<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ____________________
Commission File Number 0-19453
HOLOPAK TECHNOLOGIES, INC.
Exact name of registrant as specified in its charter
Delaware 51-0323272
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9 COTTERS LANE, EAST BRUNSWICK, NEW JERSEY 08816
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (908) 238-2883
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
CLASS OUTSTANDING AT 7/31/96
----- ----------------------
Common Stock, $ .01 Par Value 2,796,403
Class A Common Stock, $ .01 Par Value 753,086
<PAGE> 2
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NUMBER
-----------
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1996
(Unaudited) and March 31, 1996 1
Consolidated Statements of Operations (Unaudited) for the Three
Months June 30, 1996 and 1995 2
Consolidated Statements of Cash Flows (Unaudited) for the Three
Months Ended June 30, 1996 and 1995 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II: OTHER INFORMATION 9
SIGNATURES 10
EXHIBIT 11
</TABLE>
<PAGE> 3
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1996 1996
UNAUDITED
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents........................................................... $ 945,328 $ 1,999,609
Accounts Receivable, less allowance
for doubtful accounts of $42,000 and $81,000...................................... 7,966,070 6,582,515
Inventories ....................................................................... 8,297,904 8,149,598
Prepaid Expenses.................................................................... 472,799 411,748
Due From Related Parties............................................................ 46,789 20,000
Prepaid Income Taxes ............................................................... 1,241,481 1,200,162
Deferred Income Taxes .............................................................. 307,468 307,468
Other Current Assets ............................................................... 16,081 16,470
------------ ------------
TOTAL CURRENT ASSETS................................................................... 19,293,920 18,687,570
Property and Equipment, Net ........................................................... 10,569,093 10,638,555
Excess of Cost over Fair Value of Assets Acquired, less
accumulated amortization of $1,411,671 as of June, 1996 and $1,361,930 as of
March, 1996.......................................................................... 6,949,144 6,998,885
Other Assets........................................................................... 149,088 149,088
------------ ------------
TOTAL ASSETS.......................................................................... $ 36,961,245 $ 36,474,098
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank Borrowings ................................................................... $ 400,000 $ -
Current Maturities of Long- Term Debt ............................................. 1,752,500 1,752,500
Accounts Payable and Accrued Liabilities............................................ 3,993,840 3,642,661
------------ ------------
TOTAL CURRENT LIABILITIES.............................................................. 6,146,340 5,395,161
Long-Term Debt ....................................................................... 2,394,375 2,832,500
Deferred Income Taxes ................................................................ 1,689,092 1,740,128
------------ ------------
TOTAL LIABILITIES...................................................................... 10,229,807 9,967,789
------------ ------------
Commitments and Contingencies ......................................................... - -
STOCKHOLDERS' EQUITY
Preferred Stock: $.01 par value: 10,000,000 shares authorized; none issued......... - -
Common Stock; $.01 par value; 10,000,000 shares authorized; 2,796,403 shares issued 27,964 27,964
Class A Common Stock; $.01 par value: 2,000,000 shares authorized; 753,086 shares
convertible to Common Stock at any time at the stockholder's option............. 7,531 7,531
Class B Common Stock, $.01 par value; 700,000 shares authorized; none issued........ - -
Additional paid-in capital......................................................... 22,228,094 22,228,094
Retained Earning................................................................... 6,173,456 5,926,661
Cumulative Translation Adjustment.................................................. (434,122) (412,456)
------------ ------------
28,002,923 27,777,794
Less: Common Stock (201,800 shares) Held In the Treasury, at cost ................ (1,271,485) (1,271,485)
------------ ------------
Total Stockholders' Equity............................................................. 26,731,438 26,506,309
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................................. $ 36,961,245 $ 36,474,098
============ ============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1996 1995
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
NET REVENUES................................................... $11,864,154 $12,054,009
Cost of Sales.................................................. 9,557,984 9,474,131
------------ ------------
Gross Profit................................................... 2,306,170 2,579,878
Selling, General and Administrative Expenses................... 1,972,807 1,999,137
