfy several debt covenants for
which it obtained waivers from its lenders. These covenants have been
renegotiated with the lenders for fiscal 1998 and beyond.
At July 31, 1997, the company had drawn $3.8 million under its revolving credit
facility, as compared to $4.9 million at May 31, 1997 and $12.0 million at May
31, 1996. These amounts are in addition to $12.0, $12.3, and $13.7 million of
term debt at those dates.
The company anticipates capital expenditures of approximately $2.5 million in
fiscal 1998. The company intends to finance these expenditures through funds
obtained from operations plus its credit facilities and possible leasing
opportunities.
The company regularly reassesses how its various operations complement the
company as a whole and considers strategic decisions to acquire new operations
or expand, terminate or sell certain assets or existing operations.
RECENTLY ISSUED FINANCIAL ACCOUNTING PRONOUNCEMENTS
During 1997, the Financial Accounting Standards Board issued the following
statements: (1) Statement No. 128, "Earnings Per Share," which simplifies the
standards for computing earnings per share. This Statement is effective for
the company's fiscal 1998 third and fourth quarter interim and annual financial
statements. The company does not believe that this Statement will have a
significant impact on the company's earnings per share calculation. (2)
Statement No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which establishes standards for the way companies report
information about operating segments in annual and interim financial
statements. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. This Statement is
effective for the company's fiscal 1999 financial statements. The company is
evaluating the extent to which its segment reporting may be affected by this
Statement.
OTHER
In general, the company believes that the effects of inflation on the company
have not been material in recent years.
PRINCIPAL CLASSES OF SERVICES
The following table sets forth the approximate amount and percentage of net
sales (excluding the net sales of discontinued operations) contributed by each
class of the company's graphic services segment during the last three fiscal
years:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands) Net Sales by Class
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Graphic services
Specialty printing $ 50,303 70% $ 56,055 71% $ 66,817 73%
Converting and packaging 6,410 9% 10,506 13% 19,141 21%
Other 15,341 21% 12,744 16% 5,662 6%
- ------------------------------------------------------------------------------------------------------------------------------------
Total $72,054 100% $79,305 100% $ 91,620 100%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 19
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
Not required of the Company at this time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements (including the notes thereto and the
accountants' report thereon) required by this item are set forth on pages F-1
through F-17 of this Report, and are incorporated herein by reference. See
also "Index to Financial Statements and Financial Statement Schedules"
following Item 14 herein. Supplementary data is not required to be presented,
as the Company does not meet the criteria for mandatory filing.
-18-
<PAGE> 20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information in response to this item is incorporated herein by
reference to "Election of Directors" and to "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's Proxy Statement to be filed pursuant to
Regulation 14A for its Annual Meeting of Shareholders to be held on or about
October 16, 1997 ("1997 Annual Meeting Proxy Statement") and "Executive
Officers of the Registrant" in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION.
Incorporated by reference to "Election of Directors -- Directors'
Fees" and "Executive Compensation" in the 1997 Annual Meeting Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information in response to this item is incorporated herein by
reference to "Security Ownership of Certain Beneficial Owners and Management"
in the 1997 Annual Meeting Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information in response to this item is incorporated by reference to
"Certain Transactions" in the 1997 Annual Meeting Proxy Statement.
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<PAGE> 21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) DOCUMENTS FILED:
1 and 2. Financial Statements and Financial Statement
Schedules. See the following "Index to Financial
Statements and Financial Statement Schedules," which
is incorporated herein by reference.
3. Exhibits. See Exhibit Index included as last part of
this report, which is incorporated herein by
reference.
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the last quarter of
the period covered by this report.
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<PAGE> 22
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of the Company and
subsidiaries are included in this Form 10-K Annual Report:
<TABLE>
<CAPTION>
PAGE NUMBER IN 1996
ANNUAL REPORT
---------------------
<S> <C>
Consolidated Balance Sheets as of May 31, 1997 and 1996 . . . . . . . . . F-1
Consolidated Statements of Operations for the years ended May 31, 1997, 1996
and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Shareholders' Equity for the years ended
May 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Cash Flows for the years ended May 31, 1997,
1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . F-5
Report of Independent Certified Public Accountants . . . . . . . . . . . . F-15
</TABLE>
The following financial statement schedule of the Company, and the
accountants' report thereon, appear on the indicated pages in this Form 10-K
Annual Report:
<TABLE>
<CAPTION>
PAGE NUMBER IN 10-K
-------------------
<S> <C>
Report of Independent Certified Public Accountants on
Financial Statement Schedule . . . . . . . . . . . . . . . . . . . F-16
Schedule II -- Valuation and Qualifying Accounts . . . . . . . . . . . . . F-17
</TABLE>
-21-
<PAGE> 23
- ---CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31,
(in thousands except share and per share amounts) 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ -- $ 298
Accounts receivable, less allowance for doubtful accounts of
$1,124 and $896, respectively 12,640 14,785
Inventories 9,857 12,127
Deferred income taxes 708 1,181
Income taxes refundable 725 1,964
Other 2,120 1,935
- ------------------------------------------------------------------------------------------------------------------------------------
Total current assets 26,050 32,290
Property, plant and equipment
Land 1,051 1,051
Buildings and improvements 15,128 15,196
Machinery and equipment 43,759 46,418
- ------------------------------------------------------------------------------------------------------------------------------------
59,938 62,665
Less accumulated depreciation 23,326 19,882
- ------------------------------------------------------------------------------------------------------------------------------------
36,612 42,783
Other assets 4,958 2,780
- ------------------------------------------------------------------------------------------------------------------------------------
Total assets $ 67,620 $ 77,853
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term debt $ 6,674 $ 1,532
Accounts payable 4,081 4,147
Cash overdraft liability 1,605 --
Accrued liabilities
Salaries and wages 1,482 1,737
Other 840 1,174
- ------------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 14,682 8,590
Long-term debt, less current maturities 16,156 30,859
Deferred income taxes 3,311 3,463
Shareholders' equity
Cumulative preferred stock, $.01 par value -- authorized
1,000,000 shares; none issued -- --
Common stock, $.01 par value -- authorized 15,000,000 shares;
5,099,382 shares issued and outstanding 51 51
Additional paid-in capital 18,415 18,415
Retained earnings 19,454 20,924
- ------------------------------------------------------------------------------------------------------------------------------------
37,920 39,390
Less 450,000 shares of treasury
stock at cost, both years 4,449 4,449
- ------------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 33,471 34,941
- ------------------------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $ 67,620 $ 77,853
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
F-1
The accompanying notes are an integral part of these financial statements.
<PAGE> 24
- ---
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
- ------------------
(in thousands except share and per share amounts) 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 72,054 $ 79,305 $ 91,620
Cost of goods sold 61,168 74,683 77,046
- ---------------------------------------------------------------------------------------------------
Gross profit 10,886 4,622 14,574
Selling, general and administrative expenses 9,904 13,347 13,303
- ---------------------------------------------------------------------------------------------------
Operating profit (loss) 982 (8,725) 1,271
Other income (expense):
Interest expense (2,778) (2,506) (1,930)
Other income 746 1,609 959
Gain on sale of subsidiary 556 -- --
- ---------------------------------------------------------------------------------------------------
Earnings (loss) from continuing operations
before income taxes (494) (9,622) 300
- ---------------------------------------------------------------------------------------------------
Income tax expense (benefit) 58 (3,659) 118
Earnings (loss) from continuing operations (552) (5,963) 182
Discontinued operations:
Earnings (loss) from discontinued
operations before income taxes (1,492) 658 1,829
Income tax expense (benefit) (574) 253 726
- ---------------------------------------------------------------------------------------------------
Earnings (loss) from discontinued operations (918) 405 1,103
- ---------------------------------------------------------------------------------------------------
Net earnings (loss) $ (1,470) $ (5,558) $ 1,285
- ---------------------------------------------------------------------------------------------------
Net earnings (loss) per common share
Continuing operations $ (.12) $ (1.28) $ .03
Discontinued operations (.20) .09 .23
- ---------------------------------------------------------------------------------------------------
Total $ (.32) $ (1.19) $.26
- ---------------------------------------------------------------------------------------------------
Weighted average number of common shares
outstanding 4,649,382 4,661,882 4,884,607
- ---------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 25
- ---
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
Common Stock Additional Treasury Stock
------------ paid-in Retained ----------------------
(in thousands except share amounts) Shares Amount capital earnings Shares Amount Total
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at May 31, 1994 5,099,382 $51 $18,415 $25,197 100,000 $(1,089) $42,574
Acquisition of treasury stock -- -- -- -- 250,000 (2,473) (2,473)
Net earnings for 1995 -- -- -- 1,285 -- -- 1,285
- ----------------------------------------------------------------------------------------------------------------
Balance at May 31, 1995 5,099,382 51 18,415 26,482 350,000 (3,562) 41,386
Acquisition of treasury stock -- -- -- -- 100,000 (887) (887)
Net loss for 1996 -- -- -- (5,558) -- -- (5,558)
- ----------------------------------------------------------------------------------------------------------------
Balance at May 31, 1996 5,099,382 51 18,415 20,924 450,000 (4,449) 34,941
Net loss for 1997 -- -- -- (1,470) -- -- (1,470)
- ----------------------------------------------------------------------------------------------------------------
Balance at May 31, 1997 5,099,382 $51 $18,415 $19,454 450,000 $(4,449) $33,471
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 26
- ---CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
YEAR ENDED MAY 31,
- -------------------------------------
(in thousands) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (1,470) $(5,558) $ 1,285
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 5,952 5,655 4,413
Provision for doubtful accounts 639 3,030 2,491
Gain on sale of assets (407) (948) --
Gain on sale of subsidiary (556)
Deferred income taxes 321 (1,626) (147)
Changes in assets and liabilities, net of effects
of acquisitions and disposals of businesses:
Accounts receivable 991 (346) (4,257)
Inventories 1,048 2,807 (2,647)
Income taxes refundable 1,239 (1,964) --
Accounts payable 575 (2,810) 2,237
Accrued liabilities (420) (328) 205
Other (966) 194 (606)
- --------------------------------------------------------------------------------
Net cash provided by (used in) operating
activities 6,946 (1,894) 2,974
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Acquisition of property, plant and equipment (4,275) (4,942) (12,586)
Decrease in equipment acquisition trust fund -- 401 701
Proceeds from sale of assets 2,604 1,755 773
Purchase of business -- -- (1,368)
Proceeds from sale of subsidiary 2,888 -- --
Other -- (89) (503)
- --------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 1,217 (2,875) (12,983)
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Increase (decrease) in revolving credit arrangement
borrowings (7,084) 7,400 (7,050)
Increase in cash overdraft 1,605 -- --
Proceeds from long-term borrowings 4,870 -- 19,350
Payments on long-term borrowings (7,347) (1,528) (2,361)
Acquisition of treasury stock -- (887) (2,473)
Debt financing costs (505) -- --
- --------------------------------------------------------------------------------
Net cash(used in)provided by financing activities (8,461) 4,985 7,466
- --------------------------------------------------------------------------------
Net increase (decrease) in cash (298) 216 (2,543)
Cash and cash equivalents at beginning of year 298 82 2,625
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ -- $ 298 $ 82
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 27
- ---
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF ACCOUNTING POLICIES
A summary of the company's significant accounting policies consistently applied
in the preparation of the accompanying consolidated financial statements
follows.
Basis of Presentation
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include all the accounts of Outlook Group
Corp. and its wholly-owned subsidiaries: Outlook Label Systems, Inc. ("Outlook
Label"); Outlook Foods, Inc. ("Outlook Foods") - see Note M; Outlook Packaging,
Inc. ("Packaging"); and Barrier Films Corporation ("Barrier") through its
disposal in May 1997 -- see Note J.
All intercompany accounts and transactions have been eliminated in the
preparation of the consolidated financial statements.
Revenue Recognition
Revenue is recognized when services have been completed and the product has
been shipped.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, demand deposits and short-term investments with maturities of three
months or less at time of purchase.
Accounts Receivable
As of May 31, 1997 and 1996, 28% and 18%, respectively, of the accounts
receivable balance relates to two customers.
Approximately 2%, 16%, and 36% of the company's sales from continuing
operations for the years ended May 31, 1997, 1996 and 1995, respectively,
relate to the production of sports and other collectible picture cards. In
addition, 2% and 14% of the company's receivables as of May 31, 1997 and 1996,
respectively, were concentrated in this market. Provisions for doubtful
accounts were $639,000, $3,030,000 and $2,491,000 for the years ended May 31,
1997, 1996 and 1995, respectively.
At May 31, 1997, the company has recorded an allowance for doubtful
accounts of $1,124,000. The company has estimated this amount based on
information currently available. Due to uncertainties inherent in the
estimation process it is reasonably possible that this estimate will change in
the near term.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
F-5
<PAGE> 28
Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Depreciation is recorded
using the straight-line method over the estimated useful lives of the assets as
follows:
Buildings and improvements 10-40 years
Machinery and equipment 5-10 years
Depreciation expense was $5,598,000, $5,280,000 and $4,022,000 for the years
ended May 31, 1997, 1996 and 1995, respectively. Significant additions or
improvements extending the useful lives of assets are capitalized. Repairs and
maintenance are charged to earnings as incurred. Upon retirement or disposal
of assets, the applicable costs and accumulated depreciation are eliminated
from the accounts and the resulting gain or loss is included in income.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," encourages, but does not require companies to record compensation
cost for stock-based employee compensation plans at fair value. The company has
chosen to continue to account for stock-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations.
Accordingly, compensation cost is measured as the excess, if any, of the quoted
market price of the company's stock at the date of grant over the exercise
price. See Note F.
Income Taxes
Deferred tax assets, net of any applicable valuation allowance, and
liabilities are established for the future tax effects of temporary differences
between the bases of assets and liabilities for financial and income tax
reporting purposes, as measured by applying current tax laws.
Earnings Per Share
Net earnings per share is computed based on the weighted average number of
shares of common stock outstanding during each year. The effect of common
stock equivalents on earnings per share is not material.
During 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings Per Share," which simplifies the standards for computing earnings per
share. This Statement is effective for financial statements for the company's
fiscal 1998 third and fourth quarter interim and annual financial statements.
The company does not believe that this Statement will have a significant impact
on the company's earnings per share calculations.
Reclassifications
Certain reclassifications have been made in the prior years' financial
statements to conform to the current year's presentation.
F-6
<PAGE> 29
NOTE B -- INVENTORIES
Inventories consist of the following at May 31:
<TABLE>
<CAPTION>
(in thousands)
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 4,523 $ 7,543
Work-in-process 1,666 1,658
Finished goods 3,668 2,926
- --------------------------------------------------------------------------------
$ 9,857 $12,127
- --------------------------------------------------------------------------------
NOTE C - LONG-TERM DEBT
Long-term debt consists of the following at May 31:
- --------------------------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------------
<S> <C> <C>
(in thousands)
Revolving credit arrangement (described below) $ 4,917 $ --
Term note payable, due in quarterly principal
installments ranging from $183,334 to
$433,834 from September 16, 1997 through
June 16, 2004, plus interest at a weighted
average interest rate of 9.15% 10,587 11,000
Industrial development bond, due in annual
principal installments ranging from
$100,000 to $1,600,000 from August 1,
1999 through August 1, 2004, plus
interest at a floating rate determined by a
remarketing agent (5.28% at May 31, 1997) 4,000 4,000
Term notes payable, due in monthly installments
through November 1, 1999 (described below) 1,726 --
Industrial development bond, due in annual
principal installments of $400,000 through
September 1, 2000, plus interest at a
floating rate determined by a remarketing
agent (5.40% at May 31, 1997) 1,600 2,000
Revolving credit arrangement, paid during 1997 -- 12,000
Note payable, paid during 1997 -- 2,719
Industrial development bond, paid during 1997 -- 672
- --------------------------------------------------------------------------------
22,830 32,391
Less current maturities 6,674 1,532
- --------------------------------------------------------------------------------
$16,156 $30,859
- --------------------------------------------------------------------------------
</TABLE>
On November 5, 1996, the company and its subsidiaries entered into a Loan
and Security Agreement (the "Agreement") with a bank, which provided revised
credit facilities. The Agreement provides for a term loan to the company and
its subsidiaries in the aggregate amount of $4,870,000 and a revolving
credit arrangement (the "Revolver") for maximum borrowings of $25,000,000,
including an irrevocable stanby letter of credit in the aggregate amount of
$5,600,000. The Revolver matures on November 5, 1999. Due to subjective
acceleration clauses and a lockbox provision contained in the Agreement, the
F-7
<PAGE> 30
Company has classified the outstanding balance on the Revolver as a current
liability as of May 31, 1997. Borrowings under the Revolver bear interest, at
the Company's option, at a bank determined reference rate or a LIBOR based
rate. The weighted average interest rate for this debt was 9.1% at May 31,
1997. The amount available under the Revolver as of May 31, 1997 was
$19,400,000 and is based on either the lesser of $25,000,000 less the amount
available under the letters of credit, or the sum of 80% of eligible accounts
receivable and 60% of eligible raw materials and finished goods inventories. A
commitment fee of 3/8 of 1% per annum on the unused portion of the Revolver is
paid monthly. The term notes under the Agreement require monthly installment
payments of $50,000 with a final installment due on November 1, 1999. The term
notes bear interest, at the company's option, at a bank determined reference
rate or a LIBOR based rate. The weighted average interest rate for the term
notes was 9.5% at May 31, 1997.
Proceeds from the sale of industrial development bonds were held by a bank
under a trust agreement until used to purchase new machinery and equipment.
These funds were depleted during the year ended May 31, 1996.
Substantially all the company's assets have been pledged as collateral
under the various debt agreements. The creditors party to the term notes and
revolving credit arrangement have a priority security interest over the
remaining creditors. The term notes, revolving credit arrangements, and
industrial development bond obligations are subject to the terms of certain
agreements which contain provisions setting forth, among other things, fixed
charges restrictions, net worth and debt-to-equity requirements, and
restrictions on property and equipment additions, loans, investments, other
borrowings, and acquisitions and redemptions of the company's stock or the
issuance of stock except for cash. Additionally, the company may not pay cash
dividends without the prior consent of certain of its lenders. During the
year the company did not satisfy the covenants relating to its fixed charge
ratio and tangible net worth requirement. The company has obtained waivers for
these covenants from the lenders and has renegotiated certain covenants with
the lenders for fiscal 1998 and beyond.
The carrying amounts of the company's long-term debt approximates its fair
value based on rates currently available to the company for long-term
borrowings with similar terms and remaining maturities.
At May 31, 1997, future maturities of long-term debt, excluding the
revolving credit arrangement, are as follows:
<TABLE>
(in thousands)
- --------------------------------------------------------------------------------
<S> <C>
1998 $1,757
1999 2,382
2000 2,686
2001 2,510
2002 2,211
Thereafter 6,367
- --------------------------------------------------------------------------------
$17,913
- --------------------------------------------------------------------------------
</TABLE>
NOTE D -- EMPLOYEE BENEFIT PLANS
The company offers a 401(k) savings plan for all employees that meet certain
eligibility requirements. Employee contributions to the plan are made through
payroll deductions. In addition, the company matches 40-50% of the first 6% of
each employee's contribution.
F-8
<PAGE> 31
Employer matching contributions under the 401(k)
plan for the years ended May 31, 1997, 1996 and 1995 were $238,000, $308,000
and $261,000, respectively.
The company is not obligated to provide any postretirement medical or life
insurance benefits or any postemployment benefits to its employees.
NOTE E -- INCOME TAXES
The provision (benefit) for income taxes from continuing operations consist of
the following:
<TABLE>
<CAPTION>
(in thousands)
- -------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable (refundable):
Federal $(539) $(1,957) $295
State (31) (1) 46
- -------------------------------------------------------------------------------------------------------------------------
(570) (1,958) 341
- -------------------------------------------------------------------------------------------------------------------------
Deferred:
Federal 371 (1,133) (183)
State 257 (568) (40)
- -------------------------------------------------------------------------------------------------------------------------
628 (1,701) (223)
- -------------------------------------------------------------------------------------------------------------------------
$ 58 $(3,659) $118
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The reconciliation of income tax from continuing operations computed at
the statutory federal income tax rate to the company's effective income tax
rate, expressed as a percentage of pre-tax earnings (loss), is as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal income tax rate (34.0)% (34.0)% 34.0%
State income taxes, net 3.6 (4.1) 3.7
Increase in valuation allowance 41.9 -- --
Other 0.2 .1 1.6
- ----------------------------------------------------------------------------------------------------------------
11.7% (38.0)% 39.3%
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The components of the net deferred income tax liability as of May 31, 1997
and 1996 are as follows :
<TABLE>
<CAPTION>
(in thousands)
- --------------------------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Employee benefits $ 204 $ 201
Inventories 221 507
Accounts receivable 432 421
Tax carryforwards 2,299 2,259
Other 63 82
- --------------------------------------------------------------------------------------------------
3,219 3,470
Less valuation allowance (207) --
3,012 3,470
- --------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment 5,236 5,595
Other 379 157
- --------------------------------------------------------------------------------------------------
5,615 5,752
- --------------------------------------------------------------------------------------------------
Net deferred income tax liability $2,603 $2,282
- --------------------------------------------------------------------------------------------------
</TABLE>
F-9
<PAGE> 32
As of May 31, 1997, the company has $1,778,000 of alternative minimum tax
credit carryforwards, which are available to reduce future regular federal
income tax liabilities. The company also has certain loss and tax credit
carryforwards for state income tax purposes which, net of related federal
taxes, approximate $521,000. These state carryforwards expire in varying
amounts through 2012.
The company has recorded a valuation allowance during 1997 to reflect the
estimated amount of state deferred tax assets which may not be realized due to
the possible limitation on the future use of certain state tax loss and credit
carryforwards.
NOTE F -- STOCK OPTIONS
In 1990, the shareholders approved the 1990 Stock Option Plan which provides
for the granting of stock options as an incentive to officers and
certain key salaried employees. The 1990 Plan provides for the issuance of up
to 200,000 shares of common stock at an exercise price which may not be less
than the market price of the common stock on the date of the grant. Options
granted prior to 1996 became exercisable six months after the date of grant.
Options granted during 1996 and 1997 become exercisable one year after the date
of grant.
Transactions and weighted average exercise prices under the 1990 Plan and
predecessor plans during the years ended May 31, 1997, 1996 and 1995, are
summarized as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Shares Price
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Options outstanding at May 31, 1994 142,750 $11.38
Granted 10,000 $ 9.75
Expired (82,500) $11.38
- --------------------------------------------------------------------------------------------------------------------------------
Options outstanding at May 31, 1995 70,250 $11.16
Granted 77,500 $ 4.44
Expired (60,250) $11.38
- --------------------------------------------------------------------------------------------------------------------------------
Options outstanding at May 31, 1996 87,500 $ 5.02
Granted 82,750 $ 5.00
Expired (19,500) $ 4.45
- --------------------------------------------------------------------------------------------------------------------------------
Options outstanding at May 31, 1997 150,750 $ 5.16
================================================================================================================================
</TABLE>
The outstanding stock options at May 31, 1997 have a range of exercise
prices between $4.38 and $5.75 per share, a weighted average contractual life
of approximately 6.1 years, and a maximum term of 10 years from the date of
grant. At May 31, 1997, 94,750 options are exercisable at a weighted average
exercise price of $5.14. The weighted average fair value at date of grant for
options granted during 1997 and 1996 was $1.48 and $1.19, respectively. The
fair value of options at date of grant was estimated using the Black-Scholes
option pricing model with the following assumptions:
- ---------------------------------------------------------
1997 1996
- ---------------------------------------------------------
Expected life (years) 2 2
Risk-free interest rate 6.1% 5.9%
Expected volatility 62.4% 52.6%
Expected dividend yield -- --
- ---------------------------------------------------------
The company applies Accounting Principles Board Opinion No. 25, under
which no compensation cost has been recognized in the statement of operations.
Had compensation cost been determined under an alternative method suggested by
Statement of Financial Accounting
F-10
<PAGE> 33
Standards No. 123, "Accounting for Stock-Based Compensation," the effect on the
1997 and 1996 net earnings(loss) and earnings(loss) per share would not have
been significant.
NOTE G -- COMMITMENTS AND CONTINGENCIES
The company has a number of operating lease agreements primarily involving
manufacturing equipment and warehouse space. These leases are noncancelable
and expire on various dates through 2002.
The following is a schedule, by fiscal year, of the rental payments due
under noncancelable operating leases, as of May 31, 1997:
(in thousands)
- ---------------------------------------------------------
1998 $2,235
1999 2,235
2000 2,103
2001 2,260
2002 3,055
Thereafter 2,204
- ---------------------------------------------------------
Total $14,092
Rent expense for the years ended May 31, 1997, 1996 and 1995 was
$2,838,000, $4,219,000 and $4,402,000, respectively.
NOTE H -- BUSINESS SEGMENTS AND MAJOR CUSTOMERS
The company conducts its operations primarily in one industry segment - graphic
services. This segment offers an array of related services including specialty
printing, converting and packaging, and distribution. Outlook Foods Inc.,
previously reported as the food processing segment of the company, was
classified during fiscal 1997 as a discontinued operation - see Note M.
F-11
<PAGE> 34
- --------------------------------------------------------------------------------
During the years ended May 31, 1997, 1996 and 1995, the company had sales
to certain customers that accounted for more than 10% of the company's net
sales from continuing operations, as follows:
- --------------------------------------------------------------------------------
- -----------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------
Kraft Foods, Inc. 14% 13% *
Fleer Corp. * * 15%
- -----------------------------------------------------------
*Less than 10%
During 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures About Segments of an Enterprise and Related Information,"
which establishes standards for the way companies report information about
operating segments in annual and interim financial statements. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. This Statement is effective for the
company's fiscal 1999 financial statements. The company is evaluating the
extent to which its segment reporting may be affected by this Statement.
NOTE I -- SUPPLEMENTAL CASH FLOW INFORMATION
In fiscal 1997, the company sold its wholly owned subsidiary, Barrier Films,
and accepted a note and deferred consideration recorded at $2,469,000 in
partial consideration for the sale. See Note J.
In fiscal 1996, the company sold certain assets related to its publishing
division and accepted a note for $1,000,000 in partial consideration for the
sale. The company also sold certain equipment in fiscal 1996, with $395,000 of
the sales proceeds included in other current assets at May 31, 1996.
Cash paid during the year:
(in thousands)
- ----------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------
Interest $2,571 $2,493 $1,712
Income taxes $ 76 $ 150 $1,615
- ----------------------------------------------------------
NOTE J -- BARRIER FILMS
In February 1995, the company purchased 100% of the issued and outstanding
capital stock of Barrier Films Corporation ("Barrier") for approximately $1.4
million. The acquisition was accounted for using the purchase method of
accounting; therefore the results of operations are included only from the
acquisition date. Pro forma results of operations for fiscal 1995, assuming
this acquisition had been made at the beginning of the fiscal year, would not
have been materially different from the results reported.
The company sold Barrier on May 9, 1997. Net proceeds from the sale
included $2,888,000 in cash and a note receivable and deferred consideration of
$2,469,000. The gain on the sale was $556,000 before income tax effect. Net
sales and operating losses related to Barier through the date of sale included
in the company's consolidated statements of operations were $6,662,000 and
$(902,000), respectively, for the year ended May 31, 1997.
NOTE K -- RELATED PARTY TRANSACTIONS
At May 31, 1997, 1996 and 1995, the company held an 18% equity interest in one
of its
F-12
<PAGE> 35
customers. This equity interest is reported under the cost method, with
no carrying value reflected in the balance sheet. There were no sales to this
customer during the year ended May 31, 1997. During the years ended May 31,
1996 and 1995, sales to this customer were approximately $2,765,000 and
$7,500,000, respectively. During 1996, the company wrote off $2,500,000 of
accounts receivable from this customer, based on management's estimate of
potential losses on recovery. Balances due from this customer were $810,000 and
$1,121,000 at May 31, 1997 and 1996, respectively. The company earned fees
from the customer for consultation services of $145,000 and $1,094,000 during
the years ended May 31, 1996 and 1995, respectively. Interest income of
$153,000 and $59,000 on accounts receivable was recognized during the years
ended May 31, 1996 and 1995, respectively. The company did not earn any fees
from consultation services or recognize any interest income relating to this
customer for the year ended May 31, 1997.
During the first quarter of 1996 the company sold certain assets of its
Outlook Publishing division to a company partially owned by an officer of
Outlook Group Corp. The assets were sold for $1,100,000 with $100,000 payable
at closing and $1,000,000 in periodic payments through May 2000. In addition,
the company agreed to provide the purchaser with a revolving line of credit
through July 14, 1996. At May 31, 1996, the line of credit balance was
$657,000, which was subsequently paid off in June 1996.
NOTE L -- FOURTH QUARTER RESULTS
Fourth quarter write offs related to receivables and inventories decreased the
fiscal 1997 fourth quarter gain before income tax benefit by approximately
$360,000.
NOTE M DISCONTINUED OPERATIONS
During the second quarter of fiscal 1997, the company adopted a formal plan to
dispose of Outlook Foods, Inc. ("Foods"), a wholly-owned subsidiary located in
Oconomowoc, Wisconsin. Foods is a food processing operation, involved
primarily in dry-blended food processing and packaging. Foods incurred an
operating loss of $840,000 from the date the plan was approved through the year
ended May 31, 1997. Disposal of this subsidiary is expected to be in the form
of a sale to be completed during fiscal 1998. Although the ultimate outcome
is uncertain, at this time, management does not believe that it will incur a
material loss on the eventual disposal of Foods. Results of operations have been
restated to reflect the reclassification of Foods as a discontinued operation.
Net sales generated from Foods were $16,804,000, $32,051,000, and $29,122,000
for the years ended May 31, 1997, 1996 and 1995, respectively. Sales to Nestle
Beverage Company accounted for 67%, 94%, and 90% of Foods net sales for the
years ended May 31, 1997, 1996 and 1995, respectively.
The components of net assets of Foods included in the consolidated balance
sheet at May 31, 1997 and 1996, are as follows:
(in thousands) 1997 1996
- --------------------------------------------------------------------------------
Accounts receivable, net $2,579 $1,683
Inventories 2,903 1,723
Deferred income taxes 175 72
Other current assets 75 5
------------------- -------------------
Total current assets 5,732 3,483
Property, plant, and equipment, net 4,052 4,292
Other assets, noncurrent 43 --
------------------- -------------------
Total assets 9,827 7,775
------------------- -------------------
Accounts payable 1,134 627
Accrued liabilities and other 656 1,358
------------------- -------------------
Total current liabilities 1,790 1,985
Deferred income taxes 167 360
------------------- -------------------
Total liabilities 1,957 2,345
------------------- -------------------
Net assets $7,870 $5,430
------------------- -------------------
F-13
<PAGE> 36
STATEMENT OF MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS
The consolidated financial statements and accompanying information were
prepared by and are the responsibility of management. The statements were
prepared in conformity with generally accepted accounting principles and, as
such, include amounts that are based on management's best estimates and
judgments.
The internal control systems are designed to provide reliable financial
information for the preparation of financial statements, to safeguard assets
against loss or unauthorized use and to ensure that transactions are executed
consistent with company policies and procedures. Management believes that
existing internal accounting control systems are achieving their objectives and
that they provide reasonable assurance concerning the accuracy of the financial
statements.
Oversight of management's financial reporting and internal accounting
control responsibilities is exercised by the Board of Directors, through an
Audit Committee which consists solely of outside directors. The committee
meets periodically with financial management to ensure that it is meeting its
responsibilities and to discuss matters concerning auditing, internal
accounting control and financial reporting. The independent accountants have
free access to meet with the Audit Committee without management's presence.
/s/ David L. Erdmann /s/ Thomas C. Aschenbrenner
David L. Erdmann Thomas C. Aschenbrenner
Chairman and CEO Chief Financial Officer
<PAGE> 37
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BOARD OF DIRECTORS AND SHAREHOLDERS
OUTLOOK GROUP CORP. AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheets of Outlook Group
Corp. and Subsidiaries as of May 31, 1997 and 1996, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended May 31, 1997. 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 audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a tests 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Outlook Group Corp. and Subsidiaries as of May 31, 1997 and 1996, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended May 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Milwaukee, Wisconsin
July 9, 1997, except for certain information in Note C, for which
the date is August 24, 1997.
F-15
<PAGE> 38
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
Outlook Group Corp. and Subsidiaries
Our report on the consolidated financial statements of Outlook Group Corp. and
Subsidiaries has been incorporated by reference in this Form 10-K from page 20
of the 1997 Annual Report to Shareholders of Outlook Group Corp. In connection
with our audits of such financial statements, we have also audited the related
consolidated financial statement schedule listed in the index on page 13 of
this Form 10-K.
In our opinion, the consolidated financial statement schedule referred to
above, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
/S/ COOPERS & LYBRAND L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
July 9, 1997
F-16
<PAGE> 39
OUTLOOK GROUP CORP. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Additions
Balance Charged to
Beginning of costs and Balance
Year Ended May 31, 1997 Year expenses Deductions End of Year
- ----------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts $ 896 $ 639 $ 411 $ 1,124
Accumulated amortization
of goodwill 265 61 7 319
Accumulated amortization
of deferred financing costs 569 200 - 769
Year Ended May 31, 1996
- -----------------------
Allowance for doubtful accounts 725 3,030 2,859 896
Accumulated amortization of goodwill 210 55 - 265
Accumulated amortization of deferred
financing costs 428 141 - 569
Year Ended May 31, 1995
- -----------------------
Allowance for doubtful accounts 676 2,491 2,442 725
Accumulated amortization of goodwill 161 49 - 210
Accumulated amortization of deferred
financing costs 311 117 - 428
</TABLE>
F-17
<PAGE> 40
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.
OUTLOOK GROUP CORP.
By /s/ David L. Erdmann
---------------------------
David L. Erdmann, Chairman September 3, 1997
----------------------------------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David L. Erdmann, Joseph J. Baksha and
Thomas C. Aschenbrenner, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this report, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their substitutes, may lawfully
do or cause to be done by virtue hereof.
----------------------------------------
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED, AS OF SEPTEMBER 3, 1997.
<TABLE>
<CAPTION>
SIGNATURE AND TITLE SIGNATURE AND TITLE
------------------- -------------------
<S> <C>
/s/ David L. Erdmann /s/ Richard C. Fischer
--------------------------------------------------- ---------------------------------------------------
David L. Erdmann, Chairman, Chief Executive Richard C. Fischer, Director
Officer and Director
/s/ Thomas C. Aschenbrenner /s/ Pat Richter
--------------------------------------------------- ---------------------------------------------------
Thomas C. Aschenbrenner Pat Richter, Director
Chief Financial Officer
(and principal accounting officer)
/s/ Harold J. Bergman /s/ Charles E. Thompson
--------------------------------------------------- ---------------------------------------------------
Harold J. Bergman, Director Charles E. Thompson, Director
/s/ Jeffry H. Collier /s/ A. John Wiley, Jr.
--------------------------------------------------- ---------------------------------------------------
Jeffry H. Collier, Director A. John Wiley, Jr., Director
/s/ James L. Dillon
--------------------------------------------------
James L. Dillon, Director
</TABLE>
<PAGE> 41
OUTLOOK GROUP CORP.
(THE "COMPANY")
EXHIBIT INDEX
TO
ANNUAL REPORT ON FORM 10-K FOR FISCAL 1997
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT NO. EXHIBIT BY REFERENCE TO HEREWITH
- ----------- ------- ------------------- --------
<S> <C> <C> <C>
3(i) Restated Articles of Incorporation of the Exhibit 3(i) to the
Company (effective August 3, 1990), as Company's Annual Report
amended through November 1, 1994 on Form 10-K for the
fiscal year ended May 31,
1995 ("1995 10-K")
3(ii) Bylaws of the Company (as amended and Exhibit 3.2 to the
restated July 5, 1990) Company's Registration
Statement on Form S-1
(No. 33-36641), as
amended by Amendment No.
1 thereto ("S-1")
4.1 Articles III, IV and VI of the Restated Contained in Exhibit 3.1
Articles of Incorporation of the Company hereto
4.2(a) Amended and Restated Note Purchase Exhibit 4.1 to the
Agreement dated November 5, 1996 between Company's Quarterly
the Company and State of Wisconsin Report on Form 10-Q for
Investment Board* the quarter ended
November 29, 1996 ("11/96
10-Q")
4.2(b) Waiver and Amendment thereto dated August X
21, 1997
4.3(a) Loan and Security Agreement dated November Exhibit 4.2 to 11/96 10-Q
5, 1996 among the Company and its
subsidiaries and Bank America Business
Credit, Inc.*
4.3(b) Waiver and Amendment thereto dated X
August 20, 1997
4.4(a) Reimbursement Agreement dated August 1, Exhibit 4.4(a) to the
1994 between Outlook Packaging, Inc. Company's Annual Report
("Packaging") and Firstar Bank, relating on Form 10-K for the
to $4,000,000 City of Oak Creek Industrial fiscal year ended May 31,
Revenue Bonds* 1994 ("1994 10-K")
</TABLE>
EI-1
<PAGE> 42
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT NO. EXHIBIT BY REFERENCE TO HEREWITH
- ----------- ------- ------------------- --------
<S> <C> <C> <C>
4.4(b) Related Corporate Guarantee Agreement Exhibit 4.4(b) to the
dated August 1, 1994 by the Company* 1994 10-K
4.5 Loan Agreement dated as of September 1, Exhibit 4.6 to S-1
1990 by and between City of Neenah,
Wisconsin and Olympic Label Systems, Inc.
(n/k/a Outlook Label Systems, Inc.)
("Outlook Label"), relating to $4,000,000
Industrial Development Revenue Bonds
10.1 1990 Stock Option Plan** Exhibit 10.1 to S-1
10.2 Management Incentive Plan** Exhibit 10.2(a) to 1994
10-K
10.3(a) Employment Agreement dated June 1, 1994 Exhibit 10.4 to 1994 10-K
between David L. Erdmann and the Company
(superseded)**
10.3(b) Employment Agreement dated June 1, 1997 X
between David L. Erdmann and the Company**
10.4(a) Lease Agreement dated November 7, 1990 Exhibit 10.10(b) to S-1
between the Company and a joint venture
relating to the lease of City of Neenah
property*
10.4(b) Lease Amendment #1 thereto dated March 31, Exhibit 10.7(b)(ii) to
1992 the Company's Annual
Report on Form 10-K for
the fiscal year ended May
31, 1992 ("1992 10-K")
10.5 401(k) Savings Plan (as amended and Exhibit 10.11 to S-1
restated effective as of January 1, 1989)
including the Defined Contribution
Regional Prototype Plan and Trust Document
and the Adoption Agreement thereto**
10.6 Master Lease Agreement dated March 13, X
1997 between the Company and General
Electric Corporation*
10.7 Letter of Credit Agreements No. One and X
No. Two dated March 13, 1997 between
Outlook Group Corp. and General Electric
Corporation
</TABLE>
EI-2
<PAGE> 43
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT NO. EXHIBIT BY REFERENCE TO HEREWITH
- ----------- ------- ------------------- --------
<S> <C> <C> <C>
10.8(a) Master Lease Purchase Agreement and Exhibit 10.14 to S-1
Amendment No. 1 thereto, all dated March
20, 1991 by and between Metlife Capital
Corporation and the Company (terminated)
10.8(b) Lease Purchase Addendum No. 2 dated March Exhibit 19.1(a) to the
26, 1993, and related Cross Company's Quarterly
Collateralization Agreement (terminated) Report on Form 10-Q for
the Quarter Ended
February 28, 1993
10.9 Contract Manufacturing Agreement dated Exhibit 10.1 to the
December 30, 1992, by and between Nestle Company's Current Report
Beverage Company ("NBC") and Outlook on Form 8-K dated
Foods, Inc. ("Foods") (f/k/a Oconomowoc December 30, 1992
Packaging, Inc.)* ("12/30/92 8-K")
10.10 Employment Agreement dated as of June 1, X
1997 between the Company and Joseph J.
Baksha**
10.11 Assignment and Assumption dated as of Exhibit 10.3 to the
October 15, 1993 among Packaging, Sunrise Company's Current Report
and Fleet Credit Corporation, and related on Form 8-K dated
Company guaranty (terminated) October 18, 1993
10.12 Master Lease Agreement dated December 13, Exhibit 10 to the
1993 between the Company and Firstar Company's Quarterly
Leasing Services Corporation and related Report on Form 10-Q for
lease schedule (terminated) the quarter ended
November 30, 1993
10.13(a) Purchase and Sale Agreement dated as of Exhibit 10.15 to 1995
July 14, 1995 between the Company and 10-K
Willcree Press, LLC ("Willcree")*
(b) Replacement Promissory Note of Willcree Exhibit 10.15(b) to 1996
dated May 31, 1996 10-K
10.14(a) Stock Purchase Agreement dated May 12, X
1997 between the Company and Barrier Films
Ltd.--New York ("Barrier-NY")*
(b) Rebate and Supply Agreement dated May 12, X
1997 among the Company, Barrier-NY,
Barrier and World Class Films Corp.
21.1 List of subsidiaries of the Company X
</TABLE>
EI-3
<PAGE> 44
<TABLE>
<CAPTION>
INCORPORATED HEREIN FILED
EXHIBIT NO. EXHIBIT BY REFERENCE TO HEREWITH
- ----------- ------- ------------------- --------
<S> <C> <C> <C>
23.1 Consent of Coopers & Lybrand L.L.P. X
24.1 Powers of Attorney Signature Page
to this Report
27 Financial Data Schedule X
</TABLE>
- -----------------
* Excluding exhibits and/or schedules which are identified in the
document. The Company agrees to furnish supplementally a copy of any
omitted exhibit or schedule to the Commission upon request.
** Designates compensatory plans and agreements for executive officers.
EI-4
<PAGE> 1
Exhibit 4.2(b)
WAIVER AND AMENDMENT
August 21, 1997
David L. Erdmann
Chairman of the Board
Outlook Group Corp.
1180 American Drive
Neenah, WI 54956
Reference is hereby made to that certain Amended and Restated Note
Purchase Agreement, dated as of November 5, 1996, as amended prior to the date
hereof (as so amended, the "Note Purchase Agreement") between Outlook Group
Corp. (the "Company") and the undersigned State of Wisconsin Investment Board
(the "Lender"). All capitalized terms used but not otherwise defined herein
shall have the meanings given to such terms by the Note Purchase Agreement.
The Company has requested that the Lender waive certain defaults under the
Note Purchase Agreement, which existed prior to the date of this Waiver and to
amend the Note Purchase Agreement. The Lender has agreed to do so on the
condition that the Company comply with the terms and conditions set forth
herein.
1. WAIVER. The Lender and the Company hereby agree as follows:
The Company has provided the Lender with financial information which
reflects that the following Events of Default have occurred under the
Note Purchase Agreement: (a) the Fixed Charge Coverage Ratio for the
three consecutive fiscal quarter period ended May 31, 1997 and was 1.16
to 1.0, which was less than the minimum Fixed Charge Coverage Ratio
required under Section 6.8(c) of the Note Purchase Agreement of 1.20 to
1.0; and (b) the Adjusted Tangible Net Worth as of May 31, 1997 was
$32,833,000.00, which was less than the Adjusted Tangible Net Worth
required under Section 6.8(a) of the Note Purchase Agreement of
$34,000,000.00.
Subject to the conditions set forth in Paragraph 4 below, the Lender
hereby waives the foregoing Events of Default with the understanding that
the waivers are only applicable and shall only be effective in the
specific instance and for the specific purpose for which given and for
the specific period made. The waivers are expressly limited to the facts
and circumstances referred to herein and shall not operate
1
<PAGE> 2
Exhibit 4.2 (b)
(a) as a waiver of or consent to non-compliance with any other sections
of the Note Purchase Agreement, (b) as a waiver of, or a restriction on
or prejudice with respect to, any right, power, or remedy of the Lender
under the Note Purchase Agreement, or (c) as a waiver of or consent to
any other Event of Default or Event under the Note Purchase Agreement.
2. AMENDMENT. The Note Purchase Agreement is hereby amended as follows:
a. The definition of "Adjusted Tangible Assets" appearing in
Section 2.1 of the Note Purchase Agreement is hereby amended and
restated to read in its entirety as follows:
"Adjusted Tangible Assets" means all of the Company's and its
Subsidiaries consolidated assets except; (a) goodwill; (b) assets
of the Company or any Subsidiary constituting Intercompany
Accounts; (c) fixed assets to the extent of any write-up in the
book value thereof resulting from a revaluation effective after the
Closing Date; and (d) promissory notes payable to the Company or
and Subsidiary constituting either (i) promissory notes taken by
the Company or a Subsidiary in payment of an account receivable
owing to that person, or (ii) that certain promissory note dated
May 12, 1997 made by Barrier Films Corporation in favor of the
Company in the face principal amount of $2,300,000.00.
b. The definition of "Fixed Charges" appearing in Section 2.1 of
the Note Purchase Agreement is hereby amended and restated to read
in its entirety as follows:
"Fixed Charges" means as to the Company and its Subsidiaries on a
consolidated basis, for any fiscal period, the sum of (i) interest
expenses paid or payable in cash; (ii) scheduled installments of
principal paid or payable with respect to Debt for borrowed money
and Capital Leases; (iii) that portion of Capital Expenditures not
financed by borrowing from third parties; (iv) income taxes paid or
payable in cash; and (v) scheduled increases in the IRB Reserve.
c. There is created in Section 2.1 of the Note Purchase Agreement a
definition for "IRB Reserve", to read as follows.
2
<PAGE> 3
Exhibit 4.2 (b)
"IRB Reserve" means as to the Company and any Subsidiary or as to
the Company and all of its Subsidiaries in the aggregate, as
applicable, as of any date of determination, the amount owing by
Company or any Subsidiary (as applicable) under industrial revenue
bonds outstanding, less the amount that would have been outstanding
under those industrial revenue bonds, if those industrial revenue
bonds had amortized in equal installments over a seven-year period
commencing as of the Closing Date.
d. Section 7.13 of the Note Purchase Agreement is hereby amended
and restated to read in its entirety as follows.
7.13 Capital Expenditures. The Company will not permit any
Subsidiary to, make or incur any Capital Expenditure if, after
giving effect thereto, the aggregate amount of all Capital
Expenditures by Company and its Subsidiaries on a consolidated
basis would exceed the following respective amounts in the
following respective Fiscal Years: (i) $2,500,000 for the 1998
Fiscal Year; and (ii) $3,000,000 for the 1999 Fiscal Year and each
Fiscal Year thereafter.
e. section 6.8(a) of the Note Purchase Agreement is hereby amended
and restated to read in its entirety as follows:
(a) Adjusted Tangible Net Worth. Maintain Adjusted Tangible Net
Worth of not less than the following amounts during the following
periods: (i) $27,500,000 for the period from and including the last
day of the fiscal quarter ended in August, 1997 to but excluding
the last day of the fiscal quarter ended in November, 1997; (ii)
$28,000,000 for the period from and including the last day of the
fiscal quarter ended in November, 1997 to but excluding the last
day of the fiscal quarter ended in May, 1998; (iii) $29,500,000 for
the period from and including the last day of the fiscal quarter
ended in February, 1999; and (iv) thereafter, increasing by the
amount of $500,000 on the last day of the third fiscal quarter of
each subsequent Fiscal Year.
f. Section 6.8(b) of the Note Purchase Agreement is hereby amended
and restated to read in its entirety as follows:
3
<PAGE> 4
Exhibit 4.2 (b)
(b) Debt Ratio. Maintain a ratio of Indebtedness to Adjusted
Tangible Net Worth not to exceed 1.50 to 1.0 as at the last day of
each fiscal quarter.
g. Section 6.8(c) of the Note Purchase Agreement is hereby amended
and restated to read in its entirety as follows:
(c) Fixed Charge Coverage Ratio. Maintain a Fixed Charge
Coverage Ratio of not less than 1.0 to 1.0 for each period of four
consecutive fiscal quarters (in each case taken as one accounting
period) ending on the last day of each fiscal quarter of the
Company.
3. OTHER TERMS UNCHANGED. This Waiver and Amendment does not constitute a
waiver or amendment of any term, condition, or covenant in the Note
Purchase Agreement other than as specifically set forth above. Nothing
contained in this Waiver and Amendment or in any other document, or any
course of dealing with the Company, shall be construed to imply that there
is any agreement by the Lender to provide any waiver in the future. This
Waiver shall not release, discharge, or satisfy any present or future
debts, obligations, or liabilities of the Company to the Lender or any
mortgage, security interest, lien, or other collateral or security of any
of such debts, obligations, or liabilities of the Company. Except as
expressly provided herein, the Lender reserves all rights and remedies
under the Note Purchase Agreement, the Note, and the collateral documents
delivered in connection therewith, including all other Loan Documents (the
"Collateral Documents"). THIS IS A WAIVER AND AMENDMENT, BUT IS NOT A
NOVATION.
4. CONDITIONS. The Waiver and Amendments under the Note Purchase Agreement
set forth in paragraphs 1 and 2 above shall be effective upon the Lender's
receipt of all of the following, each in form and substance satisfactory
to the Lender:
a. A counterpart of this letter duly executed by the Company;
b. A photocopy of a letter or other instrument duly executed by
BankAmerica Business Credit, Inc. ("BABC") relating to the Loan and
Security Agreement dated as of November 5, 1996 between the Company
(and other companies affiliated with the Company) and BABC (the
"Loan Agreement"), pursuant to which BABC shall have (i) waived the
events of default that may have occurred
4
<PAGE> 5
Exhibit 4.2 (b)
under the Loan Agreement as a result of, or in connection with, the
defaults described in paragraph 1, above, and (ii) amended the Loan
and Security Agreement in a manner consistent with the amendments to
the Note Purchase Agreement described in paragraph 2, above;
c. A photocopy of all such other notices, consents and/or waivers that
may be required to be delivered or obtained by the Company in
connection with the occurrence of the defaults under the Note Purchase
Agreement, all of which items shall reflect any necessary consents
and/or waivers that are required to be obtained by the Company with
respect to such defaults.
5. NO DEFENSE. The Company acknowledges and agrees that the obligations under
the Note Purchase Agreement and the Note exist and are owing with no offset,
defense, or counterclaim assertable by the Company and that the Note Purchase
Agreement, Note, and Collateral Documents are valid, binding, and fully
enforceable according to their respective terms.
6. FEES AND COSTS. The Company shall be responsible for the payment of all
fees and out-of-pocket disbursements incurred by the Lenders in connection
with the administration and enforcement of this Waiver, including all costs
of collection, and including without limitation the reasonable fees and
disbursements of counsel for the Lender, whether or not any transaction
contemplated by this Waiver is consummated.
7. SUCCESSORS. The provisions of this Waiver and Amendment shall inure to
the benefit of and be binding upon any successor to any of the parties
hereto.
8. SURVIVAL. All agreements, representations, and warranties made herein
shall survive the execution of this waiver, and the making of the loans
under the Note Purchase Agreement.
9. GOVERNING LAW. This Waiver and Amendment shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin.
10. COUNTERPARTS. This Waiver and Amendment may be signed in any number of
counterparts with the same effect as if the signatures thereto and hereto
were upon the same instrument.
5
<PAGE> 6
Exhibit 4.2 (b)
If the foregoing is satisfactory to you, please sign and return the form
of acceptance below.
STATE OF WISCONSIN INVESTMENT BOARD
By: /s/ Robert L. Zobel
---------------------------------------
Robert L. Zobel, Investment Director
Accepted and agreed to this 26th day of August,
1997
OUTLOOK GROUP CORP.
(f/k/a Outlook Graphics Corp.)
By: /s/ David L. Erdmann
----------------------------------------
David L. Erdmann, Chairman of the Board
6
<PAGE> 1
Exhibit 4.3 (b)
August 20, 1997
Outlook Group Corp.
Outlook Label Systems, Inc.
Outlook Foods, Inc.
Outlook Packaging, Inc.
1180 American Drive
Neenah, Wisconsin 54957
Re: Waiver of and Amendment No. 3 to Loan and Security Agreement
------------------------------------------------------------
Ladies/Gentlemen:
Reference is hereby made to that certain Loan and Security Agreement, dated as
of November 5, 1996, as amended prior to the date hereof (as so amended, the
"Loan Agreement"), and executed by and among Outlook Group Corp. (the
"Parent"), Outlook Label Systems, Inc. ("Outlook Label"), Outlook Foods, Inc.
("Outlook Foods"), and Outlook Packaging, Inc. ("Outlook Packaging"; the
Parent, Outlook Label, Outlook Foods and Outlook Packaging being herein
collectively called the "Borrowers" and individually called a "Borrower"), and
BankAmerica Business Credit, Inc. (the "Lender"). Certain capitalized terms
used herein and not otherwise defined shall have the meaning attributed to them
in the Loan Agreement.
The Lender and the Borrowers hereby agree as follows:
1. The Borrowers have provided the Lender with financial information which
reflects that the following Events of Default have occurred under the Loan
Agreement: (a) the Fixed Charge Coverage Ratio for the three consecutive
fiscal quarter period ended May 31, 1997 was 1.16 to 1.0, which was less
than the minimum Fixed Charge Coverage Ratio required under Section 10.21
of the Loan Agreement of 1.20 to 1.0; and (b) the Adjusted Tangible Net
Worth as of May 31, 1997 was $32,833,000, which was less than the Adjusted
Tangible Net Worth required under Section 10.23 of the Loan Agreement of
$35,000,000.
Subject to the conditions set forth in Paragraph 3 below, the Lender
hereby waives the foregoing Events of Default with the understanding that
the waivers are only applicable and shall only be effective in the
specific instance and for the
1
<PAGE> 2
Exhibit 4.3 (b)
specific purpose for which given and for the specific period made. The
waivers are expressly limited to the facts and circumstances referred to
herein and shall not operate (a) as a waiver of or consent to
non-compliance with any other sections of the Loan Agreement, (b) as a
waiver of, or a restriction on or prejudice with respect to, any right,
power or remedy of the Lender under the Loan Agreement, or (c) as a waiver
of or consent to any other Event of Default or Event under the Loan
Agreement.