------------ ------------
Operating Income .............................................. 333,363 580,741
Interest Income................................................ 22,153 39,623
Interest Expense............................................... 76,791 142,743
------------ ------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES.......... 278,725 477,621
Provision for Income Taxes ................................... 31,930 142,774
------------ ------------
NET INCOME .................................................... $ 246,795 $ 334,847
============ ============
EARNINGS PER COMMON SHARE AND COMMON
SHARE EQUIVALENT
NET INCOME ................................................ $ 0.07 $ 0.10
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND COMMON SHARE EQUIVALENTS OUTSTANDING................... 3,372,732 3,517,989
------------ ------------
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1996 1995
(UNAUDITED) (UNAUDITED)
------------ -------------
<S> <C> <C>
OPERATING ACTIVITIES
NET INCOME ................................................................ $ 246,795 $ 334,847
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation ......................................................... 629,193 603,966
Amortization.......................................................... 49,741 64,077
(Increase) in accounts receivable..................................... (1,390,516) (787,312)
(Increase) in inventories............................................. (155,898) (550,939)
(Increase) in prepaid expenses....................................... (61,399) (37,579)
Decrease (Increase) in due from related parties...................... (26,789) 1,979
Decrease (Increase) in prepaid income taxes........................... (41,317) 65,929
Decrease (Increase) in other current assets........................... 389 (24,434)
(Increase) in other assets............................................ - (1,705)
Increase in accounts payable and accrued liabilities.................. 355,018 85,806
(Decrease) in deferred income taxes................................... (49,628) (53,594)
----------- ------------
NET CASH (USED) IN OPERATING ACTIVITIES............................ (444,411) (298,959)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures................................................... (570,082) (278,033)
Proceeds from discontinued operations.................................. - 499,537
---------- ------------
NET CASH PROVIDED (USED) PROVIDED BY INVESTING ACTIVITIES.......... (570,082) 221,504
----------- ------------
CASH FLOW FROM FINANCING ACTIVITIES
Net (decrease) increase from short-term borrowings..................... 400,000 (522,208)
Repayment of long-term borrowings...................................... (438,125) (438,125)
----------- ------------
NET CASH (USED) IN FINANCING ACTIVITIES............................ (38,125) (960,333)
----------- ------------
Effect of exchange rate changes on cash and cash equivalents............... (1,663) (21,213)
----------- ------------
Net (decrease) in Cash and Cash Equivalents............................... (1,054,281) (1,059,001)
Cash and Cash Equivalents, Beginning of Period............................. 1,999,609 2,300,336
----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD................................... $ 945,328 $ 1,241,335
=========== ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared by HoloPak Technologies, Inc. ("HoloPak" or the "Company")
pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three
months ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending March 31, 1997. The
Company's financial statements do not include certain information and
footnotes required by generally accepted accounting principles and
accordingly, should be read in conjunction with the financial
statements and the notes thereto included in HoloPak's Annual Report on
Form 10-K for the year ended March 31, 1996.
2. INVENTORIES
The components of inventories were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1996 MARCH 31, 1996
------------- --------------
<S> <C> <C>
Finished Goods $3,995,000 $3,765,000
Work in Process 959,000 1,006,000
Raw Materials 3,344,000 3,379,000
---------- ----------
TOTAL $8,298,000 $8,150,000
========== ==========
</TABLE>
3. RELATED PARTY TRANSACTIONS
In June 1996, the Company loaned $27,000 to an officer of the Company
as part of his employment agreement to purchase shares of the Companys
Stock on the open market. The loan bears interest at 5%. The
principal is to be repaid in five years.
4. NOTE PAYABLE & LONG-TERM DEBT
The Company has available an unsecured revolving line of credit in the
amount of $4,000,000 to be used for general corporate purposes.
4
<PAGE> 7
The facility bears interest at LIBOR plus 100 basis points which was
approximately 6% at June 30, 1996. At June 30, 1996, there was
$400,000 outstanding under this line of credit. The Company also owes
$2,025,000 under a five year term loan. This term loan requires
quarterly payments of $135,000, which began on June 17, 1995 and also
bears interest at three-month LIBOR plus 100 basis points. Final
maturity will be on March 17, 2000.
The Company also has outstanding $2,121,875 in long term debt incurred
to fund the acquisition of Alubec. This debt bears interest at a
fixed rate of 5.9%. Principal payments are $303,125 per quarter and
will mature on March 31, 1998.