2. The Loan Agreement is hereby amended as follows:
a. The definition of "Adjusted Tangible Assets" appearing in Section 1 of
the Loan Agreement is hereby amended and restated to read in its
entirety as follows:
"Adjusted Tangible Assets" means all of the Borrowers'
consolidated assets except: (a) goodwill; (b) assets of any
Borrower constituting Intercompany Accounts; (c) fixed assets
to the extent of any write-up in the book value thereof
resulting from a revaluation effective after the Closing
Date; and (d) promissory notes payable to any Borrower,
including (i) promissory notes taken by such Borrower in
payment of an Account, and (ii) that certain promissory note
dated May 12, 1997 made by Barrier Films Corporation in favor
of the Parent in the face principal amount of $2,300,000.
b. The definition of "Fixed Charges" appearing in Section 1 of the Loan
Agreement is hereby amended and restated to read in its entirety as
follows:
"Fixed Charges" means as to the Borrowers on a
consolidated basis, for any fiscal period, the sum of (i)
interest expenses paid or payable in cash; (ii) scheduled
installments of principal paid or payable with respect to
Debt for borrowed money and Capital Leases; (iii) that
portion of Capital Expenditures not financed by borrowings
from third parties; (iv) income taxes paid or payable in
cash; and (v) scheduled increases in the IRB Reserve of
$142,857 per fiscal quarter.
c. Subparagraph (b) of Section 3.1 of the Loan Agreement is hereby
amended and restated to read in its entirety as follows:
2
<PAGE> 3
Exhibit 4.3 (b)
(b)(i) The "Revolver Reference Margin" and "Revolver
LIBOR Margin" mean per annum rates of interest charged in
addition to the applicable Reference Rate or LIBOR Rate with
respect to Revolving Loans. On the effective date of the
Waiver and Amendment No. 3 to this Agreement, the Revolver
Reference Margin and Revolver LIBOR Margin shall equal
three-quarters of one percent (0.75%) and two and
three-quarters percent (2.75%) respectively. Commencing
with the first day of the month following the Lender's
receipt of the Borrowers' financial statements for the
fiscal quarter ending August 31, 1997, and prospectively, on
the first day of each month following the Lender's receipt
of the Borrowers' financial statements for each fiscal
quarter thereafter, the Revolver Reference Margin and
Revolver LIBOR Margin shall be subject to adjustment (up or
down) based on the following grid:
<TABLE>
<S> <C> <C>
If Borrowers' The Revolver The Revolver
Fixed Charge Reference LIBOR
Coverage Ratio is Margin is Margin is
Greater than 1.50 to 1.0 0.00% 2.00%
Less than or equal to
1.50 to 1.0, but greater
than 1.30 to 1.0 0.25% 2.25%
Less than or equal to
1.30 to 1.0, but greater
than 1.20 to 1.0 0.50% 2.50%
Less than or equal to
1.20 to 1.0, but greater
than 1.10 to 1.0 0.75% 2.75%
Less than or equal to
1.20 to 1.0 1.00% 3.00%
</TABLE>
(ii) The "Term Reference Rate Margin" and "Term LIBOR
Margin" mean per annum rates of interest charged in addition
to the applicable Reference Rate or LIBOR Rate with respect
to Term Loans. On the effective date of the Waiver and
3
<PAGE> 4
Exhibit 4.3(b)
Amendment No. 3 to this Agreement, the Term Reference Rate
Margin and Term LIBOR Margin shall equal one and one-quarter
percent (1.25%) and three and one-quarter percent (3.25%),
respectively. Commencing with the first day of the month
following the Lender's receipt of the Borrowers' financial
statements for the fiscal quarter ending August 31, 1997,
and, prospectively, on the first day of each month following
the Lender's receipt of the Borrowers' financial statements
for each fiscal quarter thereafter, the Term Reference Rate
Margin and Term LIBOR Margin shall be subject to adjustment
(up or down) based on the following grid:
<TABLE>
<S> <C> <C>
If Borrowers' The Revolver The Revolver
Fixed Charge Reference LIBOR
Coverage Ratio is Margin is Margin is
Greater than 1.50 to 1.0 0.50% 2.50%
Less than or equal to
1.50 to 1.0, but greater
than 1.30 to 1.0 0.75% 2.75%
Less than or equal to
1.30 to 1.0, but greater
than 1.20 to 1.0 1.00% 3.00%
Less than or equal to
1.20 to 1.0, but greater
than 1.10 to 1.0 1.25% 3.25%
Less than or equal to
1.10 to 1.0 1.50% 3.30%
</TABLE>
d. Section 10.19 of the Loan Agreement is hereby amended and restated to
read in its entirety as follows:
10.19 Capital Expenditures. Borrowers and their
Subsidiaries shall not make or incur any Capital Expenditure
if, after giving effect thereto, the aggregate amount of all
Capital Expenditures by Borrowers on a consolidated basis
4
<PAGE> 5
Exhibit 4.3 (b)
would exceed the following respective amounts in the
following respective Fiscal Years: (i) $2,500,000 for the
1998 Fiscal Year; and (ii) $3,000,000 for the 1999 Fiscal
Year and each Fiscal Year thereafter.
e. Section 10.21 of the Loan Agreement is hereby amended and restated to
read in its entirety as follows:
10.21 Fixed Charge Coverage Ratio. The Borrowers will
maintain a Fixed Charge Coverage Ratio of not less than 1.0
to 1.0 for each period of four consecutive fiscal quarters
(in each case taken as one accounting period) ending on the
last day of each fiscal quarter of the Borrowers.
f. Section 10.22 of the Loan Agreement is hereby amended and restated to
read in its entirety as follows:
10.22 Debt Ratio. The Borrowers will not permit the
ratio of Debt to Adjusted Tangible Net Worth to exceed 1.50
to 1.0 as at the last day of each fiscal quarter.
g. Section 10l.23 of the Loan Agreement is hereby amended and restated to
read in its entirety as follows:
10.23 Adjusted Tangible Net Worth. The Borrowers will
maintain Adjusted Tangible Net Worth of not less than the
following amounts during the following periods: (i)
$27,500,000 for the period from and including the last day
of the fiscal quarter ended in August, 1997 to but excluding
the last day of the fiscal quarter ended in November, 1997;
(ii) $28,000,000 for the period from and including the last
day of the fiscal quarter ended in November, 1997 to but
excluding the last day of the fiscal quarter ended in May,
1998; (iii) $29,500,000 for the period from and including
the last day of the fiscal quarter ended in May, 1998 to but
excluding the last day of the fiscal quarter ended in
February, 1999; and (iv) thereafter, increasing by the
amount of $500,000 on the last day of the third fiscal
quarter of each subsequent Fiscal Year.
3. The waivers of the Events of Default under the Loan Agreement set forth
in Paragraph 1 above and the amendments to the Loan Agreement set forth in
Paragraph 2 above shall be effective
5
<PAGE> 6
Exhibit 4.3 (b)
upon the Lender's receipt of all of the following, each in form and
substance satisfactory to the Lender:
a. A counterpart original of this letter agreement duly executed by the
Borrowers;
b. A photocopy of a letter or other instrument duly executed by The State
of Wisconsin Investment Board ("SWIB") relating to the Amended and
Restated Note Purchase Agreement, dated as of November 5, 1996, as
amended or otherwise modified prior to the date hereof, between the
Parent and SWIB (the "Note Purchase Agreement"), pursuant to which
SWIB shall have (i) waived the events of default that may have
occurred under the Note Purchase Agreement as a result of the
financial information described in Paragraph 1 above, and (ii) amended
the Note Purchase Agreement in a manner consistent with the amendments
to the Loan Agreement described in Paragraph 2 above; and
c. A photocopy of all such other notices, consents and/or waivers that
may be required to be delivered or obtained by the Borrowers in
connection with the occurrence of the Events of Default under the Loan
Agreement (including, without limitation, a waiver from General
Electric Capital Corporation), all of which items shall reflect any
necessary consents and/or waivers that are required to be obtained by
the Borrowers with respect to such Events of Default.
4. The Borrowers shall pay to the Lender on demand all costs and expenses that
the Lender pays or incurs in connection with the negotiation, preparation
and consummation of this letter agreement and any and all matters
incidental thereto, including, without limitation, attorneys' fees and
disbursements which shall include the allocated costs of the Lender's
in-house counsel fees and disbursements.
5. This letter agreement shall be deemed to have been made in the State of
Illinois and shall be governed by and interpreted in accordance with the
laws of such state, except that no doctrine of choice of law shall be used
to apply the laws of any other state or jurisdiction.
6. This letter agreement may be executed by one or more of the parties hereto
on any number of counterparts, and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
6
<PAGE> 7
Exhibit 4.3(b)
7. Except to the extent expressly waived or amended herein, the Loan
Agreement and the other Loan Documents remain in full force and effect and
are each hereby ratified and confirmed.
8. This letter agreement shall become effective in accordance with its terms
upon its execution by the Lender and the Borrowers, whereupon each
reference to the Loan Agreement in the Loan Agreement and in any other
document, instrument or agreement executed and/or delivered in connection
with the Loan Agreement shall mean and be a reference to the Loan
Agreement as amended hereby.
Please evidence the agreement of the Borrowers (as borrowers and as guarantors)
with the terms of this letter agreement by signing in the spaces below.
Sincerely,
BANKAMERICA BUSINESS CREDIT, INC.
By: /s/ Thomas G. Sullivan
------------------------------
Name: Thomas G. Sullivan
----------------------------
Title: V.P.
---------------------------
7
<PAGE> 8
Exhibit 4.3(b)
ACCEPTED AND AGREED
this 21st day of August, 1997:
OUTLOOK GROUP CORP.
By: /s/ Thomas C. Aschenbrenner
------------------------------
Name: Thomas C. Aschenbrenner
---------------------------
Title: CFO
---------------------------
OUTLOOK LABEL SYSTEMS, INC.
By: /s/ Thomas C. Aschenbrenner
------------------------------
Name: Thomas C. Aschenbrenner
----------------------------
Title: CFO
---------------------------
OUTLOOK FOODS, INC.
By: /s/ Thomas C. Aschenbrenner
------------------------------
Name: Thomas C. Aschenbrenner
----------------------------
Title: CFO
---------------------------
OUTLOOK PACKAGING, INC.
By: /s/ Thomas C. Aschenbrenner
------------------------------
Name: Thomas C. Aschenbrenner
----------------------------
Title: CFO
---------------------------
8
<PAGE> 1
Exhibit 10.3(b)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and executed in duplicate, this 1st day of June,
1997, by and between OUTLOOK GROUP CORPORATION, a Wisconsin corporation,
(hereinafter referred to as "Employer") and David L. Erdmann (hereinafter
referred to as "Employee").
EMPLOYER AND EMPLOYEE AGREE, for the consideration of the mutual promises
and agreements hereinafter set forth, as follows:
1. EMPLOYMENT. Employer agrees to employ Employee as Chairman of the Board
and Chief Executive Officer to perform the duties related to said
positions, and Employee hereby accepts and agrees to such employment.
Employee shall perform the duties as are customarily performed by one
holding such positions in a business such as Employer's. Employee shall
also unconditionally render other and related services and duties as
Employer may assign to him or ask of him from time to time. Employer
reserves the right to change from time to time the nature and scope of
Employee's duties and position.
2. COMPENSATION. Employer agrees to pay Employee during the term of this
Agreement, a compensation consisting of a salary to be determined
annually, along with an incentive earnings opportunity, also to be
determined annually, as provided in "Exhibit A", attached, which is a part
of this Agreement.
All compensation shall be subject to the customary withholding tax and
other employment taxes as required with respect to compensation paid by a
corporation to an employee. Employee shall not be entitled to any other
compensation except as expressly provided for in this Agreement, or as
provided for by the Compensation Committee of the Board of Directors.
3. SERVICES AND BEST EFFORTS OF EMPLOYEE. Employee agrees that he will at
all times faithfully, industriously, and to the best of his ability,
experience, and talent perform all the duties that may be required of him
pursuant to the express and implicit terms hereof, to the reasonable
satisfaction of Employer. Employee agrees to devote his entire working
time and attention to the performance of his duties for the Employer,
except for authorized vacation periods or periods of illness.
The expenditure of reasonable amounts of time for personal business,
charitable, and professional business, charitable, and professional
activities shall not be deemed a breach of this Agreement provided such
activities do not materially interfere with the services to be rendered
for Employer hereunder.
<PAGE> 2
4. TERM AND TERMINATION. The term of employment is for three (3) years,
beginning June 1, 1997, and is renewable June 1, 2000. However, the
agreement may be terminated by either party, at any time, with or without
cause or reason, upon thirty (30) calendar days written notice being given
to the other party of such termination. In the event of Employer
initiated termination for any reason, other than dishonesty, fraud which
has an adverse impact on the Employer in excess of Ten Thousand Dollars
($10,000.00) in the aggregate, or violation of paragraphs 8 or 9 of this
agreement, the Employee shall be entitled to receive his bi-weekly salary
each two weeks for a period of twenty-six (26) two-week periods following
the termination date. (Also, employee will receive any bonus earned
through the last day of active employment.)
However, if there is a change of control of the employer and the
employee is terminated within the restrictions listed above said
employee shall be entitled to continue in the Corporate Benefit
Programs as addressed in Point #7 plus receive his bi-weekly
salary each two weeks for a period of fifty-two (52) two-week
periods following the termination date. (Also, employee will receive
any bonus earned through the last day of active employment.)
5. VACATION. Employee shall be entitled to the number of vacation days
authorized from time to time by Employer. If vacation is not taken,
the same shall not become cumulative, nor shall the Employee draw
extra compensation if he does not take his vacation. The time of
Employee's vacation shall be determined by the Employee, with
provision for on-going business responsibilities during his absence
arranged by the Employee.
6. EXPENSE REIMBURSEMENT. During the period of his employment, Employee
shall be reimbursed for all of his reasonable and necessary expenses
actually incurred in the performance of service and duties for
Employer, in accordance with the general policy of Employer,
authorized and adopted from time to time. Employee's expenses shall
be recorded on an itemized expense account.
7. EMPLOYEE BENEFITS. During the period of his employment, Employee shall
be entitled to participate in Employee benefit plans authorized and
adopted from time to time by Employer, and any other benefits
authorized by the Compensation Committee of the Board of Directors.
8. COVENANT NOT TO COMPETE. In connection with the employment of Employee
pursuant to this Agreement, Employee hereby agrees, acknowledges, and
recognizes that the following are important to Employer and that one
or more of the following are expected to be or become applicable to
this employment relationship:
(a) on account of this employment, Employee will acquire important
business information about Employer including but not limited to
Employer's products and method of doing
2
<PAGE> 3
business, which information if used, disclosed, or applied other than
for Employer's benefit can be expected to cause serious and
substantial damage to Employer; (b) Employee's service with Employer
may result in frequent contact with customers of Employer which may
result in close relationships and the association of Employer's good
will with Employee; (c) Employer's business information and customer
relationships are significant assets owned by Employer which are
developed by substantial investment of time and effort; Employer's
business information and the identity of Employer's customers are not
meant to be generally or specifically known by or disclosed to actual
or potential competitor(s) of Employer;
(d) Employer has a legitimate interest in protecting its business
information and relationships; (e) Employee's skills and knowledge of
Employer's business information and relationships are of an unique
nature which will be further developed and acquired during Employee's
employment with Employer: and (f) Employer has a legitimate interest
in protecting its good will, customer lists and relationships,
products, method of doing business, and other business information, by
means of enforcement of this Covenant Not To Compete set forth in this
Paragraph.
Employee further acknowledges that in the course of his employment
with Employer, Employee is placed in a position of trust and
confidence by Employer with respect to Employer's methods of doing
business and with respect to Employer's customers. This Covenant Not
To Compete is an inducement to cause Employer to execute this
Agreement and as a condition and in consideration of such employment,
and continued employment, raises, promotions and/or other benefits
provided to Employee by Employer.
Employee covenants and agrees with Employer that at all times during
the term of his employment with Employer and for a period of twelve
(12) months after the termination of his employment with Employer for
any reason whatsoever, with or without cause, Employee shall not,
either directly or indirectly, engage in or participate in any
capacity, whether as an employee, independent contractor, owner,
partner, stockholder, officer, director, consultant, sole proprietor,
co-venturer, agent, or otherwise, with or without compensation, in or
with any business enterprises, of any kind, which is competitive with
the business in which the Employer was engaged at any time during the
one (1) year period immediately prior to termination of Employee's
employment with Employer. Notwithstanding the foregoing, this Covenant
Not To Compete is not intended to prohibit the Employee from working
for an employer having multiple divisions, one or more of which
divisions is engaged in a business which is competitive with
Employer's business, so long as the Employee is not employed by or
does not provide services to or perform work for any competing
division and so long as Employee does not disclose confidential
information to the other employer, or any of its divisions, regarding
any aspect of Employer's business.
3
<PAGE> 4
This Covenant Not To Compete shall be limited to the geographical
areas within the field or area of Employer's activities during the
course of Employee's employment with Employer. This Covenant Not To
Compete applies to all competition occurring within the geographical
area specified, even though the headquarters or office of the
competitor may be outside of the area specified.
9. CONFIDENTIAL INFORMATION AND RECORDS. Employer is engaged or will
engage in a very competitive industry and marketplace. Employer
expects to accumulate substantial know-how and other information, at
much effort and cost, all of which is not generally known, relating to
all or some of the following: its existing and contemplated products,
services, procedures, methods of doing business, machinery and
equipment, compositions, technology, formulas, know-how, methods of
production and providing services, research and development programs
and plans, sales and marketing methods, existing and prospective
customers and suppliers, customer lists, customer usages and
requirements, financial matters, contractual and other agreements or
business relationships, and other confidential business information,
trade secrets and data (all hereinafter referred to as "Confidential
Information"). This Confidential Information is essential to the
well-being and success of Employer.
Employee acknowledges that his employment entails a position of trust,
and that Employee has or will have access to Confidential Information.
Employee further acknowledges that such Confidential Information is
vital to the personal development, advancement, and economic security
of each person who looks to Employer as the principal means for
providing continuing opportunities for personal growth and promotion,
and that the acquisition of such Confidential Information by a
competitor of Employer would not only injure Employer, but would also
put Employer's personnel and their jobs in jeopardy.
For the above reasons, as an inducement to cause Employer to execute
this Agreement, and in further consideration of Employee's employment
and continued employment, raises, promotions, and/or other benefits
provided to Employee by Employer, Employee agrees as follows: (i)
except as required by Employee's duties to Employer, not to at any
time directly or indirectly disclose to or use for others or
appropriate for his own personal use or cause to be used by others any
Confidential Information without first obtaining the written consent
of Employer to do so; (ii) all records and other writings of
Confidential Information prepared by Employee, or which come into his
possession or control, or which he has access to, are and shall remain
the exclusive property of
4
<PAGE> 5
Employer, and upon termination of Employee's employment, Employee will
not remove any such records or copies thereof, but all shall be left
with Employer, and any such records or copies not with Employer and in
Employee's possession or control, shall be, upon termination of
employment, immediately returned to Employer along with any other
property of Employer.
The requirements of this Paragraph shall apply during the time of
Employee's employment with Employer and thereafter unless it can be
conclusively demonstrated that such Confidential Information (i) has
through no act or fault of Employee become part of the public domain,
or (ii) is no longer important or to be kept confidential for the
protection or well-being of Employer.
10. INJUNCTIVE RELIEF; EMPLOYEE'S ACKNOWLEDGMENT. Employee acknowledges
that any actual or threatened breach of (i) the Covenant Not To
Compete set forth herein or (ii) the provisions regarding Confidential
Information and records set forth herein, is likely to result in
immediate and irreparable harm to Employer. Employee also
acknowledges and admits that there may be no adequate remedy at law
for his breach or a threatened breach and therefore Employer shall be
entitled to immediate equitable relief by way of both temporary and
permanent injunctions, (including compensatory injunctions prohibiting
Employee from engaging in the restricted activity for the full period
of the agreed time plus the additional period of time equal to the
term of any violation of such restrictive covenant) and also money
damages insofar as can be determined under the circumstances, and such
further relief as any court with jurisdiction may deem just and
proper.
Furthermore, Employee shall be responsible to pay to Employer all
Employer's actual and reasonable attorneys' fees and other legal costs
occasioned by and successful enforcement of this Agreement. Nothing
contained in this Agreement shall prevent Employer from availing
itself from any other right or remedy to which Employer is entitled
under this Agreement or otherwise, and the parties agree that all
rights and remedies available to Employer are cumulative including but
not limited to injunctive relief, money damages from Employee.
Employee further acknowledges that the restrictions (including as to
time and geography) contained in the provisions for the Covenant Not
To Compete and relating to the Confidential Information of Employer
are reasonable and are not now (and are not expected to be in the
future) onerous, harsh, or oppressive. Employee further acknowledges
that these restrictions do not now, and are not expected to in the
future, create or result in a hardship to Employee in pursuit of a
livelihood or in the support of himself or his dependents, whether or
not he is employed by Employer. Employee further acknowledges that
after termination of his
5
<PAGE> 6
employment with Employer, he will be reasonably able to earn a
livelihood without violating this Covenant Not To Compete and the
provisions relating to Confidential Information. Employee hereby
agrees that the Covenant Not To Compete and the provisions relating to
Confidential Information of Employer shall survive Employee's
termination of employment with or without cause. Employee agrees to
notify any prospective employer of the existence of this Agreement.
11. EMPLOYER'S AUTHORITY. Employee agrees to observe and comply with the
rules and regulations of Employer, as adopted, created, or implemented
from time to time by Employer's Board of Directors, respecting the
performance of his duties. Although Employee may be an officer or
director of Employer, he shall have no authority whatsoever to act
unilaterally on behalf of the Employer under this Agreement regarding
Employer's relationship with Employee.
12. PERSONAL CONTRACT. Employer is entering into this Agreement on account
of the skills and knowledge of Employee, and this Agreement is
personal as to Employee. Employee may not assign or delegate his
rights and/or duties under this Agreement. This Agreement shall
automatically terminate in the event that Employee is unable or
unwilling to perform, or does not perform, his duties of employment
hereunder.
13. MISCELLANEOUS.
a. No waiver or modification of this Agreement or of any
covenant, condition, or limitation herein contained shall be
valid unless in writing and duly executed by all parties to this
Agreement; and no evidence of any waiver or modification shall
be offered or received in evidence in any proceeding,
arbitration, or litigation between the parties hereto arising
out of or affecting this Agreement, or the rights or obligations
of the parties hereunder, unless such waiver or modification is
in writing, duly executed as aforesaid, and the parties further
agree that the provisions of this section may not be waived
except as herein set forth.
b. The failure of Employer at any time to require performance by
Employee of any provision expressed herein shall in no way
affect or prejudice Employer's right thereafter to enforce such
provision or any other provision; nor shall the waiver by
Employer of any breach of any provision expressed herein be
taken or held to be a waiver of such provision itself.
c. All agreements and covenants contained herein are severable,
and in the event any of them shall be held to be invalid by any
competent court, this contract shall be interpreted as if such
invalid agreements or covenants were not contained herein.
6
<PAGE> 7
d. The captions which are underlined at the beginning of the
paragraphs of this Agreement are chiefly for the purpose of
convenience and if the same be in conflict with the text, the
text shall control.
e. It is the intention of the parties hereto that this Agreement
shall be governed by its terms and construed in accordance with
and under and pursuant to the internal laws of the state of
Wisconsin.
f. As used in this Agreement, words in the singular may mean the
plural number and words used in the plural number may mean the
singular number; and words used in any gender may mean any other
gender.
g. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors, assigns,
heirs and legal representatives subject to the paragraph above
entitled "Personal Contract."
h. All notices required under this Agreement shall be duly given
if delivered to the other party or mailed postage prepaid to the
respective party's last known address. Notices shall be
effective when personally delivered, or when sent by telegram,
or by mail when sent by certified, registered, or regular mail
and deposited in the United States mail, postage prepaid, and
sent to the respective address of the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date first above written and by so executing, the parties acknowledge that
they have read and fully understand all the terms and conditions included in
this Agreement and acknowledge receipt of an executed copy of this Agreement.
Enclosure: Exhibit "A"
EMPLOYEE: FOR THE EMPLOYER:
- --------- -----------------
- ------------------------ ---------------------------
David L. Erdmann James Dillon
Compensation Committee
---------------------------
Harold Bergman
Compensation Committee
---------------------------
Pat Richter
Chairperson
Compensation Committee
7
<PAGE> 8
EXHIBIT "A"
TO EMPLOYMENT AGREEMENT BETWEEN
OUTLOOK GROUP CORPORATION AND
DAVID L. ERDMANN
EFFECTIVE JUNE 1, 1997
COMPENSATION
1. SALARY EFFECTIVE JUNE 9, 1997
Employer agrees to pay Employee a bi-weekly salary, effective June 9,
1997, of $9,615.38 each two (2) weeks ($250,000 per year equivalent) on
its regular payroll.
2. INCENTIVE EARNINGS OPPORTUNITY EFFECTIVE JUNE 1, 1997
Employee will be paid an incentive payment immediately following audit of
Employer's 1996 fiscal year annual financial and accounting reports,
provided the results show at least a 5% profit before taxes. The amount
of the incentive payment shall be discretionary, determined by the
Compensation Committee of the Board of Directors. The amount, if any,
shall be guided by accomplishment of the goals and objectives submitted
by the Employee and accepted by the Committee at the beginning of the
fiscal year, together with acknowledgment of the difficulty of attainment
and the conditions under which the Corporation operated during the fiscal
year.
EMPLOYEE: FOR THE EMPLOYER:
- --------- -----------------
- --------------------- ----------------------------
DAVID L. ERDMANN JAMES DILLON
COMPENSATION COMMITTEE
----------------------------
HAROLD BERGMAN
COMPENSATION COMMITTEE
----------------------------
PAT RICHTER
CHAIRPERSON
COMPENSATION COMMITTEE
8
<PAGE> 1
Exhibit 10.6
MASTER LEASE AGREEMENT
THIS MASTER LEASE AGREEMENT, dated as of March 13, 1997 ("AGREEMENT"),
between, GENERAL ELECTRIC CAPITAL CORPORATION, with an office at 1415 West 22nd
Street, Oak Brook, Illinois 60521 (hereinafter called, together with its
successors and assigns, if any, "LESSOR"), and OUTLOOK GROUP CORP., a
corporation organized and existing under the laws of the State of Wisconsin
with its mailing address and chief place of business at 1180 American Drive,
Neenah, WI 54957-0748 (hereinafter called "LESSEE").
WITNESSETH:
I. LEASING:
(a) Subject to the terms and conditions set forth below, Lessor agrees to lease
to Lessee, and Lessee agrees to lease from Lessor, the equipment ("EQUIPMENT")
described in Annex A to any equipment schedule hereto ("SCHEDULE"). Terms
defined in a Schedule and not otherwise defined herein shall have the meanings
ascribed to them in such Schedule. (b) The obligation of Lessor to purchase
Equipment from the manufacturer or seller thereof ("SELLER") and to lease the
same to Lessee under any Schedule shall be subject to receipt by Lessor, prior
to the Lease Commencement Date (with respect to such Equipment), of each of the
following documents in form and substance satisfactory to Lessor: (i) a
Schedule relating to the Equipment then to be leased hereunder, (ii) paid in
full invoice or other evidence of ownership of the Equipment, (iii) evidence of
insurance which complies with the requirements of Section IX, and (iv) such
other documents as Lessor may reasonably request. As a further condition to
such obligations of Lessor, Lessee shall, upon delivery of such Equipment (but
not later than the Last Delivery Date specified in the applicable Schedule)
execute and deliver to Lessor a Certificate of Acceptance (in the form of Annex
C to the applicable Schedule) covering such Equipment. Lessor hereby appoints
Lessee as its agent for inspection and acceptance of the Equipment from the
Supplier. Upon execution by Lessee of any Certificate of Acceptance, the
Equipment described thereon shall
1
<PAGE> 2
be deemed to have been delivered to, and irrevocably accepted by, Lessee for
lease hereunder.
II. TERM, RENT AND PAYMENT:
(a) The rent payable hereunder and Lessee's right to use the Equipment shall
commence on the date of execution by Lessee of the Certificate of Acceptance
for such Equipment ("LEASE COMMENCEMENT DATE"). The term of this Agreement
shall be the period specified in the applicable Schedule. If any term is
extended, the word "term" shall be deemed to refer to all extended terms, and
all provisions of this Agreement shall apply during any extended terms, except
as may be otherwise specifically provided in writing. (b) Rent shall be paid
to Lessor at its address stated on the applicable Schedule, except as otherwise
directed in writing by Lessor. Payments of rent shall be in the amount set
forth in, and due in accordance with, the provisions of the applicable
Schedule. If one or more Advance Rentals (as defined on the applicable
Schedule) are payable, such Advance Rental shall be (i) set forth on the
applicable Schedule, (ii) due upon acceptance by Lessor of such Schedule, and
(iii) when received by Lessor, applied to the first rent payment and the
balance, if any, to the final rental payment(s) under such Schedule. In no
event shall any Advance Rental or any other rent payments be refunded to
Lessee. If rent is not paid within five days of its due date, Lessee agrees to
pay a late charge of five cents ($0.05) per dollar on, and in addition to, the
amount of such rent but not exceeding the lawful maximum, if any.
III. TAXES:
Lessee shall have no liability for taxes imposed by the United States of
America or any State or political subdivision thereof which are on or measured
by the net income of Lessor. Lessee shall report (to the extent that it is
legally permissible) and pay promptly all other taxes, fees and assessments
due, imposed, assessed or levied against any Equipment (or the purchase,
ownership, delivery, leasing, possession, use or operation thereof), this
Agreement (or any rentals or receipts hereunder), any Schedule, Lessor or
Lessee by any foreign, federal, state or local government or taxing authority
during or related to the term of this Agreement, including, without limitation,
all license and registration fees, and all sales, use, personal
property, excise, gross receipts, franchise, stamp or other
2
<PAGE> 3
taxes, imposts, duties and charges, together with any penalties, fines or
interest thereon (all hereinafter called "TAXES"). Lessee shall (i)
reimburse Lessor upon receipt of written request for reimbursement for any
Taxes charged to or assessed against Lessor, (ii) on request of Lessor, submit
to Lessor written evidence of Lessee's payment of Taxes, and (iii) send a copy
thereof to Lessor.
IV. REPORTS:
(a) Lessee will notify Lessor in writing, within ten days after any tax or
other lien shall attach to any Equipment, of the full particulars thereof and
of the location of such Equipment on the date of such notification. (b) Lessee
will within 90 days of the close of each fiscal year of Lessee, deliver to
Lessor, Lessee's balance sheet and profit and loss statement prepared in
accordance with generally accepted accounting principles consistently applied
together with a letter certifying that no default or event which, with the
giving of notice or lapse of time or both, would become Default has occurred,
certified by a recognized firm of certified public accountants. Upon request
Lessee will deliver to Lessor quarterly, within 45 days of the close of each
fiscal quarter of Lessee, in reasonable detail, copies of Lessee's quarterly
financial report certified by the chief financial officer of Lessee. (c)
Lessee will permit Lessor to inspect any Equipment during normal business
hours. (d) Lessee will keep the Equipment at the Equipment Location (specified
in the applicable Schedule) and will promptly notify Lessor of any relocation
of Equipment. Upon the written request of Lessor, Lessee will notify Lessor
forthwith in writing of the location of any Equipment as of the date of such
notification. (e) Lessee will promptly and fully report to Lessor in writing
if any Equipment is lost or damaged (where the estimated repair costs would
exceed 10% of its then fair market value), or is otherwise involved in an
accident causing personal injury or property damage. (f) Within 10 business
days after any request by Lessor, Lessee will furnish a certificate of an
authorized officer of Lessee stating that he has reviewed the activities of
Lessee and that, to the best of his knowledge, there exists no default (as
described in Section XI) or event which with notice or lapse of time (or both)
would become such a default.
V. DELIVERY, USE AND OPERATION:
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(a) All Equipment shall be shipped directly from the Seller to Lessee. (b)
Lessee agrees that the Equipment will be used by Lessee solely in the conduct
of its business and in a manner complying with all applicable federal, state,
and local laws and regulations. (c) LESSEE SHALL NOT ASSIGN, MORTGAGE, SUBLET
OR HYPOTHECATE ANY EQUIPMENT, OR THE INTEREST OF LESSEE HEREUNDER, NOR SHALL
LESSEE REMOVE ANY EQUIPMENT FROM THE CONTINENTAL UNITED STATES, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE LESSOR. (d) Lessee will keep the Equipment free
and clear of all liens and encumbrances other than those which are granted in
favor of or result from acts of Lessor.
VI. SERVICE:
(a) Lessee will, at its sole expense, maintain each unit of Equipment in good
operating order, repair, condition and appearance in accordance with
manufacturer's recommendations, normal wear and tear excepted. Lessee shall,
if at any time requested by Lessor, affix in a prominent position on each unit
of Equipment plates, tags or other identifying labels showing ownership thereof
by Lessee and Lessor's security interest therein. (b) Lessee will not, without
the prior consent of Lessor, affix or install any accessory, equipment or
device on any Equipment if such addition will impair the originally intended
function or use of such Equipment. All additions, repairs, parts, supplies,
accessories, equipment, and devices furnished, attached or affixed to any
Equipment which are not readily removable shall be made only in compliance with
applicable law; and shall become subject to the lien of Lessor. Lessee will
not, without the prior written consent of Lessor and subject to such conditions
as Lessor may impose for its protection, affix or install any Equipment to or
in any other personal or real property. (c) Any alterations or modifications
to the Equipment that may, at any time during the term of this Agreement, be
required to comply with any applicable law, rule or regulation shall be made at
the expense of Lessee.
VII. STIPULATED LOSS VALUE:
Lessee shall promptly and fully notify Lessor in writing if any unit of
Equipment shall be or become worn out, lost, stolen, destroyed, irreparably
damaged in the reasonable determination of Lessee, or permanently rendered
unfit for use from any cause whatsoever (such occurrences being hereinafter
called "CASUALTY OCCURRENCES"). On the rental payment date next succeeding
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a Casualty Occurrence (the "PAYMENT DATE"), Lessee shall pay Lessor the sum of
(x) the Stipulated Loss Value of such unit calculated as of the rental payment
date next preceding such Casualty Occurrence ("CALCULATION DATE"); and
(y) all rental and other amounts which are due hereunder as of the Payment
Date. Upon payment of all sums due hereunder, the term of this Agreement as to
such unit shall terminate and (except in the case of the loss, theft or
complete destruction of such unit) Lessor shall be entitled to recover
possession of such unit.
VIII. LOSS OR DAMAGE:
Lessee hereby assumes and shall bear the entire risk of any loss, theft, damage
to, or destruction of, any unit of Equipment from any cause whatsoever from the
time the Equipment is shipped to Lessee.
IX. INSURANCE:
Lessee agrees, at its own expense, to keep all Equipment insured for such
amounts and against such hazards as Lessor may require, including, but not
limited to, insurance for damage to or loss of such Equipment and liability
coverage for personal injuries, death or property damage, with Lessor named as
additional insured and with a loss payable clause in favor of Lessor, as its
interest may appear, irrespective of any breach of warranty or other act or
omission of Lessee. The insurance shall provide (i) liability coverage in an
amount equal to at least ONE MILLION U.S. DOLLARS ($1,000,000.00) total
liability per occurrence, and (ii) casualty/property damage coverage in an
amount equal to the higher of the Stipulated Loss value or the full replacement
cost of the Equipment; or at such other amounts as may be required by Lessor.
All such policies shall be with companies, and on terms, satisfactory to
Lessor. Lessee agrees to deliver to Lessor evidence of insurance satisfactory
to Lessor. No insurance shall be subject to any co-insurance clause. Lessee
hereby appoints Lessor as Lessee's attorney-in-fact to make proof of loss and
claim for insurance, and to make adjustments with insurers and to receive
payment of and execute or endorse all documents, checks or drafts in connection
with payments made as a result of such insurance policies. Any expense of
Lessor in adjusting or collecting insurance shall be borne by Lessee. Lessee
will not make adjustments with insurers except (i) with respect to claims for
damage to any unit of Equipment where the repair costs do not exceed ten
percent (10%) of such unit's fair market value, or
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(ii) with Lessor's written consent. Said policies shall provide that the
insurance may not be altered or canceled by the insurer until after thirty
(30) days written notice to Lessor. Lessor may, at its option, apply proceeds
of insurance, in whole or in part, to (i) repair or replace Equipment or any
portion thereof, or (ii) satisfy any obligation of Lessee to Lessor hereunder.
X. RETURN OF EQUIPMENT:
(a) Upon any expiration or termination of this Agreement or any Schedule,
Lessee shall promptly, at its own cost and expense: (i) perform any testing and
repairs required to place the affected units of Equipment in the same condition
and appearance as when received by Lessee (reasonable wear and tear excepted)
and in good working order for their originally intended purpose; (ii) if
deinstallation, disassembly or crating is required, cause such units to be
deinstalled, disassembled and crated by an authorized manufacturer's
representative or such other service person as is satisfactory to Lessor; and
(iii) return such units to a location within the continental United States as
Lessor shall direct. (b) Until Lessee has fully complied with the requirements
of Section X(a) above, Lessee's rent payment obligation and all other
obligations under this Agreement shall continue from month to month
notwithstanding any expiration or termination of the lease term. Lessor may
terminate such continued lease hold interest upon ten (10) days notice to
Lessee.
XI. DEFAULT:
(a) Lessor may in writing declare this Agreement in default if: Lessee breaches
its obligation to pay rent or any other sum when due and fails to cure the
breach within ten (10) days; Lessee breaches any of its insurance obligations
under Section IX; Lessee breaches any of its other obligations to Lessor
hereunder or under any instrument, document or agreement between Lessor and
Lessee and fails to cure that breach within thirty (30) days after written
notice thereof; any representation or warranty made by Lessee in connection
with this Agreement shall be false or misleading in any material respect;
Lessee becomes insolvent or ceases to do business as a going concern; any
Equipment is illegally used; or a petition is filed by or against Lessee or
any guarantor of Lessee's obligations to Lessor hereunder under any bankruptcy
or insolvency laws; or Lessee shall be in default under that certain Loan and
Security Agreement dated as of November 5, 1996 with Bank America Business
Credit, Inc., as such
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agreement may be amended, restated or refinanced or any other material
obligation for borrowed money, for the deferred purchase price of property or
any lease agreement. Such declaration shall apply to all Schedules except as
specifically excepted by Lessor. (b) After default, at the request of Lessor,
Lessee shall comply with the provisions of Section X(a). Lessee hereby
authorizes Lessor to enter, with or without legal process, any premises where
any Equipment is believed to be and take possession thereof. Lessee shall,
without further demand, forthwith pay to Lessor (i) as liquidated damages for
loss of a bargain and not as a penalty, the Stipulated Loss Value of the
Equipment (calculated as of the rental next preceding the declaration of
default), and (ii) all rentals and other sums then due hereunder. Lessor may,
but shall not be required to, sell Equipment at private or public sale, in bulk
or in parcels, with or without notice, and without having the Equipment present
at the place of sale; or Lessor may, but shall not be required to, lease,
otherwise dispose of or keep idle all or part of the Equipment; and Lessor may
use Lessee's premises for any or all of the foregoing without liability for
rent, costs, damages or otherwise. The proceeds of sale, lease or other
disposition, if any, shall be applied in the following order of priorities: (1)
to pay all of Lessor's costs, charges and expenses incurred in taking,
removing, holding, repairing and selling, leasing or otherwise disposing of
Equipment; then, (2) to the extent not previously paid by Lessee, to pay Lessor
all sums due from Lessee hereunder; then (3) to reimburse to Lessee any sums
previously paid by Lessee as liquidated damages; and (4) any surplus shall be
retained by Lessor. Lessee shall pay any deficiency in (1) and (2) forthwith.
In addition to the foregoing rights, Lessor may proceed against any guarantor
pursuant to any guaranty of Lessee's obligations hereunder. (c) The foregoing
remedies are cumulative, and any or all thereof may be exercised in lieu of or
in addition to each other or any remedies at law, in equity, or under statute.
Lessee waives notice of sale or other disposition (and the time and place
thereof), and the manner and place of any advertising. Lessee shall pay
Lessor's actual attorney's fees incurred in connection with the enforcement,
assertion, defense or preservation of Lessor's rights and remedies hereunder,
or if prohibited by law, such lesser sum as may be permitted. Waiver of any
default shall not be a waiver of any other or subsequent default. (d) Any
default under the terms of this or any other agreement between
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Lessor and Lessee may be declared by Lessor a default under this and any such
other agreement.
XII. AGREEMENT:
(a) Lessor may, without the consent of Lessee, assign this Agreement or any
Schedule, or the right to enter into any Schedule. Lessee agrees that it will
pay all Rent and other amounts payable under each Schedule to the Lessor named
therein, provided, however, if Lessee receives written notice of any assignment
from Lessor, Lessee will pay all Rent and other amounts payable under any
assigned Schedule to such assignee (each being herein referred to as an
'Assignee' and collectively, as the 'Assignees') or as instructed by Lessor.
Each Schedule, incorporating by reference the terms and conditions of this
Agreement, constitutes a separate instrument of lease, and the Lessor named
therein or its Assignee shall have all rights as 'Lessor' thereunder separately
exercisable by such named Lessor or Assignee as the case may be, exclusively
and independently of Lessor or any Assignee with respect to other Schedules
executed pursuant hereto. Lessee agrees to confirm in writing receipt of a
notice of assignment as reasonably may be requested by such Assignee. Lessee
hereby waives and agrees not to assert against any such Assignee any defense,
set-off, recoupment claim or counterclaim which Lessee has or may at any time
have against Lessor or any other person for any reason whatsoever.
(b) This Agreement, the Schedules related instruments and documents and/or the
Equipment may be conveyed to, in whole or in part, and may be used as security
for financing obtained from, one or more Assignees without the consent of
Lessee (the 'Syndication). Lessee agrees to cooperate with Lessor in
connection with the Syndication, including the preparation of any offering
materials and the preparation of any relevant management of Lessee and will
certify as true, correct and complete any description of Lessee and its affairs
contained in materials based upon information provided by Lessee; and the
execution and delivery of such other documents, instruments, notices, opinions,
certificates and acknowledgments as reasonably may be required by Lessor or
such Assignee; provided, however in no event shall Lessee be required to
consent to any change that would adversely affect any of the economic terms of
the transactions contemplated herein.
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(c) Subject always to the foregoing, this Agreement inures to the benefit of
and is binding upon, the successors and assigns of the parties hereto and of
the Assignees."
XIII.NET AGREEMENT; NO SET-OFF, ETC:
This Agreement is a net lease. Lessee's obligation to pay rent and other
amounts due hereunder shall be absolute and unconditional. Lessee shall not be
entitled to any abatement or reductions of, or set-offs against, said rent or
other amounts, including, without limitation, those arising or allegedly
arising out of claims (present or future, alleged or actual, and including
claims arising out of strict tort or negligence of Lessor) of Lessee against
Lessor under this Agreement or otherwise. Nor shall this Agreement terminate
or the obligations of Lessee be affected by reason of any defect in or damage
to, or loss of possession, use or destruction of, any Equipment from whatsoever
cause. It is the intention of the parties that rents and other amounts due
hereunder shall continue to be payable in all events in the manner and at the
times set forth herein unless the obligation to do so shall have been
terminated pursuant to the express terms hereof.
XIV. INDEMNIFICATION: (a) Lessee hereby agrees to indemnify, save and keep
harmless Lessor, its agents, employees, successors and assigns from and against
any and all losses, damages, penalties, injuries, claims, actions and suits,
including legal expenses, of whatsoever kind and nature, in contract or tort,
whether caused by the active or passive negligence of Lessor or otherwise, and
including, but not limited to, Lessor's strict liability in tort, arising out
of (i) the selection, manufacture, purchase, acceptance or rejection of
Equipment, the ownership of Equipment during the term of this Agreement, and
the delivery, lease, possession, maintenance, uses, condition, return or
operation of Equipment (including, without limitation, latent and other
defects, whether or not discoverable by Lessor or Lessee and any claim for
patent, trademark or copyright infringement or environmental damage) or (ii)
the condition of Equipment sold or disposed of after use by Lessee, any
sublessee or employees of Lessee. Lessee shall, upon request, defend any
actions based on, or arising out of, any of the foregoing. (b) All of
Lessor's rights, privileges and indemnities contained in this Section XIV
shall survive the expiration or other termination of this Agreement and the
rights,
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privileges and indemnities contained herein are expressly made for the benefit
of, and shall be enforceable by Lessor, its successors and assigns. (c) Lessee
shall defend, indemnify and hold harmless Lessor, the Assignees, and their
Affiliates, successors and assigns, directors, officers, employees and agents,
from and against any Environmental Claim or Environmental Loss and, unless
Lessee is then contesting in good faith such Environmental Claim or
Environmental Loss and Lessee has set aside on its books appropriate reserves
therefor, Lessee shall fully and promptly pay, perform and discharge any such
Environmental Claim or Environmental Loss.
As used herein:
(1) 'Adverse Environmental Condition' shall refer to (i) the existence or the
continuation of the existence, of an Environmental Emission (including, without
limitation, a sudden or non-sudden accidental or non-accidental Environmental
Emission), of, or exposure to, any Contaminant, odor or audible noise in
violation of any applicable Environmental Law, at, in, by, from or related to
any Equipment, (ii) the environmental aspect of the transportation storage,
treatment or disposal of materials in connection with the operation of any
Equipment in violation of any Applicable Environmental Law, or (iii) the
violation or alleged violation, of any Environmental Law connected with any
Equipment.
(2) `Affiliate' shall refer, with respect to any given Person to any Person
that directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such Person.
(3) `Contaminant' shall refer to those substances which are regulated by, or
form the liability under any Environmental Law.
(4) `Environmental Claim' shall refer to any accusation, allegation, notice of
violation, claim, demand, abatement or other order or direction (conditional or
otherwise) by any governmental authority or any Person for personal injury
(including sickness, disease or death), tangible or intangible property damage,
damage to the environment or other adverse effects on the environment, or for
fines, penalties or
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restrictions, resulting from or based upon any Adverse Environmental Condition.
(5) `Environmental Emission' shall refer to any actual or threatened release,
spill, omission, leaking, pumping, injection, deposit, disposal, discharge,
dispersal, leeching or migration into the indoor or outdoor environment, or
into or out of any of the Equipment, including, without limitation, the
movement of any Contaminant or other substance through or in the air, soil
surface water, groundwater, or property.
(6) `Environmental Law' shall mean any Federal, foreign, state or local law,
rule or regulation pertaining to the protection of the environment, including,
but not limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act (`CERCLA') (42 U.S.C. Section 9601 et seq.), the Hazardous
Material Transportation Act (49 U.S.C. Section 1801 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. Section 1251 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901, et seq.), the Clean Air
Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. Section 2601 et seq.), the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. Section 1361 et seq.), and the Occupational Safety
and Health Act (19 U.S.C. Section 651 et seq.), as these laws have been amended
or supplemented, and any analogous foreign, Federal, state or local statutes,
and the regulations promulgated pursuant thereto.
(7) `Environmental Loss' shall mean any loss, cost damage, liability,
deficiency, fine, penalty or expense (including, without limitation, reasonable
attorneys' fees, engineering and other professional or expert fees),
investigation, removal, cleanup and remedial costs (voluntarily or
involuntarily incurred) and damages to, loss of the use of or decrease in value
of the Equipment arising out of or related to any Adverse Environmental
Condition.
(8) `Person' shall include any individual, partnership, corporation, trust,
unincorporated organization, government or department or agency thereof and any
other entity.
XV. DISCLAIMER:
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LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT WITHOUT ANY ASSISTANCE
FROM LESSOR OR ANY ASSIGNEE, ITS AGENTS OR EMPLOYEES. LESSOR AND ANY ASSIGNEE
DO NOT MAKE, HAVE NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH
RESPECT TO THE EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING,
WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS,
QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE,
USE OR OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR
TITLE. All such risks, as between Lessor and any Assignee and Lessee, are to
be borne by Lessee. Without limiting the foregoing, Lessor and any Assignee
shall have no responsibility or liability to Lessee or any other person with
respect to any of the following, regardless of any negligence of Lessor and any
Assignee: (i) any liability, loss or damage caused or alleged to be caused
directly or indirectly by any Equipment, any inadequacy thereof, any deficiency
or defect (latent or otherwise) therein, or any other circumstance in
connection therewith; (ii) the use, operation or performance of any Equipment
or any risks relating thereto; (iii) any interruption of service, loss of
business or anticipated profits or consequential damages; or (iv) the delivery,
operation, servicing, maintenance, repair, improvement or replacement of any
Equipment. If, and so long as, no default exists under this Agreement, Lessee
shall be, and hereby is, authorized during the term of this Agreement to assert
and enforce, at Lessee's sole cost and expense, from time to time, in the name
of and for the account of Lessor or its Assignee, if any and/or Lessee, as
their interests may appear, whatever claims and rights Lessor or its Assignee
may have against any Seller of the Equipment.
XVI. REPRESENTATIONS AND WARRANTIES OF LESSEE:
Lessee hereby represents and warrants to Lessor that on the date hereof and on
the date of execution of each Schedule: (a) Lessee has adequate power and
capacity to enter into, and perform under, this Agreement and all related
documents (together, the "DOCUMENTS") and is duly qualified to do business
wherever necessary to carry on its present business and operations, including
the jurisdiction(s) where the Equipment is or is to be located. (B) The
Documents have been duly authorized, executed and delivered by Lessee and
constitute valid, legal and binding agreements, enforceable in accordance with
their terms, except to
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the extent that the enforceable bankruptcy and insolvency laws. (c) No
approval, consent or withholding of objections is required to the entry into
or performance by Lessee of the Documents except such as have already been
obtained. (d) The entry into and performance by Lessee of the Documents will
not: (i) violate any provision of Lessee's Certificate of Incorporation of
By-Laws; or (ii) result in any breach of, constitute a default under or
result in the creation of any lien, charge, security interest or other
encumbrance upon any Equipment pursuant to any indenture, mortgage, deed of
trust, bank loan or credit agreement or other instrument (other than this
Agreement) to which Lessee is a party. (e) There are no suits or proceedings
pending or threatened in court or before any commission, board or other
administrative agency against or affecting Lessee, which will have a material
adverse effect on the ability of Lessee to fulfill its obligations under this
Agreement. (f) The Equipment accepted under any Certificate of Acceptance is
and will remain tangible personal property. (g) Each Balance Sheet and
Statement of Income delivered to Lessor has been prepared in accordance with
generally accepted accounting principles, and since the date of the most recent
such Balance Sheet and Statement of Income, there has been no material adverse
change. (h) Lessee is and will be at all times validly existing and in good
standing under the laws of the State of its incorporation (specified in the
first sentence of this Agreement). (i) The Equipment will at all times be used
for commercial or business purposes.
XVII. OWNERSHIP FOR TAX PURPOSES, GRANT OF SECURITY INTEREST; USURY SAVINGS:
(a) For income tax purposes only, the parties hereto agree that it is their
mutual intention that Lessee shall be considered the owner of the Equipment.
Accordingly, Lessor agrees (i) to treat Lessee as the owner of the Equipment on
its federal income tax return, (ii) not to take actions or positions
inconsistent with such treatment on or with respect to its federal income tax
return, and (iii) not to claim any tax benefits available to an owner of the
Equipment on or with respect to its federal income tax return. The foregoing
undertakings by Lessor shall not be violated by Lessor's taking a tax position
inconsistent with the forgoing sentence to the extent such a position is
required by law or is taken through inadvertence so long as such inadvertent
tax position is reversed by Lessor promptly upon its discovery. Lessor shall
in no event be liable to Lessee if Lessee fails
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to secure any of the tax benefits available to the owner of the Equipment.
(b) Lessee hereby grants to Lessor a first security interest in the Equipment,
together with all additions, attachments, accessions, accessories and
accessions thereto whether or not furnished by the Seller of the Equipment and
any and all substitutions, replacements or exchanges therefor, and any and all
insurance and/or other proceeds of the property in and against which is a
security interest is granted hereunder. Notwithstanding anything to the
contrary contained elsewhere in this Agreement, to the extent that Lessor
asserts a purchase money security interest in any items of Equipment ("PMSI
EQUIPMENT"): (i) the PMSI Equipment shall secure only those sums which have
been advanced by Lessor for the purchase of the PMSI Equipment, or the
acquisition of rights therein, or the use thereof (the "PMSI INDEBTEDNESS"),
and (ii) no other Equipment shall secure the PMSI indebtedness. (c) It is the
intention of the parties hereto to comply with any applicable usury laws to the
extent that any Schedule is determined to be subject to such laws; accordingly,
it is agreed that, notwithstanding any provision to the contrary in any
Schedule or this Agreement, in no event shall any Schedule require the payment
or permit the collection of interest in excess of the maximum amount permitted
by applicable law. If any such excess interest is contracted for, charged or
received under any Schedule or this Agreement, or in the event that all of the
principal balance shall be prepaid, so that under any of such circumstances the
amount of interest contracted for, charged or received under any Schedule or
this Agreement shall exceed the maximum amount f interest permitted by
applicable law, then in such event (i) the provisions of this paragraph shall
govern and control, (ii) neither Lessee nor any other person or entity now or
hereafter liable for the payment hereof shall be obligated to pay the amount of
such interest to the extent that it is in excess of the maximum amount of
interest permitted by applicable law, (iii) any such excess which may have been
collected shall be either applied as a credit against the then unpaid principal
balance or refunded to Lessee, at the option of the Lessor, and (iv) the
effective rate of interest shall be automatically reduced to the maximum lawful
contract rate allows under applicable law as now or hereafter construed by the
courts having jurisdiction thereof. It is further agreed that without
limitation of the foregoing, all calculations of the rate of interest
contracted for, charged or received under any Schedule or this Agreement which
are made for the purpose of
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determining whether such rate exceeds the maximum lawful contract rate, shall
be made, to the extent permitted by applicable law, by amortizing, prorating,
allocating and spreading in equal parts during the period of the full stated
term of the indebtedness evidenced hereby, all interest at any time contracted
for, charged or received from Lessee or otherwise by Lessor in connection with
such indebtedness; provided, however, that if any applicable state law is
amended or the law of the United States of America preempts any applicable
state law, so that it becomes lawful for Lessor to receive a greater interest
per annum rate than is presently allowed, the Lessee agrees that, on the
effective date of such amendment or preemption, as the case may maximum
interest per annum rate allowed by the amended state law or the law of the
United States of America in order for Lessor to receive its original return
rate.
XVIII. EARLY TERMINATION: (a) On or after the First Termination Date (specified
in the applicable Schedule), Lessee may, so long as no default exists
hereunder, terminate this Agreement as to all (but not less than all) of the
Equipment on such Schedule as of a Rent Payment Date ("Termination Date") upon
at least 90 days prior written notice to Lessor. (b) Lessee shall, and Lessor
may, solicit cash bids for the Equipment on an AS IS, WHERE IS BASIS without
recourse to or warranty from Lessor, express or implied ("AS IS BASIS"). Prior
to the Termination Date, Lessee shall (i) certify to Lessor any bids received
by Lessee and (ii) pay to Lessor (A) the Termination Value (calculated as of
the rental due on the Termination Date) for the Equipment, and (B) all rent and
other sums due and unpaid as of the Termination Date. (c) Provided that all
amounts due hereunder have been paid on the Termination Date, Lessor shall
(i) sell the Equipment on an AS IS BASIS for cash to the highest bidder and
(ii) refund the proceeds of such sale (net of any related expenses) to Lessee
up to the amount of the Termination Value. If such sale is not consummated, no
termination shall occur and Lessor shall refund the termination Value (less any
expenses incurred by Lessor) to Lessee. (d) Notwithstanding the foregoing,
Lessor may elect by written notice, at any time prior to the Termination Date,
not to sell the Equipment. In that event, on the Termination Date Lessee shall
(i) return the Equipment (in accordance with Section X) and (ii) pay to Lessor
all amounts required under Section XVIII(b) less the amount of the highest bid
certified by Lessee to Lessor.
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XIX. EARLY PURCHASE OPTION: (a) Provided that this Agreement has not been
earlier terminated and provided further that Lessee is not in default under
this Agreement or any other agreement between Lessor and Lessee, Lessee may,
UPON AT LEAST 30 DAYS BUT NO MORE THAN 270 DAYS PRIOR WRITTEN NOTICE TO LESSOR
OF LESSEE'S IRREVOCABLE ELECTION TO EXERCISE SUCH OPTION, purchase all (but not
less than all) of the Equipment listed and described in this scheduled on any
Rent Payment Date following the First Termination Date as set forth in the
applicable Schedule, and prior to the date which is the scheduled expiration of
this Agreement, (the "EARLY PURCHASE DATE") for a price equal to (i) the
Termination Value (calculated as of the Early Purchase Date) for the Equipment,
and (ii) all rent and other sums due and unpaid as of the Purchase Date (the
"EARLY OPTION PRICE"), plus all applicable sales taxes on an AS IS BASIS. (The
purchase option granted by this subsection shall be referred to herein as the
"EARLY PURCHASE OPTION"). (b) If Lessee exercises its Early Purchase Option
with respect to the Equipment leased hereunder, then on the Early Purchase
Option with respect to the Equipment leased hereunder, then on the Early
Purchase Date, Lessee shall pay to Lessor any rent and other sums due and
unpaid on the Early Purchase Date and Lessee shall pay the Early Option Price,
plus all applicable sales taxes, to Lessor in cash.