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
JUNE 30, PAYMENTS
-------- ----------
<S> <C>
1997 1,752,500
1998 1,449,375
1999 540,000
2000 405,000
----------
TOTAL $4,146,875
==========
</TABLE>
5. COMMITMENTS & CONTINGENCIES
As a result of the discontinuance of the operations of Jaeger Graphic
Technologies ("JGT"), on October 13, 1995, Bollore Technologies S.A.
filed suit in the Commercial Court of Paris against JGT and the
Company. The suit claims noncompliance by the Company and JGT with a
supply agreement and seeks damages in the amount of approximately 5.76
million French francs (approximately $1.3 million as of June 30, 1996).
The Company is defending this matter vigorously. At this time
management is unable or predict the outcome of this matter or the range
of loss, if any, which may result and therefore no such amount has been
provided for as of June 30, 1996.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1995
GENERAL:
The cost of raw materials decreased during the three month period ended June
30, 1996, from the unusually high costs that adversely affected fiscal 1996.
However, the quality of certain key raw materials available to the Company has
declined, forcing the Company to undertake costly additional processing steps
to assure product quality. Accordingly, it is the belief of management that
gross margins will remain low for the foreseeable future.
On August 5, 1996, the Company announced that it would be taking a
restructuring charge in the second quarter amounting to approximately $210,000
to reflect work force reductions. Management sees this as the first of a
number of steps necessary to rebuild margins, which will include capital
investment in quality improvements and upgrading the skill levels of the
Company's workforce.
NET REVENUES:
During the three months ended June 30, 1996, revenues were $11.9 million,
compared to $12.1 million for the same period last year, a decrease of 1.6%.
The decrease is attributable to weak sales of hot-stamping foils, particularly
in metallic graphics foils. For the period, foil revenues declined from $7.2
to $6.3 million. Slow weaker demand in a variety of graphics and packaging
businesses caused the decline.
The decrease in foil revenues was partially offset by increases in holography
and paper revenues. Holography revenues increased to $1.8 million from $1.5
million in the year earlier period, an increase of 20%. The increase is
attributable to strong sales of security products. Paper revenues increased to
$3.8 million from $3.3 million, an increase of 15%. The increase resulted from
increased demand for packaging and trading cards.
Selling prices for the Company's products were unchanged during the quarter.
COST OF SALES AND GROSS PROFIT:
Cost of goods sold increased by $84,000 to $9.6 million. The increase from the
first quarter of last year is attributable to higher raw material prices and
poorer production yield in the manufacture of hot-stamping foil.
6
<PAGE> 9
Gross profit declined to $2.3 million from $2.6 million in the year earlier
period. Gross margin was 19.4%, compared to 21.4% in the first quarter of last
year. The decrease in margin was caused by the production problems mentioned
above and lower overhead absorption on reduced production.
The poorer production yield was caused by a quality problem in one of the key
raw materials for the manufacture of hot-stamping foil. This quality problem
necessitated an extra processing step in foil manufacture which increased, both
production waste and labor costs. Management estimates that this problem cost
the Company $350,000 in gross margin for the quarter.
The quality problem with this raw material has not yet been solved. The
Company is directing all of its research efforts to finding an acceptable and
cost-effective solution.
SELLING GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses declined slightly from year
earlier levels, reflecting lower administrative expenses.
OPERATING RESULTS:
Operating profit for the quarter was $333,000, compared to $581,000 one year
ago. The decrease was attributable to the falloff in sales and gross profits.
INTEREST EXPENSE (NET)
Net interest expense for the quarter was $55,000, compared to $103,000 in the
first quarter last year. The decrease was attributable to lower debt levels
prevailing during the first quarter offset by lower average invested cash
balances.
NET INCOME:
Net income was $247,000, compared to $335,000 in the first quarter last year.
The cause of the decreased earnings was the decrease in operating profits.
INCOME TAXES:
The effective tax rate for the three months period was 11.5%, compared to 29.9%
one year ago. The decline is attributable to a higher percentage of the
Company's earnings deriving from Canadian operations, a tax loss benefit in the
United States, and the reversal of a certain timing differences under the
effects of FASB 109.
7
<PAGE> 10
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES:
As of June 30, 1996, the Company had working capital of $13.1 million, compared
to $13.3 million at March 31, 1996. The decrease in working capital resulted
from two offsetting factors; first, an increase in receivables of $1.4 million,
which resulted from extended terms granted to one major customer and higher
sales to that customer, which was offset by increased payables, and an increase
of $400,000 in the Company's short term credit line.