XX. PURCHASE OPTION: (a) So long as no default exists hereunder and this
Agreement has not been earlier terminated, Lessee may at the expiration of the
term of the applicable Schedule term purchase all (but not less than all) of
the Equipment in any Schedule on an AS IS, WHERE IS BASIS for cash equal to the
amount indicated in such Schedule (the "OPTION PAYMENT"). The Option Payment
shall be due and payable in immediately available funds on the Expiration Date.
(b) Lessee shall be deemed to have waived this option unless it provides Lessor
with written notice of its irrevocable election to exercise the same not less
than 90 days prior to the Expiration Date.
XXI. MISCELLANEOUS:
(a) LESSEE HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY,
THIS AGREEMENT, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN LESSEE AND
LESSOR RELATING TO THE
16
<PAGE> 17
SUBJECT MATTER OF THIS TRANSACTION OR ANY RELATED TRANSACTIONS, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN LESSEE AND LESSOR. The scope of
this waiver is intended to be all encompassing of any and all disputes that may
be filed in any court (including, without limitation, contract claims, tor
claims, breach of duty claims, and all other common law and statutory claims).
THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR
IN WRITING, AND THE WAIVER OR MODIFICATIONS TO THIS AGREEMENT, ANY RELATED
DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS
TRANSACTION OR ANY RELATED TRANSACTION. In the event of litigation, this
Agreement may be filed as a written consent to a trial by the court. (b)
Unless and until Lessee exercises its rights under Section XIX above, nothing
herein contained shall give or convey to Lessee any right, title or interest in
and to any Equipment except as a lessee. Any cancellation or termination by
Lessor, pursuant to the provisions of this Agreement, any Schedule, supplement
or amendment hereto, or the lease of any Equipment hereunder, shall not release
lessee from any then outstanding obligations to Lessor hereunder. All
Equipment shall at all times remain personal property of Lessor regardless of
the degree of its annexation to any real property and shall not by reason of
any installation in, or affixation to, real or personal property become a part
thereof. (c) Time is of the essence of this Agreement. Lessor's failure at any
time to require strict performance by Lessee of any of the provisions hereof
shall not waive or diminish Lessor's right thereafter to demand strict
compliance therewith. Lessee agrees, upon Lessor's request, to execute any
instrument necessary or expedient for filing, recording or perfecting the
interest of Lessor. All notices required to be given hereunder shall be
deemed adequately given if sent by registered or certified mail to the
addressee at its address stated herein, or at such other place as such
addressee may have designated in writing. This Agreement and any Schedule and
Annexes thereto constitute the entire agreement of the parties with respect to
the subject matter hereof. NO VARIATION OR MODIFICATION OF THIS AGREEMENT OR
ANY WAIVER OF ANY OF ITS PROVISIONS OR CONDITIONS, SHALL BE VALID UNLESS IN
WRITING AND SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE PARTIES HERETO.
________________
initials
17
<PAGE> 18
(d) In case of a failure of Lessee to comply with any provision of this
Agreement, Lessor shall have the right, but shall not be obligated to, effect
such compliance, in whole or in part; and all moneys spent and expenses and
obligations incurred or assumed by Lessor in effecting such compliance shall
constitute additional rent due to Lessor within five days after the date Lessor
sends notice to Lessee requesting payment. Lessor's effecting such compliance
shall not be a waiver of Lessee's default. (e) Any rent or other amount not
paid to Lessor when due hereunder shall bear interest, both before and after
any judgment to termination hereof, at the lesser of eighteen percent per annum
or the maximum rate allowed by law. Any provisions in this Agreement and any
Schedule which are in conflict with any statute, law of applicable rule shall
be deemed omitted, modified or altered to conform thereto.
IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to be executed
by their duly authorized representatives as of the date first above written.
<TABLE>
<S> <C>
LESSOR: LESSEE:
General Electric Capital Corporation OUTLOOK GROUP CORP.
By:________________________________ By:______________________
Name:______________________________ Name:____________________
Title:_____________________________ Title:___________________
</TABLE>
18
<PAGE> 19
ADDENDUM
TO MASTER LEASE AGREEMENT
DATED AS OF MARCH 13, 1997
THIS ADDENDUM amends and supplements above lease (the "Lease"), between GENERAL
ELECTRIC CAPITAL CORPORATION and its successors and assigns ("Lessor") and
OUTLOOK GROUP CORP. ("Lessee") and is hereby incorporated into the Lease as
though fully set forth therein. Capitalized terms not otherwise defined herein
shall have the meanings set forth in the Lease.
The Lease is hereby amended as follows:
Section XI (a): The following sentences are added at the end of subsection (a)
Lessor agrees that if Bank of America Business Credit waives any default
by the Lessee under the Loan and Security agreement with the Lessee or if
such default is cured within the applicable cure period then such default
shall not be a default under this agreement. Lessor also agrees that if
the State of Wisconsin Investment Board waives any default Agreement with
the Lessee or if such default is cured within the applicable cure period
then such default shall not be a default under this Agreement. Lessee
shall provide Lessor with a copy of any such waiver.
Except as expressly modified hereby, all terms and provisions of the Lease
shall remain in full force and effect. This Addendum is not binding or
effective with respect to the Lease or the Equipment until executed on behalf
of Lessor and Lessee by authorized representatives of Lessor and Lessee.
IN WITNESS WHEREOF, Lessee and Lessor have cause this Addendum to be executed
by their duly authorized representatives as of the date first above written.
<TABLE>
<S> <C>
LESSOR: LESSEE:
General Electric Capital Corporation OUTLOOK GROUP CORP.
By:________________________________ By:______________________
Name:______________________________ Name:____________________
</TABLE>
19
<PAGE> 20
Title:_____________________________ Title:___________________
Attest:
By:_______________________
20
<PAGE> 1
Exhibit 10.7
LETTER OF CREDIT AGREEMENT - NUMBER ONE
THIS LETTER OF CREDIT AGREEMENT, dated March 13, 1997 ("Agreement"), between
Outlook Group Corp., a corporation organized and existing under the laws of the
State of Wisconsin ("Lessee"), and General Electric Capital Corporation, a New
York corporation ("Lessor").
RECITALS:
WHEREAS, Lessee desires to lease from Lessor certain equipment or other
property (collectively, "EQUIPMENT") pursuant to a Master Lease Agreement dated
as of March 13, 1997 (said Master Lease Agreement together all present and
future schedules thereto, as the same may be from time to time extended,
amended, restated or otherwise modified, being hereinafter collectively
referred to as the "LEASE"); and
WHEREAS, Lessor is unwilling to lease the Equipment to Lessee unless and
until Lessee provides Lessor with certain additional assurances in the form of
a letter of credit as hereinafter described;
NOW, THEREFORE, in consideration of the above premises and promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:
1. Concurrently with the execution of this Agreement, Lessee shall, at its
sole cost and expense and as additional security for the prompt payment and
performance of all of its obligations (whether now existing or hereafter
arising) under the Lease, deliver or cause to be delivered to Lessor an
irrevocable standby letter of credit ("LETTER OF CREDIT") which shall be (i) in
the amount of TWO HUNDRED FIFTY THOUSAND AND 00/100 US Dollars (US
$250,000.00), (ii) issued by a bank which is acceptable to Lessor in its sole
discretion, (iii) substantially in the form of Exhibit A attached hereto (or in
such other form as may be acceptable to Lessor in its sole discretion), and
(iv) for an initial term of one year with automatic annual renewals thereafter
(without amendment except for extension of the then current expiry date by an
additional year) until Lessee has received written notice from Lessor to the
effect that the Letter of Credit is being released in its entirety. After all
of Lessee's obligations under the Lease have been indefeasibly paid and
performed in full, Lessor shall, upon the request of Lessee, release the Letter
of Credit and provide Lessee with a written notice to that effect. If
requested by Lessor, the Letter of
<PAGE> 2
Credit shall, at Lessee's sole cost and expense, be accompanied by an opinion
of counsel regarding its due authorization, execution, and enforceability
(which opinion shall be in form and substance, and from counsel, acceptable to
Lessor in its sole discretion).
2. Lessee shall be in default under this Agreement and the Lease if for
any reason whatsoever: (a) Lessor fails to receive the Letter of Credit in the
time and manner required herein; (b) the Letter of Credit is not automatically
renewed as required in Section 1 hereof at least thirty (30) days prior to the
expiry of such Letter of Credit; (c) Lessor receives any notice to the effect
that the Letter of Credit will not be automatically renewed as required herein;
or (d) Lessee otherwise breaches any of its obligations hereunder; or (e)
Issuer fails to comply with any terms, agreements or conditions of any Letter
of Credit. The foregoing events of default are in addition to, not in lieu of,
those set forth in the Lease.
3. Upon the occurrence of any default under this Agreement or the Lease,
or upon the filing of any petition by or against Lessee under any bankruptcy,
insolvency or similar laws, then in any such event and at any time thereafter
Lessor shall have the right, with or without notice to or demand upon Lessee,
to draw upon the Letter of Credit, by presenting to the issuer one or more
sight drafts and any other necessary documents, and to receive (in a lump sum
or in several sums from time to time at the sole discretion of Lessor) and
retain an amount not to exceed, in the aggregate, that available under the
Letter of Credit.
4. If Lessor draws on the Letter of Credit, the proceeds received by
Lessor therefrom shall be applied: first, towards costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
incurred by Lessor in connection with such draw or in otherwise enforcing its
rights and remedies hereunder; second, towards any rent or other sums of any
kind then due and unpaid by Debtor under the Lease; and third, at Lessor's
option either (i) towards the Stipulated Loss Value calculated as provided in
the Lease or (ii) Lessor may hold any such proceeds as additional security
(commingled with its own funds and without any need to pay interest or income
thereon) for any further obligations Of Lessee under the Lease, including,
without limitation, any rent or other sums of any kind that may become due
under the Lease and/or the Stipulated Loss Value calculated as provided in the
Lease. Once all obligations of Lessee under the Lease have been indefeasibly
paid and performed in full, any remaining excess proceeds from the Letter of
Credit shall be remitted by Lessor to Lessee. In any event, Lessee shall
remain liable for any deficiency under the Lease.
<PAGE> 3
5. Lessor's rights and remedies under this Agreement (including, without
limitation, the right to draw upon the Letter of Credit), the Lease or
otherwise are cumulative and may be exercised singularly or concurrently.
Neither any failure nor delay on the part of Lessor to draw upon the Letter
Credit or to exercise any other rights or remedies shall operate as a waiver
thereof, nor shall any single or partial exercise of any right or remedy
preclude any other or further exercise thereof or of any other right or remedy
howsoever arising. Under no circumstances shall Lessor be deemed or construed
to have waived its right to draw upon the Letter of Credit or to exercise any
of its other rights or remedies unless such waiver is in writing and executed
by a duly authorized representative of Lessor. A waiver of any right or remedy
on any one occasion shall not operate as a waiver of such right or remedy on
any future occasion or as a waiver of any other right or remedy.
6. LESSEE AND LESSOR HEREBY UNCONDITIONALLY WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
IN CONNECTION WITH, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, THE LETTER OF
CREDIT, THE LEASE, ANY DOCUMENTS RELATING HERETO OR THERETO, ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER HEREOF OR THEREOF, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN THEM. THE SCOPE OF THIS WAIVER
IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS
IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT, THE LETTER OF CREDIT, THE LEASE OR ANY
DOCUMENTS RELATING HERETO OR THERETO. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO TRIAL BY THE COURT.
7. Any notices to be given in connection herewith shall be delivered in
the manner contemplated by the Lease. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof, and
supersedes all prior understandings (whether written, verbal, implied or
otherwise) with respect thereto. None of the terms hereof may be amended,
waived or otherwise modified except pursuant to a written instrument duly
executed by the party to be charged. Lessor amy assign its rights hereunder at
any time, but Lessee may not do so without the prior written consent of Lessor.
This Agreement shall be binding upon, and shall inure to the benefit of,
Lessor, Lessee, and their respective successors and permitted assigns.
<PAGE> 4
IN WITNESS WHEREOF, Lessee and Lessor have caused their duly authorized
representatives to execute and deliver this Agreement on the year and day first
above written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL OUTLOOK GROUP CORP.
CORPORATION
By: /s/ William J. McElroy By: /s/ Larry E. Driscoll
------------------------------- -------------------------------
Name: William J. McElroy Name: Larry E. Driscoll
---------------------------- ----------------------------
Title: Region Credit Analyst Title: Vice President
--------------------------- ---------------------------
<PAGE> 5
LETTER OF CREDIT AGREEMENT - NUMBER TWO
THIS LETTER OF CREDIT AGREEMENT, dated March 13, 1997 ("Agreement"), between
Outlook Group Corp., a corporation organized and existing under the laws of the
State of Wisconsin ("Lessee"), and General Electric Capital Corporation, a New
York corporation ("Lessor").
RECITALS:
WHEREAS, Lessee desires to lease from Lessor certain equipment or other
property (collectively, "EQUIPMENT") pursuant to a Master Lease Agreement dated
as of March 13, 1997 (said Master Lease Agreement together all present and
future schedules thereto, as the same may be from time to time extended,
amended, restated or otherwise modified, being hereinafter collectively
referred to as the "LEASE"); and
WHEREAS, Lessor is unwilling to lease the Equipment to Lessee unless and
until Lessee provides Lessor with certain additional assurances in the form of
a letter of credit as hereinafter described;
NOW, THEREFORE, in consideration of the above premises and promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto, intending to
be legally bound, do hereby agree as follows:
1. Concurrently with the execution of this Agreement, Lessee shall, at its
sole cost and expense and as additional security for the prompt payment and
performance of all of its obligations (whether now existing or hereafter
arising) under the Lease, deliver or cause to be delivered to Lessor an
irrevocable standby letter of credit ("LETTER OF CREDIT") which shall be (i) in
the amount of TWO HUNDRED FIFTY THOUSAND AND 00/100 US Dollars (US
$250,000.00), (ii) issued by a bank which is acceptable to Lessor in its sole
discretion, (iii) substantially in the form of Exhibit A attached hereto (or in
such other form as may be acceptable to Lessor in its sole discretion), and
(iv) for an initial term of one year with automatic annual renewals thereafter
(without amendment except for extension of the then current expiry date by an
additional year) until Lessee has received written notice from Lessor to the
effect that the Letter of Credit is being released in its entirety. After all
of Lessee's obligations under the Lease have been indefeasibly paid and
performed in full, Lessor shall, upon the request of Lessee, release the Letter
of Credit and provide Lessee with a written notice to that effect. If
requested by Lessor, the Letter of Credit shall, at Lessee's sole cost and
expense, be accompanied
<PAGE> 6
by an opinion of counsel regarding its due authorization, execution, and
enforceability (which opinion shall be in form and substance, and from counsel,
acceptable to Lessor in its sole discretion).
2. Lessee shall be in default under this Agreement and the Lease if for
any reason whatsoever: (a) Lessor fails to receive the Letter of Credit in the
time and manner required herein; (b) the Letter of Credit is not automatically
renewed as required in Section 1 hereof at least thirty (30) days prior to the
expiry of such Letter of Credit; (c) Lessor receives any notice to the effect
that the Letter of Credit will not be automatically renewed as required herein;
or (d) Lessee otherwise breaches any of its obligations hereunder; or (e)
Issuer fails to comply with any terms, agreements or conditions of any Letter
of Credit. The foregoing events of default are in addition to, not in lieu of,
those set forth in the Lease.
3. Upon the occurrence of any default under this Agreement or the Lease,
or upon the filing of any petition by or against Lessee under any bankruptcy,
insolvency or similar laws, then in any such event and at any time thereafter
Lessor shall have the right, with or without notice to or demand upon Lessee,
to draw upon the Letter of Credit, by presenting to the issuer one or more
sight drafts and any other necessary documents, and to receive (in a lump sum
or in several sums from time to time at the sole discretion of Lessor) and
retain an amount not to exceed, in the aggregate, that available under the
Letter of Credit.
4. If Lessor draws on the Letter of Credit, the proceeds received by
Lessor therefrom shall be applied: first, towards costs and expenses
(including, without limitation, reasonable attorneys' fees and disbursements)
incurred by Lessor in connection with such draw or in otherwise enforcing its
rights and remedies hereunder; second, towards any rent or other sums of any
kind then due and unpaid by Debtor under the Lease; and third, at Lessor's
option either (i) towards the Stipulated Loss Value calculated as provided in
the Lease or (ii) Lessor may hold any such proceeds as additional security
(commingled with its own funds and without any need to pay interest or income
thereon) for any further obligations Of Lessee under the Lease, including,
without limitation, any rent or other sums of any kind that may become due
under the Lease and/or the Stipulated Loss Value calculated as provided in the
Lease. Once all obligations of Lessee under the Lease have been indefeasibly
paid and performed in full, any remaining excess proceeds from the Letter of
Credit shall be remitted by Lessor to Lessee. In any event, Lessee shall
remain liable for any deficiency under the Lease.
5. Lessor's rights and remedies under this Agreement (including, without
limitation, the right to draw upon the Letter
<PAGE> 7
of Credit), the Lease or otherwise are cumulative and may be exercised
singularly or concurrently. Neither any failure nor delay on the part of Lessor
to draw upon the Letter Credit or to exercise any other rights or remedies
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right or remedy preclude any other or further exercise thereof or of any
other right or remedy howsoever arising. Under no circumstances shall Lessor
be deemed or construed to have waived its right to draw upon the Letter of
Credit or to exercise any of its other rights or remedies unless such waiver is
in writing and executed by a duly authorized representative of Lessor. A
waiver of any right or remedy on any one occasion shall not operate as a waiver
of such right or remedy on any future occasion or as a waiver of any other
right or remedy.
6. LESSEE AND LESSOR HEREBY UNCONDITIONALLY WAIVE THEIR RESPECTIVE RIGHTS
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
IN CONNECTION WITH, DIRECTLY OR INDIRECTLY, THIS AGREEMENT, THE LETTER OF
CREDIT, THE LEASE, ANY DOCUMENTS RELATING HERETO OR THERETO, ANY DEALINGS
BETWEEN THEM RELATING TO THE SUBJECT MATTER HEREOF OR THEREOF, AND/OR THE
RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN THEM. THE SCOPE OF THIS WAIVER
IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS). THIS WAIVER IS
IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT, THE LETTER OF CREDIT, THE LEASE OR ANY
DOCUMENTS RELATING HERETO OR THERETO. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO TRIAL BY THE COURT.
7. Any notices to be given in connection herewith shall be delivered in
the manner contemplated by the Lease. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof, and
supersedes all prior understandings (whether written, verbal, implied or
otherwise) with respect thereto. None of the terms hereof may be amended,
waived or otherwise modified except pursuant to a written instrument duly
executed by the party to be charged. Lessor amy assign its rights hereunder at
any time, but Lessee may not do so without the prior written consent of Lessor.
This Agreement shall be binding upon, and shall inure to the benefit of,
Lessor, Lessee, and their respective successors and permitted assigns.
<PAGE> 8
IN WITNESS WHEREOF, Lessee and Lessor have caused their duly authorized
representatives to execute and deliver this Agreement on the year and day first
above written.
LESSOR: LESSEE:
GENERAL ELECTRIC CAPITAL OUTLOOK GROUP CORP.
CORPORATION
By: /s/ William J. McElroy By: /s/ Larry E. Driscoll
---------------------------- ---------------------------
Name: William J. McElroy Name: Larry E. Driscoll
-------------------------- ------------------------
Title: Region Credit Analyst Title: Vice President
------------------------- -----------------------
<PAGE> 1
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT, made and executed in duplicate, this 1st day of June,
1997, by and between OUTLOOK GROUP CORPORATION, a Wisconsin corporation,
(hereinafter referred to as "Employer") and Joseph J. Baksha (hereinafter
referred to as "Employee").
EMPLOYER AND EMPLOYEE AGREE, for the consideration of the mutual promises
and agreements hereinafter set forth, as follows:
1. EMPLOYMENT. Employer agrees to employ Employee as President and Chief
Operating Officer to perform the duties related to said positions, and
Employee hereby accepts and agrees to such employment. Employee
shall perform the duties as are customarily performed by one holding such
positions in a business such as Employer's. Employee shall also
unconditionally render other and related services and duties as Employer
may assign to him or ask of him from time to time. Employer reserves the
right to change from time to time the nature and scope of Employee's
duties and position.
2. COMPENSATION. Employer agrees to pay Employee during the term of this
Agreement, a compensation consisting of a salary to be determined
annually, along with an incentive earnings opportunity, also to be
determined annually, as provided in "Exhibit A", attached, which is
a part of this Agreement.
All compensation shall be subject to the customary withholding tax and
other employment taxes as required with respect to compensation paid by a
corporation to an employee. Employee shall not be entitled to any other
compensation except as expressly provided for in this Agreement, or as
provided for by the Compensation Committee of the Board of Directors.
3. SERVICES AND BEST EFFORTS OF EMPLOYEE. Employee agrees that he will at
all times faithfully, industriously, and to the best of his ability,
experience, and talent perform all the duties that may be required of him
pursuant to the express and implicit terms hereof, to the reasonable
satisfaction of Employer. Employee agrees to devote his entire working
time and attention to the performance of his duties for the Employer,
except for authorized vacation periods or periods of illness.
The expenditure of reasonable amounts of time for personal business,
charitable, and professional business, charitable, and professional
activities shall not be deemed a breach of this Agreement provided such
activities do not materially interfere with the services to be rendered
for Employer hereunder.
<PAGE> 2
4. TERM AND TERMINATION. The term of employment is for two(2) years,
beginning June 1, 1997, and is renewable June 1, 1999. However, the
agreement may be terminated by either party, at any time, with or without
cause or reason, upon thirty (30) calendar days written notice being given
to the other party of such termination. In the event of Employer
initiated termination for any reason, other than dishonesty, fraud which
has an adverse impact on the Employer in excess of Ten Thousand Dollars
($10,000.00) in the aggregate, or violation of paragraphs 8 or 9 of this
agreement, the Employee shall be entitled to receive his bi-weekly salary
each two weeks for a period of twenty-six (26) two-week periods following
the termination date. (Also, employee will receive any bonus earned
through the last day of active employment.)
In the event there is a change of control of the employer and one of
the below listed events occurs, said employee will then be entitled to
continue in the Corporate Benefit Programs as addressed in Point #7 plus
receive his bi-weekly salary each two weeks for a period of fifty-two (52)
two-weeks periods following the date in which the below listed event
occurs. (Also, employee will receive any bonus earned through the last
day of active employment.)
Referred to events as mentioned above:
a. The employee is terminated by the employer for reasons other than
dishonesty, fraud which has an adverse impact on the employee of
ten-thousand dollars ($10,000) in aggregate or violation of
paragraph 8 or 9 of this agreement.
b. Change in employment status as it relates to relocation,
authority or compensation and said employee terminates his
employment.
c. An employment agreement is not renewed within ninety (90) days
prior to the listed expiration date of this agreement and said
employee terminates his employment.
5. VACATION. Employee shall be entitled to the number of vacation days
authorized from time to time by Employer. If vacation is not taken, the
same shall not become cumulative, nor shall the Employee draw extra
compensation if he does not take his vacation. The time of Employee's
vacation shall be determined by the Employee, with provision for on-going
business responsibilities during his absence arranged by the Employee.
6. EXPENSE REIMBURSEMENT. During the period of his employment, Employee
shall be reimbursed for all of his reasonable and necessary expenses
actually incurred in the performance of service and duties for Employer,
in accordance with the general policy of Employer, authorized and adopted
from time to time. Employee's expenses shall be recorded on an
itemized expense account.
2
<PAGE> 3
7. EMPLOYEE BENEFITS. During the period of his employment, Employee shall be
entitled to participate in Employee benefit plans authorized and adopted
from time to time by Employer, and any other benefits authorized by the
Compensation Committee of the Board of Directors.
8. COVENANT NOT TO COMPETE. In connection with the employment of Employee
pursuant to this Agreement, Employee hereby agrees, acknowledges, and
recognizes that the following are important to Employer and that one or
more of the following are expected to be or become applicable to this
employment relationship: (a) on account of this employment, Employee will
acquire important business information about Employer including but not
limited to Employer's products and method of doing business, which
information if used, disclosed, or applied other than for Employer's
benefit can be expected to cause serious and substantial damage to
Employer; (b) Employee's service with Employer may result in frequent
contact with customers of Employer which may result in close relationships
and the association of Employer's good will with Employee; (c) Employer's
business information and customer relationships are significant assets
owned by Employer which are developed by substantial investment of time
and effort; Employer's business information and the identity of Employer's
customers are not meant to be generally or specifically known by or
disclosed to actual or potential competitor(s) of Employer; (d) Employer
has a legitimate interest in protecting its business information and
relationships; (e) Employee's skills and knowledge of Employer's business
information and relationships are of an unique nature which will be
further developed and acquired during Employee's employment with Employer:
and (f) Employer has a legitimate interest in protecting its good will,
customer lists and relationships, products, method of doing business, and
other business information, by means of enforcement of this Covenant Not
To Compete set forth in this Paragraph.
Employee further acknowledges that in the course of his employment with
Employer, Employee is placed in a position of trust and confidence by
Employer with respect to Employer's methods of doing business and with
respect to Employer's customers. This Covenant Not To Compete is an
inducement to cause Employer to execute this Agreement and as a condition
and in consideration of such employment, and continued employment, raises,
promotions and/or other benefits provided to Employee by Employer.
Employee covenants and agrees with Employer that at all times during the
term of his employment with Employer and for a period of six (6) months
after the termination of his employment with Employer for any reason
whatsoever, with or without cause, Employee shall not, either directly or
indirectly, engage in or participate in any capacity, whether as an
employee, independent contractor, owner, partner,
3
<PAGE> 4
stockholder, officer, director, consultant, sole proprietor, co-venturer,
agent, or otherwise, with or without compensation, in or with
any business enterprises, of any kind, which is competitive with the
business in which the Employer was engaged at any time during the one (1)
year period immediately prior to termination of Employee's employment with
Employer. Notwithstanding the foregoing, this Covenant Not To Compete is
not intended to prohibit the Employee from working for an employer having
multiple divisions, one or more of which divisions is engaged in a
business which is competitive with Employer's business, so long as the
Employee is not employed by or does not provide services to or perform
work for any competing division and so long as Employee does not disclose
confidential information to the other employer, or any of its divisions,
regarding any aspect of Employer's business.
This Covenant Not To Compete shall be limited to the geographical areas
within the field or area of Employer's activities during the course of
Employee's employment with Employer. This Covenant Not To Compete applies
to all competition occurring within the geographical area specified, even
though the headquarters or office of the competitor may be outside of the
area specified.
9. CONFIDENTIAL INFORMATION AND RECORDS. Employer is engaged or will engage
in a very competitive industry and marketplace. Employer expects to
accumulate substantial know-how and other information, at much effort and
cost, all of which is not generally known, relating to all or some of the
following: its existing and contemplated products, services, procedures,
methods of doing business, machinery and equipment, compositions,
technology, formulas, know-how, methods of production and providing
services, research and development programs and plans, sales and marketing
methods, existing and prospective customers and suppliers, customer lists,
customer usages and requirements, financial matters, contractual and other
agreements or business relationships, and other confidential business
information, trade secrets and data (all hereinafter referred to as
"Confidential Information"). This Confidential Information is essential to
the well-being and success of Employer.
Employee acknowledges that his employment entails a position of trust, and
that Employee has or will have access to Confidential Information.
Employee further acknowledges that such Confidential Information is vital
to the personal development, advancement, and economic security of each
person who looks to Employer as the principal means for providing
continuing opportunities for personal growth and promotion, and that the
acquisition of such Confidential Information by a competitor of Employer
would not only injure Employer, but
4
<PAGE> 5
would also put Employer's personnel and their jobs in jeopardy.