The Company has available a general purpose credit line of $4.0 million,
against which $400,000 had been drawn as of June 30, 1996.
During the quarter, the Company made $570,000 in capital expenditures. The
primary expenditure was $200,000 for a thermal oxidizer needed to produce foil
in Canada.
STOCKHOLDER'S EQUITY:
Stockholders equity increased by $225,000. The increase was comprised of net
income less a slight increase in the cumulative translation adjustment.
DISCONTINUED OPERATIONS:
All of the operations of Jaeger Graphic Technology, S.A. have either been
closed or sold. However, as a result of this discontinuance, on October 13,
1995, Bollore Technologies S.A. filed suit in the Commercial Court of Paris
against JGT and the Company. The suit claims noncompliance by the Company and
JGT with a supply agreement and seeks damages in the amount of approximately
5.76 million French francs (approximately $1.3 million as of June 30, 1996).
The Company is defending this matter vigorously. At this time management is
unable to predict the outcome of this matter or the range of loss, if any,
which might result. Therefore, no such amount has been provided for in the
financial statements.
8
<PAGE> 11
PART II
OTHER INFORMATION
<TABLE>
<S> <C> <C>
Item 1. Legal Proceedings None
Item 2. Change in Securities None
Item 3. Defaults Upon Senior Securities None
Item 4. Submission of Matters to Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 10.1 Note and Pledge Agreement between
the Company and R. E. Coghan, dated 6/26/96
Exhibit 11 Computation of Earnings Per Share
b. Report on Form 8-K None
</TABLE>
9
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this to be signed on its behalf by the undersigned
thereunto duly authorized.
HOLOPAK TECHNOLOGIES, INC.
/s/ ROBERT E. COGHAN Dated: August 9, 1996
-----------------------------
Robert E. Coghan,
Chief Executive Officer
/s/ DAVID W. JAFFIN Dated: August 9, 1996
-----------------------------
David W. Jaffin,
Chief Financial Officer
10
<PAGE> 13
EXHIBIT INDEX
-------------
Exhibit
No. Description
------- -----------
Exhibit 10.1 Note and Pledge Agreement between
the Company and R. E. Coghan, dated 6/26/96
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
NOTE AND PLEDGE AGREEMENT
NOTE AND PLEDGE AGREEMENT, dated as of June 26, 1996, between Robert E.
Coghan (the "Maker") and HOLOPAK TECHNOLOGIES, INC., a Delaware corporation
(the "Payee").
PRELIMINARY STATEMENT
The Maker has purchased 12,764 shares of common stock, par value $0.01
per share, of the Payee (the "Shares"). The Maker has the right to purchase
the Shares by delivering this Note and Pledge Agreement whereby the Maker
promises, among other things, to pay the principal amount of $26,788.60 (the
"Note") as partial payment of the purchase price of the Shares and to pledge
to the Payee the Shares to secure the payment of the purchase price of the
Shares (the "Pledge"). Under the terms of the Pledge, the Payee shall continue
to hold the Pledged Securities (as defined below) until the termination of this
Note and Pledge Agreement.
NOW, THEREFORE, to induce the Payee to make a loan under this Note and
Pledge Agreement and in consideration of the mutual covenants contained herein,
the parties hereto, each intending to be legally bound hereby, covenant and
agree as follows:
A. Promissory Note.
1. Terms. FOR VALUE RECEIVED, and intending to be legally bound,
the Maker hereby promises to pay, in lawful money of the United States of
America, which shall be legal tender for payment of public and private debts,
without demand, defalcation, set off or deduction, to the order of Payee, at
the address of the Payee, 9 Cotters Lane, East Brunswick, New Jersey 08816 or
at such other place as the holder hereof shall from time to time designate in
writing, the principal amount of twenty six thousand, seven hundred eighty
eight dollars and 60/100 ($26,788.60),with interest on the unpaid principal
balance from the date of this Note until paid at the annual rate of five
percent (5%), calculated on the basis of a 360-day year consisting of twelve
30-day months. The principal amount and accrued interest shall be due and
payable on the fifth anniversary of the date hereof.