For the above reasons, as an inducement to cause Employer to execute this
Agreement, and in further consideration of Employee's employment and
continued employment, raises, promotions, and/or other benefits provided
to Employee by Employer, Employee agrees as follows: (i) except as
required by Employee's duties to Employer, not to at any time directly or
indirectly disclose to or use for others or appropriate for his own
personal use or cause to be used by others any Confidential Information
without first obtaining the written consent of Employer to do so; (ii) all
records and other writings of Confidential Information prepared by
Employee, or which come into his possession or control, or which he has
access to, are and shall remain the exclusive property of Employer, and
upon termination of Employee's employment, Employee will not remove any
such records or copies thereof, but all shall be left with Employer, and
any such records or copies not with Employer and in Employee's possession
or control, shall be, upon termination of employment, immediately returned
to Employer along with any other property of Employer.
The requirements of this Paragraph shall apply during the time of
Employee's employment with Employer and thereafter unless it can be
conclusively demonstrated that such Confidential Information (i) has
through no act or fault of Employee become part of the public domain, or
(ii) is no longer important or to be kept confidential for the
protection or well-being of Employer.
10. INJUNCTIVE RELIEF; EMPLOYEE'S ACKNOWLEDGMENT. Employee acknowledges that
any actual or threatened breach of (i) the Covenant Not To Compete set
forth herein or (ii) the provisions regarding Confidential Information and
records set forth herein, is likely to result in immediate and irreparable
harm to Employer. Employee also acknowledges and admits that there may be
no adequate remedy at law for his breach or a threatened breach and
therefore Employer shall be entitled to immediate equitable relief by way
of both temporary and permanent injunctions, (including compensatory
injunctions prohibiting Employee from engaging in the restricted activity
for the full period of the agreed time plus the additional period of time
equal to the term of any violation of such restrictive covenant) and also
money damages insofar as can be determined under the circumstances, and
such further relief as any court with jurisdiction may deem just and
proper.
Furthermore, Employee shall be responsible to pay to Employer all
Employer's actual and reasonable attorneys' fees and other legal costs
occasioned by and successful enforcement of this Agreement. Nothing
contained in this Agreement shall prevent Employer from availing
itself from any other right or remedy
5
<PAGE> 6
to which Employer is entitled under this Agreement or otherwise, and the
parties agree that all rights and remedies available to Employer are
cumulative including but not limited to injunctive relief, money damages
from Employee.
Employee further acknowledges that the restrictions (including as to
time and geography) contained in the provisions for the Covenant Not To
Compete and relating to the Confidential Information of Employer are
reasonable and are not now (and are not expected to be in the future)
onerous, harsh, or oppressive. Employee further acknowledges that these
restrictions do not, and are not expected to in the future, create or
result in a hardship to Employee in pursuit of a livelihood or in the
support of himself or his dependents, whether or not he is employed by
Employer. Employee further acknowledges that after termination of his
employment with Employer, he will be reasonably able to earn a livelihood
without violating this Covenant Not To Compete and the provisions relating
to Confidential Information. Employee hereby agrees that the Covenant Not
To Compete and the provisions relating to Confidential Information of
Employer shall survive Employee's termination of employment with or
without cause. Employee agrees to notify any prospective employer of the
existence of this Agreement.
11. EMPLOYER'S AUTHORITY. Employee agrees to observe and comply with the rules
and regulations of Employer, as adopted, created, or implemented from time
to time by Employer's Board of Directors, respecting the performance of his
duties. Although Employee may be an officer or director of Employer, he
shall have no authority whatsoever to act unilaterally on behalf of the
Employer under this Agreement regarding Employer's relationship with
Employee.
12. PERSONAL CONTRACT. Employer is entering into this Agreement on account of
the skills and knowledge of Employee, and this Agreement is personal as to
Employee. Employee may not assign or delegate his rights and/or duties
under this Agreement. This Agreement shall automatically terminate in the
event that Employee is unable or unwilling to perform, or does not perform,
his duties of employment hereunder.
13. MISCELLANEOUS.
a. No waiver or modification of this Agreement or of any covenant,
condition, or limitation herein contained shall be valid unless in
writing and duly executed by all parties to this Agreement; and no
evidence of any waiver or modification shall be offered or received in
evidence in any proceeding, arbitration, or litigation between the
parties hereto arising out or affecting this Agreement, or the rights
or obligations of the parties hereunder, unless such waiver or
modification is in writing, duly executed as aforesaid, and the parties
6
<PAGE> 7
further agree that the provisions of this section may not be waived
except as herein set forth.
b. The failure of Employer at any time to require performance by
Employee of any provision expressed herein shall in no way affect or
prejudice Employer's right thereafter to enforce such provision or
any other provision; nor shall the waiver by Employer of any breach
of any provision expressed herein be taken or held to be a waiver
of such provision itself.
c. All agreements and covenants contained herein are severable, and in
the event any of them shall be held to be invalid by any competent
court, this contract shall be interpreted as if such invalid
agreements or covenants were not contained herein.
d. The captions which are underlined at the beginning of the paragraphs
of this Agreement are chiefly for the purpose of convenience and if
the same be in conflict with the text, the text shall control.
e. It is the intention of the parties hereto that this Agreement shall
be governed by its terms and construed in accordance with and under
and pursuant to the internal laws of the state of Wisconsin.
f. As used in this Agreement, words in the singular may mean the plural
number and words used in the plural number may mean the singular
number; and words used in any gender may mean any other gender.
g. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors, assigns, heirs and
legal representatives subject to the paragraph above entitled
"Personal Contract."
h. All notices required under this Agreement shall be duly given if
delivered to the other party or mailed postage prepaid to the
respective party's last known address. Notices shall be effective
when personally delivered, or when sent by telegram, or by mail when
sent by certified, registered, or regular mail and deposited in the
United States mail, postage prepaid, and sent to the respective
address of the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written and by so executing, the parties acknowledge that they
have read and fully understand all the terms and conditions included in this
Agreement and acknowledge receipt of an executed copy of this Agreement.
Enclosure: Exhibit "A"
7
<PAGE> 8
EMPLOYEE: FOR THE EMPLOYER:
- ---------------------------------- ----------------------------------
Joseph J. Baksha James Dillon
Compensation Committee
----------------------------------
Harold Bergman
Compensation Committee
----------------------------------
Pat Richter
Chairperson
Compensation Committee
8
<PAGE> 9
EXHIBIT "A"
TO EMPLOYMENT AGREEMENT BETWEEN
OUTLOOK GROUP CORPORATION AND
JOSEPH J. BAKSHA
EFFECTIVE JUNE 1, 1997
COMPENSATION
1. SALARY EFFECTIVE JUNE 9, 1997
Employer agrees to pay Employee a bi-weekly salary, effective June 9,
1997, of $6,730.77 each two (2) weeks ($175,000 per year equivalent) on
its regular payroll.
2. INCENTIVE EARNINGS OPPORTUNITY EFFECTIVE JUNE 1, 1997
Operating Income Level Incentive
$0 to $1,500,000 None
$1,500,001 to $4,300,000 5%
$4,300,001 to above 3%
This is a quarterly program that is annualized. Payments will be made
quarterly with the fourth quarter distribution subject to the year end
audit. Plan payment is maximized at 100% of participants salary.
3. STOCK OPTION
An additional 10,000 shares of Outlook Group's stock will be granted under
the provisions of the Corporate 1990 Stock Option Plan. Stock option
price will be determined in the future by the Compensation Committee.
In the event change of control occurs and the stock option can not be
granted employee will receive the value of the stock option based on a
price of $5.00 per share and the price received by the shareholders in
the change of control.
4. CAR ALLOWANCE
Monthly reimbursement rate is set for $550 which includes all auto related
expenses including gas.
5. Loan Agreement
At the time the window to purchase stock on the public exchange becomes
available to Officers of the Corporation the employer agrees to make
available to the employee a loan in
9
<PAGE> 10
the amount up to $100,000 to purchase said employer's stock. The terms of
this loan would be 5 years at the interest rate of the employer line of
credit at the time of the loan.
EMPLOYEE: FOR THE EMPLOYER:
- --------- -----------------
- ------------------------ --------------------------
Joseph J. Baksha James Dillon
Compensation Committee
--------------------------
Harold Bergman
Compensation Committee
--------------------------
Pat Richter
Chairperson
Compensation Committee
10
<PAGE> 1
EXHIBIT 10.14(a)
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
BARRIER FILMS LTD. - NEW YORK
AND
OUTLOOK GROUP CORP.
DATED AS OF MAY 12, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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----
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Agreement . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Breakup Event . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Breakup Fee . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Buildings . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.8 Closing . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Closing Balance Sheet . . . . . . . . . . . . . . . . . . 2
1.10 Closing Date . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Company . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Contracts . . . . . . . . . . . . . . . . . . . . . . . . 2
1.13 Disclosure Schedule . . . . . . . . . . . . . . . . . . . 2
1.14 Earn-Out Payment . . . . . . . . . . . . . . . . . . . . . 2
1.15 Employment Agreements . . . . . . . . . . . . . . . . . . 3
1.16 Equipment . . . . . . . . . . . . . . . . . . . . . . . . 3
1.17 Financial Statements . . . . . . . . . . . . . . . . . . . 3
1.18 Initial Cash Payment . . . . . . . . . . . . . . . . . . . 3
1.19 Inventory . . . . . . . . . . . . . . . . . . . . . . . . 3
1.20 Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.21 Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.22 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 3
1.23 OGC . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.24 OGC's Knowledge . . . . . . . . . . . . . . . . . . . . . 3
1.25 Permits . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.26 Real Properties . . . . . . . . . . . . . . . . . . . . . 4
1.27 Rebate and Supply Agreement . . . . . . . . . . . . . . . 4
1.28 Secured Promissory Note . . . . . . . . . . . . . . . . . 4
1.29 Security Agreement . . . . . . . . . . . . . . . . . . . . 4
1.30 September Balance Sheet . . . . . . . . . . . . . . . . . 4
1.31 Stock . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.32 Total Purchase Price . . . . . . . . . . . . . . . . . . . 4
1.33 Working Capital Adjustment . . . . . . . . . . . . . . . . 4
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE II PURCHASE AND SALE; WORKING CAPITAL ADJUSTMENT; EARN-
OUT PAYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Purchase and Sale . . . . . . . . . . . . . . . . . . . . 5
2.2 Payment of Purchase Price . . . . . . . . . . . . . . . . 5
2.3 Liabilities Adjustment . . . . . . . . . . . . . . . . . . 5
2.4 Working Capital Adjustment . . . . . . . . . . . . . . . . 5
2.5 Earn-Out Payment . . . . . . . . . . . . . . . . . . . . . 6
2.6 Rebate and Supply Arrangement . . . . . . . . . . . . . . 7
2.7 Retained Accounts Receivable . . . . . . . . . . . . . . . 7
2.8 Hoaglund Payment . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF OGC . . . . . . . . . . 8
3.1 Ownership of Purchased Shares . . . . . . . . . . . . . . 8
3.2 Enforceability; Conflicting Obligations . . . . . . . . . 8
3.3 No Broker . . . . . . . . . . . . . . . . . . . . . . . . 8
3.4 Organization; Authority . . . . . . . . . . . . . . . . . 8
3.5 Capitalization . . . . . . . . . . . . . . . . . . . . . . 8
3.6 No Violation or Conflict . . . . . . . . . . . . . . . . . 9
3.7 Title to and Condition of Assets . . . . . . . . . . . . . 9
3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 9
3.9 Financial Statements . . . . . . . . . . . . . . . . . . . 10
3.10 Absence of Certain Changes . . . . . . . . . . . . . . . . 10
3.11 Contracts . . . . . . . . . . . . . . . . . . . . . . . . 10
3.12 No Violation of Law . . . . . . . . . . . . . . . . . . . 10
3.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.14 Permits . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.15 Governmental Approvals . . . . . . . . . . . . . . . . . . 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER . . . . . . . 11
4.1 Organization; Authority . . . . . . . . . . . . . . . . . 11
4.2 Authorization; Enforceability . . . . . . . . . . . . . . 11
4.3 No Violation or Conflict . . . . . . . . . . . . . . . . . 11
4.4 No Broker . . . . . . . . . . . . . . . . . . . . . . . . 11
4.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 11
4.6 Consents and Approvals . . . . . . . . . . . . . . . . . . 11
ARTICLE V CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER . . . 12
5.1 Representations and Warranties . . . . . . . . . . . . . . 12
5.2 Compliance with Agreement . . . . . . . . . . . . . . . . 12
5.3 Proceedings Taken . . . . . . . . . . . . . . . . . . . . 12
5.4 No Litigation . . . . . . . . . . . . . . . . . . . . . . 12
5.5 No Adverse Change . . . . . . . . . . . . . . . . . . . . 12
5.6 Material Damage to the Business or the Assets . . . . . . 12
</TABLE>
ToC-ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
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<S> <C>
5.7 Conveyance of Stock . . . . . . . . . . . . . . . . . . . 12
5.8 Repayment of Loans . . . . . . . . . . . . . . . . . . . . 12
5.9 Closing Balance Sheet . . . . . . . . . . . . . . . . . . 13
5.10 Rebate and Supply Agreement . . . . . . . . . . . . . . . 13
5.11 Other Documents . . . . . . . . . . . . . . . . . . . . . 13
5.12 Approvals and Consents . . . . . . . . . . . . . . . . . . 13
5.13 Books and Records . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATIONS OF OGC . . . . . . 13
6.1 Representations and Warranties . . . . . . . . . . . . . . 13
6.2 Compliance with Agreement . . . . . . . . . . . . . . . . 13
6.3 Proceedings Taken . . . . . . . . . . . . . . . . . . . . 13
6.4 No Litigation . . . . . . . . . . . . . . . . . . . . . . 14
6.5 Employment Agreement and Related Consents . . . . . . . . 14
6.6 Third Party Consents . . . . . . . . . . . . . . . . . . . 14
6.7 Deliveries at Closing . . . . . . . . . . . . . . . . . . 14
ARTICLE VII INDEMNITIES . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 OGC's Indemnity . . . . . . . . . . . . . . . . . . . . . 14
7.2 Buyer's Indemnity . . . . . . . . . . . . . . . . . . . . 15
7.3 Provisions Regarding Indemnities . . . . . . . . . . . . . 16
ARTICLE VIII CERTAIN MATTERS PENDING THE CLOSING . . . . . . . . . . 17
8.1 Full Access . . . . . . . . . . . . . . . . . . . . . . . 17
8.2 Carry on in Regular Course . . . . . . . . . . . . . . . . 17
8.3 Use of Assets . . . . . . . . . . . . . . . . . . . . . . 17
8.4 Preservation of Relationships . . . . . . . . . . . . . . 17
8.5 No Default . . . . . . . . . . . . . . . . . . . . . . . . 17
8.6 Publicity . . . . . . . . . . . . . . . . . . . . . . . . 18
8.7 Insurance Policies . . . . . . . . . . . . . . . . . . . . 18
8.8 Contracts and Commitments . . . . . . . . . . . . . . . . 18
8.9 Compliance with Laws . . . . . . . . . . . . . . . . . . . 18
8.10 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8.11 Amendments . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 18
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . 18
9.2 Rights on Termination; Waiver . . . . . . . . . . . . . . 18
9.3 Survival of Representations and Warranties . . . . . . . . 19
9.4 Entire Agreement; Amendment . . . . . . . . . . . . . . . 19
9.5 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . 19
9.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
PAGE
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<S> <C>
9.8 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.9 Counterparts; Headings . . . . . . . . . . . . . . . . . . 20
9.10 Interpretation . . . . . . . . . . . . . . . . . . . . . . 20
9.11 Severability . . . . . . . . . . . . . . . . . . . . . . . 21
9.12 No Reliance . . . . . . . . . . . . . . . . . . . . . . . 21
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
LIST OF EXHIBITS
A. Rebate and Supply Agreement
B. Secured Promissory Note
C. Security Agreement
ToC-iv
<PAGE> 6
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 12th day of May, 1997, by and
between BARRIER FILMS LTD. - NEW YORK and OUTLOOK GROUP CORP.
RECITALS
WHEREAS, the Company is engaged in the business of manufacturing,
distributing and selling co-extruded film and related materials;
WHEREAS, OGC owns the Stock, which constitutes all of the issued and
outstanding capital stock of the Company; and
WHEREAS, OGC desires to sell the Stock to the Buyer and the Buyer desire to
purchase the Stock from OGC.
NOW THEREFORE, in consideration of the mutual covenants, conditions and
agreements set forth herein, the sufficiency of which are hereby acknowledged,
it is hereby agreed that:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified below:
1.1 Accounts. "Accounts" shall mean all accounts receivable of the Company
(other than intercompany accounts involving OGC and its other subsidiaries).
1.2 Agreement. "Agreement" shall mean this Stock Purchase Agreement,
together with the Exhibits and Schedules attached hereto, as the same may be
amended from time to time in accordance with the terms hereof.
1.3 Assets. "Assets" shall mean the Accounts, the Contracts, the Buildings,
the Equipment, the Inventory, the Permits, the Real Properties and any other
assets of the Company.
1.4 Breakup Event. "Breakup Event" shall mean (a) Buyer's failure to obtain
the financing necessary to purchase the Stock or to otherwise make the various
payments and deliveries at Closing as contemplated by this Agreement, or (b)
Buyer's withdrawal of its proposal to acquire the Stock and such withdrawal is
not due to OGC's failure to disclose any material fact to Buyer or the parties'
failure to agree, after good faith negotiations, on the terms and conditions of
the Note.
<PAGE> 7
1.5 Breakup Fee. "Breakup Fee" shall mean the payment by Buyer to OGC upon
the occurrence of a Breakup Event of Fifty Thousand and no/100 Dollars
($50,000), as currently held in escrow in Buyer's Counsel's fiduciary escrow
account.
1.6 Buildings. "Buildings" shall mean all buildings, fixtures, structures
and improvements leased or owned by the Company.
1.7 Buyer. "Buyer" shall mean Barrier Films Ltd. - New York, a newly formed
New York corporation controlled by Ronnie Shemesh, Yoram Shemesh and Joy Gross.
1.8 Closing. "Closing" shall mean the conference to be held at 9:00 A.M.
local time, on the Closing Date, at the offices of Quarles & Brady, 411 East
Wisconsin Avenue, Milwaukee, Wisconsin 53202 or at such other time and place as
the parties may mutually agree to in writing, at which the transactions
contemplated by this Agreement shall be consummated.
1.9 Closing Balance Sheet. "Closing Balance Sheet" shall mean the estimated
balance sheet for the Company as of the Closing Date, to be prepared in good
faith and delivered by OGC at the Closing. A final Closing Balance Sheet,
certified by an executive officer of OGC, shall be prepared in good faith and
delivered by OGC within 14 days after the Closing. The final Closing Balance
Sheet shall be prepared in accordance with generally accepted accounting
principles and on a basis consistent with the September Balance Sheet, except
that the Inventory for purposes of the Closing Balance Sheet shall be valued in
a manner consistent with the March 28, 1997 balance sheet.
1.10 Closing Date. "Closing Date" shall mean May 12, 1997, or such other
date as the parties may mutually agree to in writing.
1.11 Company. "Company" shall mean Barrier Films Corporation, a Nevada
corporation.
1.12 Contracts. "Contracts" shall mean all of the contracts, agreements,
leases and legally binding commitments, written and oral, to which the Company
is a party or by which it is bound.
1.13 Disclosure Schedule. "Disclosure Schedule" shall mean the disclosure
schedule delivered by OGC to the Buyer contemporaneously with the execution and
delivery of this Agreement and, as amended, on the Closing Date.
1.14 Earn-Out Payment. "Earn-Out Payment" shall mean an amount equal to Five
Hundred and no/100 Dollars ($500,000.00) to be paid by the Buyer to OGC
pursuant to Section 2.4 hereof.
2
<PAGE> 8
1.15 Employment Agreements. "Employment Agreements" shall mean the
Employment Agreements between the Company and each of William D. Wright,
Bradley Abeson and Michael Hoaglund.
1.16 Equipment. "Equipment" shall mean all machinery, vehicles, equipment
(including so-called "Line No. 2"), furniture, fixtures, furnishings, molds,
parts, office equipment, computers and other items of tangible personal
property, which are either presently owned and used, or are owned and used on
the Closing Date, by the Company, including without limitation those items of
Equipment set forth on Schedule A attached hereto.
1.17 Financial Statements. "Financial Statements" shall mean the unaudited
balance sheet and income statement for the interim period ended September 27,
1996, as certified by an executive officer of OGC.
1.18 Initial Cash Payment. "Initial Cash Payment" shall mean the cash
payment from Buyer to OGC at Closing in the amount of Four Million Ninety-Six
Thousand Six Hundred Ninety-Five and no/100 Dollars ($4,096,695.00) subject to
adjustment as set forth in Sections 2.3 and 2.4 hereof.
1.19 Inventory. "Inventory" shall mean all of the Company's inventories of
raw materials, supplies, repair parts, works-in-process and finished goods.
1.20 Law. "Law" means any federal, state, local or other law, statute,
ordinance or similar governmental requirement, and any rule, regulation or
order promulgated thereunder.
1.21 Lien. "Lien" shall mean, with respect to any asset: (a) any mortgage,
pledge, lien, charge, claim, restriction, reservation, condition, easement,
covenant, lease, encroachment, title defect, imposition, security interest or
other encumbrance of any kind; and (b) the interest of a vendor or lessor under
any conditional sale agreement, financing lease or other title retention
agreement relating to such asset.
1.22 Litigation. "Litigation" shall mean all suits, audit inquiries,
charges, litigation, arbitrations, proceedings, governmental investigations,
citations and actions of any kind against or by the Company.
1.23 OGC. "OGC" shall mean Outlook Group Corp., a Wisconsin corporation.
1.24 OGC's Knowledge. "OGC's Knowledge" shall mean the best knowledge and
belief of the executive officers of OGC after reasonable inquiry of officers of
the Company.
1.25 Permits. "Permits" shall mean all permits, licenses, certifications and
governmental authorizations required for the conduct of the Business or
ownership or use of the Assets.
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1.26 Real Properties. "Real Properties" shall mean all real properties and
improvements thereto owned or leased by the Company.
1.27 Rebate and Supply Agreement. "Rebate and Supply Agreement" shall mean
the rebate and supply agreement among the Company, World Class Film Corp. and
OGC (solely on behalf of its operating subsidiary, Outlook Packaging, Inc.),
regarding the supply of monolayer and co-extruded films to OGC, in the form set
forth as Exhibit A attached hereto.
1.28 Secured Promissory Note. "Secured Promissory Note" shall mean the
secured promissory note from the Buyer to OGC delivered at Closing in the
amount of Two Million Three Hundred Thousand and no/100 Dollars
($2,300,000.00), as adjusted, in the form set forth as Exhibit B attached
hereto.
1.29 Security Agreement. "Security Agreement" shall mean the Security
Agreement made by the Company in favor of OGC, in the form set forth as Exhibit
C attached hereto.
1.30 September Balance Sheet. "September Balance Sheet" shall mean the
Company's unaudited balance sheet as of September 27, 1996, as certified by an
executive officer of OGC.
1.31 Stock. "Stock" shall mean all 91,100 shares of the common stock, $.01
par value, of the Company issued and outstanding now and at the Effective Time
of Closing, which shares represent, all of the issued and outstanding equity
securities of the Company.
1.32 Total Purchase Price. "Total Purchase Price" shall mean: (a) Six
Million Eight Hundred Ninety-Six Thousand Six Hundred Ninety-Five and no/100
Dollars ($6,896,695.00), less the liabilities shown on the Closing Balance
Sheet and assumed by the Buyer as set forth in Section 2.3 hereof, consisting
of the Initial Cash Payment, the Secured Promissory Note and the Earn-Out
Payment; (b) plus or minus the Working Capital Adjustment. The Total Purchase
Price as finally determined shall be reflected on a closing statement.
1.33 Working Capital Adjustment. "Working Capital Adjustment" shall mean the
adjustment to the Initial Cash Payment and Total Purchase Price, as set forth
in Section 2.4 hereof.
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ARTICLE II
PURCHASE AND SALE; WORKING CAPITAL ADJUSTMENT;
EARN-OUT PAYMENT
2.1 Purchase and Sale. At the Closing, and upon all of the terms and
subject to all of the conditions of this Agreement, OGC shall sell, assign,
convey and deliver to the Buyer, and the Buyer shall purchase and accept from
OGC, the Stock free and clear of all Liens.
2.2 Payment of Purchase Price. At the Closing, upon delivery of the Stock
free and clear of all Liens, and upon all of the terms and subject to all of
the conditions of this Agreement, the Buyer shall pay and/or deliver to OGC the
following as part of the Total Purchase Price:
(a) The Initial Cash Payment, as adjusted pursuant to Sections 2.3 and
2.4 hereof, to be paid by certified or bank cashier's check made in the name
of OGC or by wire transfer into an account designated by OGC; and
(b) The Secured Promissory Note.
2.3 Liabilities Adjustment. As soon as practicable after the execution of
this Agreement and in any event not less than one week prior to the Closing
Date, OGC shall deliver to the Buyer a pro forma Closing Balance Sheet setting
forth the estimated liabilities which will be assumed by the Buyer and applied
to reduce the Total Purchase Price as set forth below. At the Closing, OGC
shall deliver to the Buyer an estimated Closing Balance Sheet, together with an
itemized list of the liabilities stated thereon to be assumed by the Buyer.
Such Closing Balance Sheet shall exclude all debts and liabilities of the
Company to be retained by OGC (including bank debt and intercompany account
balances). The Buyer shall have the right, in its reasonable discretion, not
to assume certain liabilities stated on the Closing Balance Sheet, in which
event any such liabilities will be retained by OGC and not be applied to reduce
the Purchase Price. All of the liabilities stated on the Closing Balance Sheet
to be assumed by the Buyer shall reduce the Initial Cash Payment on a
dollar-for-dollar basis. Within 14 days following the Closing Date, OGC shall
deliver to the Buyer a final Closing Balance Sheet and itemized list of the
liabilities stated thereon assumed by the Buyer, and any difference between the
amount of the liabilities as shown on such final Closing Balance Sheet and
those shown on the estimated Closing Balance Sheet shall be applied to increase
or decrease, as the case may be, the amounts otherwise payable following the
Closing Date under Section 2.4 below. The Buyer agrees to assume all of the
liabilities shown on the final Closing Balance Sheet which are applied to
reduce the Initial Cash Payment, and OGC shall be responsible for all debts,
obligations and liabilities which should have been shown on such Closing
Balance Sheet but which were not.
2.4 Working Capital Adjustment. At the Closing, OGC shall deliver to the
Buyer its determination of the Working Capital Adjustment (as defined below),
based on amounts shown on the estimated Closing Balance Sheet. OGC shall
permit the Buyer (or its
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representatives) to observe the taking of any Inventory, and to receive copies
of invoices and other documents supporting the Accounts and liabilities assumed
by the Buyer, in connection with the preparation of the Closing Balance Sheet
and Working Capital Adjustment. The Working Capital Adjustment shall be equal
to the aggregate value of the Company's Accounts and Inventory as shown on the
Closing Balance Sheet minus the value of such items as shown on the September
Balance Sheet; provided, however, that the value of Retained Accounts (as
defined in Section 2.7 hereof) shall be excluded from the Closing Balance Sheet
for purposes of determining the Working Capital Adjustment and shall,
therefore, reduce the Initial Cash Payment and the Total Purchase Price. The
Inventory on the Closing Balance Sheet will be valued in a manner consistent
with the manner of valuing the Inventory on the March 28, 1997 balance sheet.
The Working Capital Adjustment shall be applied, dollar for dollar, to the
Initial Cash Payment. Within 14 days following the Closing Date, OGC shall
deliver to the Buyer a final Working Capital Adjustment based on a final
Closing Balance Sheet. The Working Capital Adjustment, as finally determined
(plus or minus any difference between the amount of the assumed liabilities
estimated at Closing and finally determined under Section 2.3 above), shall be
paid by the Buyer or OGC, as the case may be, interest free, within 90 days
following the Closing Date.
2.5 Earn-Out Payment. In addition, as part of the Total Purchase Price, the
Buyer shall pay to OGC the Earn-Out Payment pursuant to the following payment
schedule:
(a) One percent (1%) of the Company's gross sales during the first year
following the Closing Date;
(b) Two percent (2%) of the Company's gross sales during each of the
second, third, fourth and fifth years following the Closing Date;
(c) Three percent (3%) of all Company sales made to and paid for by OGC
during each of the first, second, third, fourth and fifth years following the
Closing Date.
The Buyer shall determine and pay such portions of the Earn-Out Payment
within 60 days following the end of each applicable year, which determination
shall be subject to review and audit by OGC. If any inaccuracy in the Buyer's
determination of the Royalties is discovered by OGC in its review and/or audit,
the Buyer shall be responsible for reimbursing OGC for its costs and expenses
incurred in connection with such review and/or audit.
Notwithstanding the above schedule for making the Earn-Out Payment, the
minimum payments to be paid to OGC shall be $50,000 in the first year, $75,000
in the second year, $100,000 in the third year, $125,000 in the fourth year,
and $150,000 in the fifth and final year, for a total of $500,000. Any accrued
portion of the Earn-Out Payment which is not paid when due shall bear interest
at 12% per annum. Notwithstanding anything herein to the contrary, the total
amount of the Earn-Out Payment shall not exceed $500,000 (plus any applicable
interest upon default) under any circumstances.
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2.6 Rebate and Supply Arrangement. Upon Closing, OGC shall and Buyer shall
cause the Company and World Class Film Corp. ("World Class") to enter into the
Rebate and Supply Agreement. As consideration for OGC's agreement to enter
into the Rebate and Supply Agreement and for the other business opportunities
available as a result of the transactions contemplated by this Agreement and
the Rebate and Supply Agreement, the Company agrees to secure such obligations
by granting to OGC a qualified secondary security interest in the Company's
assets, as set forth in the Security Agreement.
2.7 Retained Accounts Receivable.
(a) The parties agree that the Wesprint account receivable (the
"Wesprint Account") set forth on the Closing Balance Sheet shall be retained by
OGC and not transferred to the Buyer. The retention of the Wesprint Account
shall be excluded from the value of the Accounts set forth on the Closing
Balance Sheet, which will reduce the Working Capital Adjustment and thus the
Initial Cash Payment and the Total Purchase Price. OGC shall have the right to
take such action as it deems necessary to collect the full amount on the
Wesprint Account, provided that any collection efforts made by OGC shall not
adversely affect the Company's continuing relationship (if any) with Wesprint.
The Buyer shall provide reasonable cooperation to OGC in connection with OGC's
collection efforts on the Wesprint Account. The Buyer agrees to provide a
$50,000 line of credit to Wesprint, make arrangements with Wesprint for the
weekly payment by Wesprint of amounts in excess of those otherwise payable by
Wesprint on invoices provided by the Company and/or World Class after the
Closing Date, and immediately forward to OGC any such excess amounts which will
be applied to reduce the Wesprint Account. The Buyer shall also provide weekly
payment reports with respect to the Wesprint Account and prompt notification of
any failure by Wesprint to make payments on the Wesprint Account or otherwise.
(b) The parties agree that accounts receivable from Davis-Standard,
Mesa Fibres, Respire, Sierra Converting, Trico Converting and Dove Medical
outstanding as of the Closing Date (together with the Wesprint Account, the
"Retained Accounts") shall be retained by OGC and not transferred to the Buyer.
The value of such Retained Accounts shall be excluded from the value of the
Accounts set forth on the Closing Balance Sheet, which will reduce the Working
Capital Adjustment and thus the Initial Cash Payment and the Total Purchase
Price. OGC shall have the right to take such action as it deems necessary to
collect the full amount on the Retained Accounts, and the Buyer agrees to
immediately forward to OGC any amounts received by the Buyer relating to the
Retained Accounts.
2.8 Hoaglund Payment. The parties understand that Michael Hoaglund has
indicated that he intends to retire. OGC and the Buyer agree to share equally
the cost of any payments made to Michael Hoaglund in connection with continued
short-term employment or retirement, provided that OGC shall not be responsible
for paying more than $5,000. OGC's $5,000 payment obligation with regard to
Michael Hoaglund shall reduce the Initial Cash Payment and thus the Total
Purchase Price.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF OGC
OGC represents and warrants to the Buyer that, except as set forth on the
Disclosure Schedule:
3.1 Ownership of Purchased Shares. OGC owns and, at the Closing, will own
of record and beneficially the Stock and has and, at the Closing, will have
good and marketable title to the Stock free and clear of any and all Liens.
3.2 Enforceability; Conflicting Obligations. OGC has full right, power,
authority and capacity to enter into and perform this Agreement. All consents,
approvals, authorizations and orders of, or other action by or filing with, any
person, business entity, court or governmental authority or agency necessary
for the execution, delivery and performance by OGC of this Agreement have been
obtained, taken or made. This Agreement is OGC's valid and binding obligation,
enforceable against OGC in accordance with its terms. The making, execution,
delivery and performance of this Agreement do not violate, conflict with, or
result in a default under, any material agreement to which OGC is a party or by
which the Stock is bound, or any material Law, order, rule, regulation, writ,
injunction or decree having jurisdiction over OGC or the Stock.
3.3 No Broker. OGC has not incurred any brokers', finders' or similar fee
in connection with the transactions contemplated by this Agreement.
3.4 Organization; Authority. The Company is a corporation, duly and validly
organized and existing and in good standing under the laws of the State of
Nevada. The Company is qualified to do business in all other jurisdictions
wherein the ownership or leasing of property by the Company, or the conduct of
the Company's business, requires qualification as a foreign corporation. The
Company has no subsidiaries and does not own, directly or indirectly, the
capital stock of any other corporation or any interest in any partnership,
joint venture or other business enterprise. The Company has full corporate
power and authority and all necessary permits, licenses, approvals,
authorizations, franchises and registrations to carry on its business as it is
now conducted, and to own its assets and properties. The Company owns or has
the right to use all Assets which are necessary for the operation of its
business.
3.5 Capitalization. The entire authorized capital stock of the Company
consists solely of 200,000 shares of common stock, $.01 par value, of which
91,100 shares are issued and outstanding. All of the outstanding capital stock
of the Company is duly authorized, validly issued, fully paid and
nonassessable. There are no options, warrants, conversion or preemptive rights
or other rights to subscribe for or purchase, or other commitments,
arrangements, understandings or contracts with respect to, any capital stock of
the Company. All of the issued and outstanding shares of capital stock of the
Company are owned by OGC.
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3.6 No Violation or Conflict. The execution, delivery and performance of
this Agreement by OGC do not and will not, in any material respect, conflict
with, violate or constitute a default under any Law, judgment, order, decree,
the Articles of Incorporation or Bylaws of OGC, the Company or any contract or
agreement to which OGC or the Company is a party or by which OGC, the Company
or the Stock is bound.
3.7 Title to and Condition of Assets.
(a) The Company owns good, valid and marketable title to all of the
Assets it owns or purports to own, in all cases free and clear of any and all
Liens.
(b) The Buildings and Equipment are in good operating condition and
repair, ordinary wear and tear excepted, are reasonably suited for the purposes
for which they are used and are performing the functions for which they are
intended. No notice of violation of any building, zoning or other law relating
to their respective uses has been received by the Company.
(c) The Inventory is of a quality and quantity merchantable and
useable or saleable within a reasonable time period in the ordinary course of
business.
(d) All of the Accounts (other than the Retained Accounts) have arisen
from bona fide transactions in the ordinary course of business and are valid
and enforceable claims. No portion of any Account is subject to a counterclaim
or set off or, to OGC's Knowledge, is in dispute. No payments due on any of
the Accounts (other than the Retained Accounts) have been outstanding and
unpaid or more than 90 days after billing.
(e) All leases pursuant to which the Company leases from others
material amounts of real or personal property (including Real Properties,
Buildings and Equipment) and in full force and effect and constitute the legal
and binding obligations of the Company and, to OGC's Knowledge, the other
parties thereto. To OGC's Knowledge, no party is in default under any such
leases. No such lease will require the consent of the lessor in connection with
the transactions contemplated by this Agreement. The consummation of the
transactions contemplated by this Agreement will not cause the termination of,
or a breach, violation or default under, any such lease.
(f) The Real Properties constitute all real property and improvements
leased by the Company. The Company owns no real estate or other real property.
OGC has no notice or knowledge of any planned or contemplated public
improvements which may result in special assessments against the Real
Properties or otherwise materially affect the availability of utility service
or access to the Real Properties; or any increase in the assessed value of the
Real Properties from any tax assessing authorities which would increase the
estimated real estate taxes for the Real Properties.
3.8 Litigation. The Company is not subject to any outstanding judgment,
order, writ, injunction or decree of, or settlement agreement with, any person,
corporation,
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business entity, court, arbitrator or governmental agency or authority,
limiting, restricting or adversely affecting the Company or the Business. The
Company is not a party to any pending or, to OGC's Knowledge, threatened
Litigation.
3.9 Financial Statements. The Financial Statements were prepared in
accordance with generally accepted accounting principles consistently applied
throughout all periods (other than the preparation of notes thereto and subject
to normal year-end adjustments) and fairly present the financial condition and
the results of operation of the Company as of the relevant date and for the
periods thereof.
3.10 Absence of Certain Changes. Since September 27, 1996, there has not
been any, and no event has occurred and no facts or circumstances exist which,
will likely result in any: (a) material adverse change in the financial
condition, properties or operations of the Company; or (b) damage, destruction
or loss which has materially and adversely affected, or will materially and
adversely affect, the business or assets of the Company or the Stock.
3.11 Contracts. Each of the Contracts is in full force and effect and
constitutes the legal and binding obligation of the Company and, to OGC's
Knowledge, the other parties thereto. To OGC's Knowledge, no party is in
default under such Contracts. No Contract requires the written consent of, or
prior notice to, any third party in connection with the transactions
contemplated hereby.
3.12 No Violation of Law. The Company is not in violation of any Permits,
any Law, or any decree, judgment or order, or any zoning, building, planning,
use or other similar restriction.
3.13 Taxes. The Company has paid or made full and adequate provision for all
federal, state and local taxes or other governmental charges (including all
income, franchise, sales, payroll, property, employee withholding, social
security and unemployment taxes) with respect to its business or the Assets
prior to the date hereof. The Company has filed or will file all required
returns and reports with respect to such taxes and charges. No deficiencies or
claims for additional taxes have been proposed or assessed by the IRS or other
governmental entity or taxing authority against either Company.
3.14 Permits. The Company has all material Permits necessary for the
ownership of the Assets and the operation of its business. The Company is
operating in compliance with all such Permits. Each Permit has been lawfully
and validly issued, and no proceeding is pending or, to OGC's Knowledge,
threatened looking toward the revocation, suspension, termination or limitation
of any Permit. The consummation of the transactions contemplated hereby will
not result in the revocation, suspension, termination or limitation of any
Permit, and no Permit will require the consent of, filing with or payment to
its issuing authority as a result of the consummation of the transactions
contemplated by this Agreement.
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3.15 Governmental Approvals. No permission, approval, determination, consent
or waiver by, or any declaration, filing or registration with, any governmental
or regulatory authority is required in connection with the execution, delivery
and performance of this Agreement by the Company or OGC.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer hereby represents and warrants to OGC that:
4.1 Organization; Authority. The Buyer is a corporation, duly and validly
organized and existing and in good standing under the laws of the State of New
York. The Buyer has full corporate power and authority and all necessary
permits, licenses, approvals, authorizations, franchises and registrations to
carry on its business and to own its assets and properties. The Buyer has only
recently been formed, and has nominal assets and liabilities.
4.2 Authorization; Enforceability. The Buyer has full right, power,
authority and capacity to execute, deliver and perform this Agreement and the
other agreements and documents contemplated hereby. This Agreement and the
Secured Promissory Note have been duly executed and delivered by the Buyer.
This Agreement and the Secured Promissory Note are the Buyer's valid and
binding obligations, enforceable against the Buyer in accordance with their
respective terms.
4.3 No Violation or Conflict. The making, execution, delivery and
performance of this Agreement by the Buyer do not conflict with or violate any
Law or agreement to which the Buyer is a party or by which the Buyer is bound.
4.4 No Broker. The Buyer has not incurred any brokers', finders' or any
similar fee in connection with the transactions contemplated by this Agreement.
4.5 Litigation. There are no actions, suits or proceedings pending or, to
the knowledge of the Buyer, threatened, by any person or governmental agency,
involving the Buyer, which question the validity, legality or propriety of the
transactions contemplated by this Agreement.
4.6 Consents and Approvals. No permission, approval, determination, consent
or waiver by, or any declaration, filing or registration with, or notice to any
governmental or regulatory authority or third party is required in connection
with the execution, delivery and performance of this Agreement by the Buyer.
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ARTICLE V
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE BUYER
Each and every obligation of the Buyer to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the
following express conditions precedent:
5.1 Representations and Warranties. The representations and warranties made
by OGC in this Agreement shall be true and correct in all material respects as
of the Closing Date with the same force and effect as though said
representations and warranties had been made on the Closing Date.
5.2 Compliance with Agreement. OGC shall have performed and complied with,
in all material respects, its obligations under this Agreement which are to be
performed or complied with by OGC prior to or on the Closing Date.
5.3 Proceedings Taken. All proceedings, corporate or other, required to be
taken by OGC in connection with the transactions contemplated by this Agreement
shall have been taken, and all corporate approvals necessary for the execution,
delivery and performance of this Agreement shall have been obtained by OGC.
5.4 No Litigation. No investigation, suit, action or other proceeding shall
be threatened or pending before any court or governmental agency that seeks the
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
5.5 No Adverse Change. During the period from the date hereof to the
Closing Date, there shall not have occurred any event, condition or fact which
is materially adverse to the financial condition, properties, business or
results of operations of the Company and which continues to exist on the
Closing Date.
5.6 Material Damage to the Business or the Assets. Between the date of this
Agreement and the Closing Date, neither the Business nor the Assets shall have
been materially and adversely affected by reason of any loss, taking,
condemnation, destruction or physical damage, whether or not insured against.
5.7 Conveyance of Stock. OGC shall have delivered to the Buyer certificates
representing all of the Stock, free and clear of all Liens, which certificates
shall be duly endorsed in blank or have duly executed stock powers attached
thereto and shall otherwise be in proper form for transfer.
5.8 Repayment of Loans. OGC shall have paid or made arrangements to repay
all borrowings incurred by the Company, and all Liens on the Assets shall have
been removed.
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5.9 Closing Balance Sheet. OGC shall have delivered to the Buyer the
Closing Balance Sheet, together with a calculation of the Working Capital
Adjustment.
5.10 Rebate and Supply Agreement. OGC shall have delivered to the Buyer the
Rebate and Supply Agreement, as properly executed and delivered.
5.11 Other Documents. OGC shall have delivered to the Buyer such
certificates and documents of officers of the Company and public officials as
shall be reasonably requested by the Buyer's counsel to establish the existence
and good standing of the Company and the due authorization of this Agreement
and the transactions contemplated hereby by OGC and the Company, including (a)
copies of the Articles of Incorporation of the Company, as amended to date,
certified as of a recent date by appropriate governmental officials; and (b)
certificates of appropriate governmental officials as to the good standing of
the Company, dated as of a recent date, in its jurisdiction of organization and
any other jurisdiction in which it is qualified to do business.
5.12 Approvals and Consents. There shall have been secured such permissions,
approvals, determinations, consents and waivers, if any, as may be required by
Law, regulatory authorities or the Contracts in order to consummate the
transactions contemplated by this Agreement.
5.13 Books and Records. OGC shall have delivered to the Buyer all corporate
minute books, stock transfer books, blank stock certificates and corporate
seals of the Company. Copies of the same shall have been delivered to the
Buyer at least one week prior to the Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF OGC
Each and every obligation of OGC to be performed on the Closing Date shall be
subject to the satisfaction prior to or at the Closing of the following express
conditions precedent:
6.1 Representations and Warranties. The representations and warranties made
by the Buyer in this Agreement shall be true and correct as of the Closing Date
with the same force and effect as though such representations and warranties
had been made on the Closing Date.
6.2 Compliance with Agreement. The Buyer shall have performed and complied
with all of their obligations under this Agreement which are to be performed or
complied with by them prior to or on the Closing Date.
6.3 Proceedings Taken. All proceedings, corporate or other, required to be
taken by OGC in connection with the transactions contemplated by this Agreement
shall have
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been taken, and all corporate approvals necessary for the execution, delivery
and performance of this Agreement shall have been obtained by OGC.
6.4 No Litigation. No investigation, suit, action or other proceeding shall
be threatened or pending before any court or governmental agency that seeks the
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.
6.5 Employment Agreement and Related Consents. OGC shall have received the
consents of each of the Company's employees under the Employment Agreements to
the transactions contemplated hereby, and the Buyer shall have agreed to assume
the Employment Agreements (other than the stock option provisions included
therein and Michael Hoaglund's Employment Agreement due to his intention to
retire).
6.6 Third Party Consents. OGC shall have obtained all necessary
governmental and third party consents and approvals for the consummation of the
transactions contemplated by this Agreement.
6.7 Deliveries at Closing. The Buyer shall have delivered and made to OGC
the payments contemplated by Sections 2.2 and 2.3 hereof and shall have
delivered the following documents, each properly executed and dated as of the
Closing Date: (a) the Secured Promissory Note; (b) the Security Agreement; and
(c) the Rebate and Supply Agreement.
ARTICLE VII
INDEMNITIES
7.1 OGC's Indemnity. Subject to the provisions of Section 7.3 hereof, OGC
hereby indemnifies and holds the Buyer and their agents (the "Buyer Parties")
harmless from and against, and agree to promptly defend the Buyer Parties from
and reimburse the Buyer Parties for, any and all losses, damages, costs,
expenses, liabilities, obligations and claims of any kind (including, without
limitation, reasonable attorneys' fees, other legal costs and expenses, and
costs and expenses relating to or resulting from any lawsuits, actions or
proceedings, whether by a governmental agency or otherwise) which the Buyer
Parties may at any time suffer or incur, or become subject to, as a result of
or in connection with:
(a) any breach or inaccuracy of any of the representations and
warranties made by OGC in or pursuant to this Agreement;
(b) any failure by OGC to carry out, perform, satisfy and discharge
any of his or her covenants, agreements, undertakings, liabilities or
obligations under this Agreement or under any of the documents and materials
delivered by OGC pursuant to this Agreement;
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(c) any litigation or proceeding commenced after the Closing Date to
the extent it results from activities conducted by the Company prior to the
Closing Date;
(d) any taxes owed in respect of the ownership and operation of the
Company prior to the Closing Date;
(e) the amount of the deferred income tax liabilities as shown on the
Closing Balance Sheet, constituting book to tax differences in the method
of depreciating certain of the Company's assets, when and as the accumulated tax
benefit of accelerated depreciation of such assets for tax purposes reverses and
becomes an aggregate net tax liability;
(f) any debts, liabilities and obligations of the Company incurred
prior to the Closing Date which should have been shown on the Closing Balance
Sheet but which were not so shown (other than continuing obligations or future
performance under the Contracts or outstanding purchase or sales orders and
confirmations).
7.2 Buyer's Indemnity. Subject to the provisions of Section 7.3 hereof, the
Buyer hereby indemnify and hold OGC and its officers, directors, employees,
subsidiaries, affiliates and agents (the "OGC Parties") harmless from and
against, and agree to promptly defend OGC Parties from and reimburse OGC
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including, without limitation, reasonable
attorneys' fees and other legal costs and expenses, and costs and expenses
relating to or resulting from any lawsuits, actions or proceedings, whether by
a governmental agency or otherwise) which OGC Parties may at any time suffer or
incur, or become subject to, as a result of or in connection with:
(a) any breach or inaccuracy of any representations and warranties
made by the Buyer in or pursuant to this Agreement;
(b) any failure by the Buyer to carry out, perform, satisfy and
discharge any of their covenants, agreements, undertakings or obligations under
this Agreement, the Secured Promissory Note or under any of the documents and
materials delivered by Buyer pursuant to this Agreement;
(c) any taxes owed in respect of the ownership and operation of the
Company on and after the Closing Date;
(d) any debts, liabilities and obligations of the Company as shown on
the final Closing Balance Sheet;
(e) any debts, liabilities and obligations of the Buyer or the Company
incurred on and after the Closing Date.
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<PAGE> 21
7.3 Provisions Regarding Indemnities.
(a) The amounts for which an indemnifying party shall be liable under
Sections 7.1 and 7.2 of this Agreement shall be: (i) net of any tax benefit
realized by the indemnified party by reason of the facts and circumstances
giving rise to the liability; and (ii) calculated by taking into account any
tax required to be paid by the indemnified party as a result of any payment
made to the indemnified party pursuant to Sections 7.1, 7.2 and 7.3 of this
Agreement, but not including any tax that arises as a result of a reimbursement
for tax pursuant to this clause; and (iii) net of any insurance proceeds
received by the indemnified party in connection with the facts giving rise to
the right of indemnification.
(b) The indemnified party shall promptly notify the indemnifying party
in reasonable detail of any claim, demand, action or proceeding for which
indemnification will be sought under Section 7.1, 7.2 or 7.3 of this Agreement,
and if such claim, demand, action or proceeding is a third party claim, demand,
action or proceeding, the indemnifying party will have the right at its expense
to assume the defense thereof using counsel reasonably acceptable to the
indemnified party. The indemnified party shall have the right to participate,
at its own expense, with respect to any such third party claim, demand, action
or proceeding. In connection with any such third party claim, demand, action or
proceeding, the parties shall cooperate with each other and provide each other
with access to relevant books and records in their possession. No such third
party claim, demand, action or proceeding shall be settled without the prior
written consent of the indemnified party, which shall not be unreasonably
withheld. If a firm written offer is made to settle any such third party claim,
demand, action or proceeding and the indemnifying party proposes to accept such
settlement and the indemnified party refuses to consent to such settlement,
then: (i) the indemnifying party shall be excused from, and the indemnified
party shall be solely responsible for, all further defense of such third party
claim, demand, action or proceeding; (ii) the maximum liability of the
indemnifying party relating to such third party claim, demand, action or
proceeding shall be the amount of the proposed settlement if the amount
thereafter recovered from the indemnified party on such third party claim,
demand, action or proceeding is greater than the amount of the proposed
settlement; and (iii) the indemnified party shall pay all attorneys' fees and
legal costs and expenses incurred after rejection of such settlement by the
indemnified party, but if the amount thereafter recovered by such third party
from the indemnified party is less than the amount of the proposed settlement,
the indemnified party shall be reimbursed by the indemnifying party for such
attorneys' fees and legal costs and expenses up to a maximum amount equal to the
difference between the amount recovered by such third party and the amount of
the proposed settlement.
(c) OGC shall not be required to indemnify the Buyer Parties under
Section 7.1 hereof unless and until the aggregate of the Buyer's losses,
damages, costs, expenses, liabilities, obligations and claims subject to such
indemnification obligation exceeds Fifty Thousand Dollars ($50,000), and then
OGC shall be responsible for the first $50,000 of such losses, damages, costs,
expenses, liabilities, obligations and claims in addition to any amounts in
excess thereof.
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<PAGE> 22
(d) The Buyer Parties agree that their indemnification rights under
this Article VII shall be their exclusive remedy for any breach or inaccuracy
of the representations and warranties made by OGC in or pursuant to this
Agreement, except in instances of fraud or intentional misconduct on the part of
OGC.
ARTICLE VIII
CERTAIN MATTERS PENDING THE CLOSING
From and after the date of this Agreement and until the Closing Date:
8.1 Full Access.
(a) The Buyer, and its authorized agents, officers and representatives,
shall have full access to the Company's books, records and Assets, to conduct
such examination and investigation of the Company as it deems necessary,
provided that such examinations shall be during the Company's normal business
hours and shall not unreasonably interfere with its operations and activities.
(b) If the transactions provided for herein are not consummated, the
Buyer, and its officers, agents and representatives, will hold in strict
confidence, and not utilize in any manner, all information obtained from OGC,
the Company and their officers, agents or representatives, excepting however,
any such information which: (i) was or is in the public domain, (ii) was in
fact known to the Buyer prior to disclosure to the Buyer by the Company or OGC,
(iii) is disclosed to the Buyer by a third party (other than officers,
directors, employees and agents of the Company or OGC) who was not obligated to
maintain the confidentiality of such information after disclosure by the
Company or OGC, or (iv) thereafter through an act or failure to act on the part
of the Company or OGC becomes information generally available to the public.
8.2 Carry on in Regular Course. The Company shall diligently carry on its
business in the regular course and substantially in the same manner as
heretofore and shall not make or institute any unusual or novel methods of
manufacture, purchase, sale, lease, management, accounting or operation.
8.3 Use of Assets. The Company shall use, operate, maintain and repair the
Assets in a normal business manner.
8.4 Preservation of Relationships. The Company will use its reasonable best
efforts to preserve its business intact, to retain the services of its
employees, and to maintain business with suppliers, customers and others having
business relationships with the Company.
8.5 No Default. The Company shall not intentionally do any act or omit to
do any act, or permit any act or omission to act, which will cause a breach of
any of the Contracts.
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<PAGE> 23
8.6 Publicity. No party shall make any further public announcement, issue
any press release or otherwise make any communication to employees, suppliers
and customers of either party or to the general public, without the prior
written consent of the other party. Notwithstanding the above, the Buyer
understands and agrees that OGC may be required to issue a press release
regarding this Agreement or the transactions contemplated hereby pursuant to
applicable securities laws and the rules of the Nasdaq National Market.
8.7 Insurance Policies. The Company shall maintain all of its insurance
policies in full force and effect.
8.8 Contracts and Commitments. The Company shall not enter into any
contract or commitment or engage in any transaction not in the usual and
ordinary course of business and consistent with their normal business
practices, and the Company shall not purchase, lease, sell or dispose of any
capital asset other than in the ordinary course of business without the prior
written consent of the Buyer.
8.9 Compliance with Laws. The Company shall comply with all applicable Laws
and orders of any court or federal, state, local or other governmental entity.
8.10 Taxes. The Company shall file all federal and state tax returns which
are required to be filed, and shall pay or make provision for the payment of
all taxes owed by it.
8.11 Amendments. OGC shall take no action to amend the Company's Articles of
Incorporation or Bylaws, or make any change in its authorized or issued capital
stock.
ARTICLE IX
MISCELLANEOUS
9.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date, as
follows: (a) by mutual written agreement of OGC and the Buyer; or (b) by the
Buyer if any of the conditions set forth in Article V of this Agreement shall
not have been fulfilled by the Closing Date, if any of the covenants set forth
in Article VIII of this Agreement shall have been breached, or if the Closing
shall not have occurred on or about May 15, 1997; or (c) by OGC if any of the
conditions set forth in Article VI of this Agreement shall not have been
fulfilled by the Closing Date or if the Closing shall not have occurred on or
about May 15, 1997.
9.2 Rights on Termination; Waiver.
(a) If this Agreement is terminated pursuant to Section 9.1, all
further obligations of the parties under or pursuant to this Agreement shall
terminate without further liability of any party to the others, except that the
obligations under Sections 8.1(b), 9.2(b),
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<PAGE> 24
and 9.6 shall survive, and except further that nothing herein shall limit the
right of any party to seek damages for breach of this Agreement. If any of the
conditions set forth in Article V of this Agreement have not been satisfied or
if any of the covenants set forth in Article VIII of this Agreement have not
been complied with, the Buyer may nevertheless elect to proceed with the
consummation of the transactions contemplated hereby, and if any of the
conditions set forth in Article VI have not been satisfied, OGC may
nevertheless elect to proceed with the consummation of the transactions
contemplated hereby.
(b) Notwithstanding any provision to the contrary contained herein,
upon the occurrence of a Breakup Event, the Breakup Fee shall be paid to OGC.
9.3 Survival of Representations and Warranties. All representations and
warranties of the Buyer and OGC contained in this Agreement or made pursuant
hereto shall survive the Closing Date and the consummation of the transactions
contemplated by this Agreement.
9.4 Entire Agreement; Amendment. This Agreement and the documents referred
to herein and to be delivered pursuant hereto constitute the entire agreement
between the parties pertaining to the subject matter hereof, and supersede all
prior and contemporaneous agreements, understandings, negotiations and
discussions of the parties, whether oral or written, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof, except as specifically set forth
herein. No amendment, supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any of the provisions of this Agreement shall be deemed
or shall constitute a waiver of any other provision of this Agreement, whether
or not similar, not shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
9.5 Expenses. Whether or not the transactions contemplated by this
Agreement are consummated, each of the parties hereto shall pay the fees and
expenses of its respective counsel, accountants and other experts incident to
the negotiation and preparation of this Agreement and consummation of the
transactions contemplated hereby.
9.6 Governing Law. This Agreement shall be construed and interpreted
according to the laws of the State of New York, without giving effect to its
choice of law provisions.
9.7 Assignment. This Agreement shall not be assigned by any party without
the prior written consent of the other party. Notwithstanding the above, the
Buyer's post-closing obligations under this Agreement may be assigned to an
affiliated entity so long as the ownership of such affiliated entity is
substantially similar to that of the Buyer and such affiliated entity agrees in
writing to honor all of the Buyer's obligations under this Agreement assigned
to such entity.
9.8 Notices. All communications or notices required or permitted by this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an individual party or to an
officer of a corporate party or
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<PAGE> 25
three (3) business days after deposited in the United States mail, certified or
registered mail, postage prepaid, return receipt requested, and addressed as
follows, or by fax, receipt confirmed, to the indicated number, unless and
until either of such parties notifies the other in accordance with this Section
of a change of address:
If to OGC: Outlook Group Corp.
Attn: Joseph J. Baksha, President and
Chief Operating Officer
1180 American Drive
Neenah, WI 54956
Fax: (414) 727-8529
with a copy to:
Quarles & Brady
Attn: Kenneth V. Hallett, Esq.
411 East Wisconsin Avenue
Milwaukee, WI 53202
Fax: (414) 271-3552
If to the Buyer: Ronnie Shemesh
c/o World Class Film Corp.
78 Fernbrook Street
Yonkers, NY 10705
Fax: (914) 423-8004
with a copy to:
Norman Paul Weiss, Esq.
110 Walt Whitman Road, Suite 105
Huntington Station, New York 11746
Fax: (516) 351-6910
9.9 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of
Contents and Article and Section headings in this Agreement are inserted for
convenience of reference only and shall not constitute a part hereof.
9.10 Interpretation. Unless the context requires otherwise, all words used
in this Agreement in the singular number shall extend to and include the
plural, all words in the plural number shall extend to and include the
singular, and all words in any gender shall extend to and include all genders.
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<PAGE> 26
9.11 Severability. If any provision, clause, or part of this Agreement, or
the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of such provision, clause or
part under other circumstances, shall not be affected thereby.
9.12 No Reliance. No third party is entitled to rely on any of the
representations, warranties and agreements of the Buyer and OGC contained in
this Agreement. The parties hereto assume no liability to any third party
because of any reliance on the representations, warranties and agreements of
the Buyer or OGC contained in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Stock Purchase
Agreement as of the date first above written.
BARRIER FILMS LTD. - NEW YORK
_________________________________
Ronnie Shemesh, President
OUTLOOK GROUP CORP.
By:
_____________________________
Joseph J. Baksha, President
21
<PAGE> 1
EXHIBIT 10.14(b)
REBATE AND SUPPLY AGREEMENT
THIS REBATE AND SUPPLY AGREEMENT (this "Agreement") is entered into
this 12th day of May, 1997 by and among BARRIER FILMS LTD. - NEW YORK and
BARRIER FILMS CORPORATION (collectively, "Barrier"), WORLD CLASS FILM CORP.,
including its subsidiaries and affiliates whether currently in existence or
hereafter acquired ("World Class"), and OUTLOOK GROUP CORP., solely on behalf
of its subsidiary, Outlook Packaging, Inc. ("OGC").
RECITALS
WHEREAS, OGC is selling all of the 91,100 issued and outstanding
shares of Common Stock of Barrier, pursuant to the terms of that certain Stock
Purchase Agreement dated as of May 12, 1997, by and between the Buyer (as
defined therein) and OGC (the "Purchase Agreement");
WHEREAS, the execution and delivery of this Agreement are conditions
precedent to the parties' execution and delivery of the Purchase Agreement and
the consummation of the transactions contemplated hereby;
WHEREAS, this Agreement is intended by the parties to facilitate
payment by the Buyers of the Secured Promissory Note (as defined in the
Purchase Agreement);
WHEREAS, the parties acknowledge that a vital aspect of the
transaction contemplated by the Purchase Agreement is this Agreement, and it is
the intention of the parties that a significant portion of the purchase price
(represented by the Secured Promissory Note) will be paid through the payment
of credits under this Agreement;
WHEREAS, Barrier and World Class desire to supply monolayer and
co-extruded films to OGC, and OGC desires to purchase monolayer and co-
extruded films from Barrier and World Class, pursuant to the terms and subject
to the conditions herein stated;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and for other valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties agree as follows:
1. Supply. During the term of this Agreement, each of Barrier
and World Class (individually a "Seller" and collectively the "Sellers") agrees
to produce and sell to OGC monolayer and co-extruded films (including low
density, high density, polyethylene, nylon, polyester, polypropylene,
bi-oriented polypropylene and other packaging and laminating films) (the
"Films") as ordered by OGC from time to time, subject to the terms and
conditions set forth in this Agreement. The obligations of OGC set forth in
Section 4 hereof (i.e., the quantity order obligations) shall only apply to the
monolayer and co-extruded polyethylene Film types (the "Designated Films") and
not to any other types of Films, although the credits set forth in Section 6(d)
below apply to all Film types.
<PAGE> 2
2. Information to be Provided. As soon as practicable following
the date hereof, OGC shall provide to the Sellers a list of its current
purchases of Films and the price ranges, specifications and other material
terms applicable to such purchases. OGC shall also provide to the Sellers
physical samples for the Films and its specifications relating thereto, and its
estimated Film requirements over the next six months (and each succeeding
six-month period) which information is subject to adjustment from time to time.
OGC will not be responsible for any inaccuracies in its estimates of
requirements, except for gross negligence in significantly underestimating such
requirements. OGC will only be responsible for actual orders of Films which
may or may not be consistent with its estimated requirements.
3. Product Qualification. OGC shall afford the Sellers the
opportunity to qualify to manufacture and sell all Films ordered by OGC as
follows:
(a) First, the Sellers must inform OGC in writing as to
the Films they intend to offer to manufacture and sell to OGC, together with
the prices to be charged to OGC for such Films, delivery terms, specifications
and other material conditions. OGC shall then promptly determine whether the
price and other terms and conditions are at least as favorable (equal) as those
offered by OGC's and other available suppliers. If the Sellers fail to inform
OGC in writing as to any particular Film they intend to offer to manufacture
and sell to OGC within 30 days following their receipt of the information and
physical sample with respect to such Films as set forth in Section 2 above,
then OGC shall have no obligation to allow the Sellers to qualify such Film
under this Section 3 or to purchase any specified quantities thereof as set
forth in Section 4 below. In the event that the Sellers desire to, and are
subsequently able to, offer and manufacture any Films at a later date, then OGC
shall give the Sellers an opportunity at a mutually convenient time or times
during the term of this Agreement to qualify such Films pursuant to this
Section 3.
(b) Second, once the parties agree that the price and
other terms are at least as favorable as those offered by OGC's and other
available suppliers and further agree on the price and other terms for the
Films to be supplied by the Sellers to OGC, the Sellers shall produce a sample
order for the Films, and OGC shall inspect such order for competitive quality
and compliance with OGC's specifications. As used herein, the term "Acceptable
Quality" shall mean Films demonstrating quality competitiveness and compliance
with industry norms, applicable legal requirements and OGC's specifications
(within reasonably acceptable tolerances and variations as are customary and
normal in the industry). If the sample order demonstrates Acceptable Quality,
then the parties shall adhere to the supply levels set forth in Section 4(a)
below.
4. Supply Levels.
(a) After the Sellers have qualified to sell a particular
Designated Film to OGC as set forth in Section 3 above, OGC shall afford the
Sellers the opportunity to manufacture and sell, and OGC shall order, the
Designated Film, as follows:
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<PAGE> 3
(i) First, OGC shall order a "minimum" sample
quantity of the Designated Film to be manufactured and sold by
the Sellers ("Minimum Quantity"), which order shall specify
the agreed upon price, quantity, delivery, specifications and
other terms. Upon receipt of such Minimum Quantity of the
Designated Film, OGC shall inspect the Designated Film to
determine whether the shipment complies with the terms of the
Minimum Quantity order and demonstrates Acceptable Quality.
If the shipment does not comply with the terms of the Minimum
Quantity order or demonstrate Acceptable Quality, then the
Sellers shall repeat this level.
(ii) Second, if the Sellers' shipment of the
Minimum Quantity of the Designated Film complies with the
terms of the order and demonstrates Acceptable Quality as set
forth in Section 4(a)(i) above, OGC shall order production
quantity (at least 50% of its aggregate orders for the
Designated Film) of the Designated Film ("Production
Quantity"), which order shall specify the agreed upon price,
quantity, delivery, specifications and other terms. Upon
receipt of each shipment of the Designated Film subject to the
Production Quantity order, OGC shall inspect the Designated
Film to determine whether the shipment complies with the terms
of the order and demonstrates Acceptable Quality. If the
shipment does not comply in all material respects with the
Production Quantity order or demonstrate Acceptable Quality,
OGC shall not be required to continue to order such Designated
Film under this subsection (ii) and the Sellers shall revert
to Section 4(a)(i) with respect to such Film.
(iii) Third, if the Sellers' shipments of the
Production Quantity of the Designated Film complies with the
terms of the order as set forth in Section 4(a)(ii) above and
demonstrates Acceptable Quality, OGC shall order full
production quantity (75% of its aggregate orders for the
Designated Film, or more at the discretion of OGC) of the
Designated Film ("Full Quantity"), which order shall specify
the agreed upon price, quantity, delivery, specifications and
other terms. Upon receipt of each shipment of the Film
subject to the Full Quantity order, OGC shall inspect the
Designated Film to determine whether the shipment complies
with the terms of the order and demonstrates Acceptable
Quality. If the shipment does not comply in all material
respects with the Full Quantity order or demonstrate
Acceptable Quality, OGC shall not be required to continue to
order such Designated Film under this subsection (iii) and the
Sellers shall revert to Section 4(a)(ii) with respect to such
Designated Film.
(b) If the Sellers revert back to or repeat Section
4(a)(i) above three times with respect to a particular Designated Film after
being at higher levels then OGC shall have the right not to purchase that
Designated Film from the Sellers.
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<PAGE> 4
(c) In no event shall OGC be required to order from the
Sellers more than 75% of its aggregate orders for any Designated Film.
However, OGC may elect to order from the Sellers more than 75% of its aggregate
orders for the Designated Film and any quantity of other Film, in which case
the principal amount on the Secured Promissory Note may be repaid sooner than
scheduled because the credits set forth in Section 6(d) hereof are due and
payable regardless of whether they exceed the principal payments then due on
the Secured Promissory Note, and all such credits paid will be applied against
the outstanding principal balance on such Note.
(d) If, despite the Sellers' satisfaction of the
conditions of Section 4(a)(iii) above, OGC elects to buy less than 75% of its
estimated needs for the Designated Film in a given year, the "unearned" credit
provision set forth in Section 7 shall apply, although OGC shall be entitled to
make up any such deficiency in succeeding years.
(e) The Sellers shall have the right to refuse any orders
for the Films, in which case OGC shall not be obligated to order any specific
quantities of such Films and no adjustment or "unearned" credit will be made to
the Secured Promissory Note.
5. Orders. All orders of Films by OGC to the Sellers shall be
made pursuant to written purchase orders delivered by OGC to the Sellers
stating the price, quantity, delivery and other material terms and OGC's
specifications (if any), and shall be subject to OGC's standard terms and
conditions, including those stated on OGC's purchase orders.
6. Prices, Credits and Other Terms.
(a) The base prices for the Films to be charged by the
Sellers to OGC during the term of this Agreement shall be at least as favorable
as prices being charged by current suppliers of OGC and offered by the Sellers
to its other customers, subject to quality, quantity and delivery
specifications which may affect price. Such prices shall then give effect to
the credits outlined below. Prices agreed upon by OGC and the Sellers shall be
firm for a period of at least one year, subject to an appropriate reference
rate adjustment (such as market prices for applicable resins) made periodically
from time to time during the term hereof, as agreed to by the parties following
written notice of such adjustment provided by the Sellers at least 30 days
prior to the effective date of such adjustment. Notwithstanding the above,
prices may also be renegotiated once during each year to account for market and
other economic changes. OGC shall be entitled to "favored nation" treatment
with respect to prices for the Films, and prices charged to OGC shall
automatically be reduced to reflect the lowest amount then charged for such
Films by the Sellers to any of its other customers based on Film type and
volume. Unless otherwise agreed to by the parties, the prices for the Films
shall be F.O.B. OGC's designated destination(s) and include all packing,
shipping and delivery costs, and payment terms shall be net 30 days from date
of receipt of the delivered Films.
(b) The Sellers shall fill OGC's regular orders for the
Films within normal lead times which are 14 business days. The Sellers shall
fill special orders for co-extruded
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<PAGE> 5
Films within 30 to 45 day lead times. Variations from such lead times and
other delivery schedules will cause OGC not to have any obligation to purchase
the Films subject to such orders and cause the Sellers to revert to a lower
level as provided in Section 4(a) above with respect to future orders of the
Films.
(c) OGC may from time to time order Films from the
Sellers on a consignment basis, in which case the Sellers shall deliver
specified quantities of Films to a warehouse or other location designated by
OGC, and OGC shall pay invoices for such Films as they are used by OGC. OGC
shall also be responsible for paying for any Films that have been delivered but
not used by OGC after 75 days. In no event will the Sellers delivery any
quantities of Films which exceed 75 days' expected usage pursuant to OGC's
consignment orders.
(d) During the term of this Agreement, OGC shall be
entitled to the following credits against the prices of the Films sold by the
Sellers to OGC: $0.10 per pound for every pound of monolayer film sold to OGC;
and $0.25 per pound for every pound of co-extruded film sold to OGC. Credits
for other Film types will be negotiated in good faith by the parties. Such
credits shall not be reflected on invoices for the Films delivered to OGC.
However, at the end of each annual period in which a scheduled principal
payment is to be made on the Secured Promissory Note, an accounting of the
total credits then earned by OGC shall be presented to OGC for approval. The
agreed upon credits for such period shall then be paid by the Sellers to OGC,
and the amount of such payment shall be applied to reduce the principal
payments otherwise then due on the Secured Promissory Note and affect the
interest rates applicable thereto in the manner provided in the Note. Credits
for any period shall be paid by the Sellers to OGC notwithstanding the fact
that they may exceed the principal amount then due on the Secured Promissory
Note.
(e) The Sellers shall maintain consistent product quality
and manufacture the Films in accordance with their quality assurance and
manufacturing standards, as well as OGC's specifications as stated or
referenced on the relevant purchase order. OGC shall have the right to reject
any quantity of Films that does not meet such quality standards and
specifications. The Sellers shall warrant to OGC that all Films sold to OGC
shall be free from defects in materials and workmanship, shall comply with
OGC's specifications and shall comply with all applicable laws. OGC shall
promptly notify the Sellers of any defective or rejected Films in accordance
with the usual customs and usage in the industry. Thereupon, OGC shall
receive, at its option, either a full refund and credit for any such rejected
or defective Films or a prompt shipment of replacement Films at no additional
cost to OGC. OGC shall return, at the Sellers' cost, all rejected or defective
Films.
7. Unearned Credit. OGC may elect not to purchase Films from the
Sellers in accordance with Sections 2, 3 or 4 above. This election shall not
constitute a breach hereof. However, if OGC makes such election and does not
afford the Sellers the opportunity to qualify and supply Designated Films in
accordance with such Sections, OGC shall notify the Sellers of the amount and
type of Designated Film which it has elected not
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<PAGE> 6
to purchase from the Sellers during each year of this Agreement. Thereupon,
the Sellers shall calculate the amount of the credit (under Section 6(d)
hereof) that would have been earned by OGC if it had purchased such amount of
the Designated Film from the Sellers, and such aggregate "unearned" credits
shall be applied to reduce the principal amount on the Secured Promissory Note
otherwise due during such year and no interest shall be charged on such
reduction of the principal amount. However, OGC shall have the right to earn
or re-qualify for such "unearned" credit and restore its right to payment of
such reduction of the principal amount in any succeeding year of this Agreement
in the following manner: If, during a succeeding year, OGC orders quantities of
any Designated Film in excess of its applicable order quantity obligations
under Section 4(a) above for such Film (the amount of such excess being
referred to as the "Excess Order Amount"), OGC will receive payment for the
accrued credits on all such orders (as provided in Section 6(d) above), but the
principal amount on the Secured Promissory Note would only be reduced by the
amount of such payment less the amount of the paid credit attributable to the
Excess Order Amount up to the amount of the previously "unearned" credit. In
addition, the credits set forth in Section 6(d) above shall continue to apply
and be paid after the term of this Agreement until OGC has received an amount
equal to 50% of the value of the "unearned" credit in effect at the end of the
term hereof.
This provision does not apply to an election made by OGC not to
purchase Films as a result of a breach of this Agreement by the Sellers or
termination of this Agreement by OGC under Section 9 hereof. It also does not
apply to non-Designated Films (since no quantity obligation is imposed on OGC
for such Films) or elections made not to purchase Designated Films from the
Sellers in quantities in excess of those otherwise applicable under Section
4(a) or 4(b) hereof.
8. Term. Except as otherwise terminated pursuant to Section 9
below, the term of this Agreement shall be for a period of three years
commencing on the date hereof. However, if the Secured Promissory Note is
repaid in full prior to the expiration of this Agreement, the Agreement shall
continue in full force and effect, except that the credits set forth in Section
6(d) hereof shall terminate.
9. Termination.
(a) Any party may terminate this Agreement upon written
notice to the other parties (i) if any other party breaches this Agreement or
otherwise fails to perform any of its material obligations hereunder, and such
breach or failure (if curable) continues for a period of 30 days after written
notice of such breach or failure is given to such other parties; (ii) if such
other party commences or has commenced against it a proceeding under any
bankruptcy or similar law; has a receiver appointed for it or for any of its
properties; becomes insolvent or unable to pay its debts as they mature or
ceases to pay its debts as they mature in the ordinary course of business; or
discontinues its business, is liquidated or is dissolved; or (iii) as otherwise
provided herein. No termination of this Agreement shall release any party from
liability or obligation which at the time of such termination has already
accrued or which thereafter may accrue in respect of any act or omission prior
to
-6-
<PAGE> 7
such termination, or affect in any way the survival of any right, duty or
obligation of a party which, as is expressly stated elsewhere herein, is to
survive the expiration or termination of this Agreement. Each party expressly
agrees that a party which terminates this Agreement in accordance with this
Section 9 shall not be liable to the other party or parties for compensation,
loss or damage of any nature resulting from such termination, except as
provided in Section 9(b) below.
(b) If the defaulting party as described in Section 9(a)
above is OGC and as a result OGC does not purchase Films under this Agreement
and the Buyers are unable to pay amounts due under the Secured Promissory Note,
then OGC shall forfeit, as and for liquidated damages (which the parties
represent to be fair and reasonable), 50% of the principal amount then
outstanding on the Secured Promissory Note, and the remaining principal amount
on such Note shall thereupon cease to earn interest. If the defaulting party
as described in Section 9(a) above is any Seller, then OGC shall not be
required to purchase any Films from the Seller, this Agreement may be
terminated and the Secured Promissory Note and all other obligations under the
Purchase Agreement shall remain in full force and effect.
10. Force Majeure. If the performance of this Agreement or any
obligation hereunder is prevented, restricted or interfered with by an act of
God, war, riots, sabotage, embargo, explosion, flood, drought, fire,
earthquake, strike or labor dispute, inability to procure raw materials, power
or supplies, a law, order, rule, regulation, proclamation or other act or
omission of a governmental authority or otherwise due to causes beyond a
party's control (an "Event of Force Majeure"); the parties so affected upon
giving notice to the other party shall be excused from such performance to the
extent of such preventions, restriction or interference (and if the Event of
Force Majeure so affects the Sellers, interest on the Secured Promissory Note
shall temporarily cease to accrue, and the timing of the scheduled payments
shall be delayed, while the Event of Force Majeure is in effect), provided that
the parties so affected shall use all reasonable efforts under the
circumstances to avoid or remove such cause of nonperformance and shall
continue performance hereunder with the utmost dispatch whenever such causes
are removed. An Event of Force Majeure shall not subject a party to any
liability to the other party.
11. Independent Contractors. The parties affirm that this
Agreement establishes only a contractual relationship among independent
parties, and nothing herein shall be construed to constitute any party as an
employee, partner, joint venturer, agent or legal representative of any other
party for any purpose. No party shall have the authority to act for or to
obligate any other party in any way.
12. Confidentiality. All materials and information relating to
the manufacturer of the Films and all other confidential and/or proprietary
information which is disclosed or made available by a party (the "disclosing
party") to any other party (the "receiving party") shall be considered
confidential, shall be retained in strict confidence by the receiving party,
shall not be disclosed by the receiving party to any third person or used by
the receiving party except to the extent necessary in connection with the
manufacture, sale and use of the
-7-
<PAGE> 8
Films as contemplated by this Agreement. Such confidential information does
not include information which the disclosing party authorizes the receiving
party to disclose, is known by the receiving party prior to the disclosure by
the disclosing party, is disclosed to the receiving party by a third party
without any obligation of confidentiality to the disclosing party, is publicly
available at the time of disclosure other than as a result of a breach by the
receiving party of its obligation of confidentiality set forth herein, or is
required to be disclosed in any legal proceeding. Upon termination of this
Agreement, all tangible confidential information shall be immediately returned
to the respective disclosing party. The obligations contained in this Section
12 shall survive the termination or expiration of this Agreement.
13. Indemnification.
(a) Each Seller shall indemnify and hold harmless OGC and
its officers, directors, employees, agents, shareholders and affiliates from
and against any and all claims, losses, damages, costs and expenses relating to
or arising out of any breach by a Seller of any provision of this Agreement,
any wrongful, intentional, reckless or grossly negligent act or omission of a
Seller, any allegation that the Films (or the related technology, design,
patents or other intellectual property rights) infringes on the rights of any
third party, or any defective Films.
(b) OGC shall indemnify and hold harmless each Seller and
its officers, directors, employees, agents, shareholders and affiliates from
and against any and all claims, losses, damages, costs and expenses relating to
or arising out of any breach by OGC of any provision of this Agreement or any
wrongful, intentional, reckless or grossly negligent act or omission of OGC
(which shall include OGC's providing improper specification information or the
sale or use by OGC of the Films in a non-conforming manner).
14. Notices. Each notice, request, demand or other communication
("Notice") by any party to the other parties pursuant to this Agreement shall
be writing, and, except for purchase orders, order acknowledgements, and
routine documentation and correspondence, shall be personally delivered or sent
by U.S. certified or registered mail, return receipt requested, postage
prepaid, or by commercial courier, charges prepaid, or by facsimile
transmission (but each Notice sent by facsimile transmission shall be confirmed
by sending the original thereof to the other parties by U.S. mail or commercial
courier as provided herein), addressed to the address of the receiving parties
set forth below or to such other address as such parties shall have
communicated to the other party in accordance with this Section. Any Notice
hereunder shall be deemed to have been given and received when personally
delivered, on the date when sent by facsimile or on the third business day
following the date when sent by mail or commercial courier.
-8-
<PAGE> 9
If to OGC: Outlook Group Corp.
Attn: President
1180 American Drive
Neenah, WI 54956
FAX: (414) 727-4787
with a copy to: Quarles & Brady
Attn: Kenneth V. Hallett, Esq.
411 East Wisconsin Avenue
Milwaukee, WI 53202
FAX: (414) 271-3552
If to any Seller: Barrier Films Corporation
Attn: President
78 Fernbrook Street
Yonkers, NY 10705
FAX: (914) 423-8004
with a copy to: Norman Paul Weiss, Esq.
110 Walt Whitman Road, Suite 105
Huntington Station, NY 11746
FAX: (516) 351-6910
15. Miscellaneous.
(a) No party may assign this Agreement or any of its
rights or obligations hereunder (whether voluntarily or by operation of law)
without the prior written consent of the other parties, and any such attempt at
assignment shall be ineffective.
(b) If any provision of this Agreement is held to be
illegal or unenforceable for any reason, such determination shall not effect
the remainder of this Agreement and such remainder shall remain in full force
and effect.
(c) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
principles of conflict of laws.
(d) This Agreement may not be amended or modified except
in writing signed by all of the parties. This Agreement, together with the
Purchase Agreement, the Guaranty, the Security Agreement, the Secured
Promissory Note, the Stock Pledge Agreement and the agreements and documents
referred to herein and therein, constitute the entire understanding of the
parties regarding the subject matter hereof, and supersede all prior or
contemporaneous agreements, understandings and discussions regarding such
subject matter.
-9-
<PAGE> 10
(e) This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
(f) Each party seeing to enforce this Agreement which
prevails in any court proceeding regarding such enforcement shall be entitled
to reimbursement from the other party of its court costs and reasonable fees of
counsel and experts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first written above.
BARRIER FILMS CORPORATION
By:
___________________________________
Title:
________________________________
WORLD CLASS FILM CORP.
By:
___________________________________
Title:
________________________________
OUTLOOK GROUP CORP.
By:
___________________________________
Title:
________________________________
-10-
<PAGE> 1
EXHIBIT 21.1
Fiscal 1997 10-K
OUTLOOK GROUP CORP.
List of Subsidiaries*
Outlook Foods, Inc., a Wisconsin corporation
Outlook Label Systems, Inc., a Wisconsin corporation
Outlook Packaging, Inc., a Wisconsin corporation
(All are wholly-owned by Outlook Group Corp.)
- -----------
* Represents all companies at to which Outlook Group Corp. holds 50% or
more of the outstanding securities.
<PAGE> 1
[COOPERS & LYBRAND LETTERHEAD]
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Outlook Group Corp. on Forms S-8 (File Nos. 33-44491 and 33-44075) of our
reports dated July 9, 1997, except as to the information in Note C, for which
the date is August 25, 1997, and July 9, 1997 on our audits of the consolidated
financial statements and financial statement schedule, respectively, of Outlook
Group Corp. and Subsidiaries as of May 31, 1997 and 1996, and for the years
ended May 31, 1997, 1996 and 1995, which reports are included in this Annual
Report on Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
----------------------------
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
September 3, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1997
<PERIOD-END> MAY-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 12,640
<ALLOWANCES> 1,124
<INVENTORY> 9,857
<CURRENT-ASSETS> 26,050
<PP&E> 59,938
<DEPRECIATION> 23,326
<TOTAL-ASSETS> 67,620
<CURRENT-LIABILITIES> 14,682
<BONDS> 0
0
0
<COMMON> 51
<OTHER-SE> 33,420
<TOTAL-LIABILITY-AND-EQUITY> 67,620
<SALES> 72,054
<TOTAL-REVENUES> 72,054
<CGS> 61,168
<TOTAL-COSTS> 71,072
<OTHER-EXPENSES> (1,302)
<LOSS-PROVISION> 517
<INTEREST-EXPENSE> 2,778
<INCOME-PRETAX> (494)
<INCOME-TAX> 58
<INCOME-CONTINUING> (552)
<DISCONTINUED> (918)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1470)
<EPS-PRIMARY> (.32)
<EPS-DILUTED> 0
</TABLE>