2. Prepayment. The Maker may prepay at any time all or part of
the outstanding principal balance hereof without penalty at any time, provided
that when making such prepayment the Maker pays all interest then accrued and
all other sums then due hereunder. Partial prepayments shall be applied to
reduce the principal indebtedness evidenced hereby, the amortization of the
remaining principal to be revised appropriately.
3. Default Interest. All sums not paid when due shall bear
interest between the due date until the payment date at the rate that is five
percent (5%) over the above-specified interest rate on the principal of this
Note, or if such rate is usurious, the highest legal rate (the rate so
determined is herein called the "Default Rate").
<PAGE> 2
4. Deferral. All sums due under this Note may be deferred the extent
necessary (based on an opinion of counsel to the Maker that is acceptable to
the Payee) to avoid any violation of applicable rules and regulations of the
Securities and Exchange Commission, the National Association of Securities
Dealers, Inc. and any other regulatory authority and also to avoid any violation
of the Delaware General Corporation Law that would result from repayment. Any
amount deferred hereunder shall bear interest at the default Rate, with such
interest payable quarterly.
5. Default.
a. The Maker shall be in default hereunder upon the occurrence of
any of the following events: (i) if the Maker fails to pay any interest or
principal or any other sum due hereunder on the applicable due date therefor;
(ii) if any representation or warranty now or hereafter made by the maker or in
connection with the debt evidenced by this Note or the Pledge is false or
incorrect in any material respect and is not cured within 30 days of notice
therefor; or (iii) the occurrence of any default under the Pledge (an "Event of
Default").
b. Upon the occurrence of an Event of Default by the Maker, which
shall be continuing, the entire unpaid principal indebtedness of this Note,
together with all interest accrued at the above specified rate until the date of
such default and thereafter at the Default Rate, together with all other charges
provided for herein, shall at the option of the holder of this Note, become due
and payable immediately.
c. Any right or remedy granted herein or in the Pledge is
separate, distinct and cumulative and not exclusive of any other right or remedy
granted herein or in the Pledge or provided by law or equity, and may be
exercised concurrently, independently or successively by the holder hereof in
such holder's discretion. Any forbearance on the part of any holder in
exercising any such right or remedy. The holder hereof shall not be deemed by
any act or omission to have waived any such right or remedy or any default by
the Maker hereunder or under the Pledge unless such waiver is in writing and
signed by the holder, and then only to the extent specifically set forth in the
writing. Any such waiver of any right or remedy with respect to any other
default by the Maker.
d. The maker agrees to pay on demand all costs of collection,
including without limitation reasonable attorneys fees, incurred by the holder
hereof with respect to any default by the Maker hereunder. Such amounts, until
paid by the Maker, shall be added to the principal hereof, bear interest at the
Default Rate and be secured by the Pledge.
<PAGE> 3
B. Pledge Agreement
1. Pledge of Stock. As collateral security for the punctual payment
and performance of all existing and future indebtedness, obligations and other
liabilities, absolute or contingent, direct or indirect, primary or secondary,
of the Maker to the Payee of any nature whatsoever under this Note and Pledge
Agreement (all of such indebtedness, obligations and liabilities of the Maker
being hereinafter sometimes referred to collectively as the "Obligations"), the
Maker hereby deposits with and pledges and hypothecates to the Payee for its
benefit and grants to the Payee for its benefit and agrees that the Payee shall
have a first security interest in and pledge of, the number of shares of Shares
(the "Pledged Securities) of the Payee set forth below:
Class of Security Certificate Numbers(s) Number of Shares Pledged
----------------- ---------------------- ------------------------
Common 12,764
2. Representations and Warranties of the Maker. The Maker represents
and warrants to and agrees with Payee as follows:
a. The Pledged Securities have been duly and validly pledged
hereunder in accordance with all applicable laws, and the Maker warrants and
covenants to defend the Payee's right, security interest and special property
in and to the Pledged Securities against the claims and demands of all persons
whomsoever. Except for the security interest created hereby in favor of the
Payee, the Maker is the exclusive legal and equitable owner of, and has good
title to, all of the Pledged Securities identified in Section 1 as being owned
by the Maker, free and clear of all claims, liens, security interests and other
encumbrances, and the Maker has the unqualified legal right to pledge the same
hereunder. The security interest created hereby or intended so to be
represents a valid, perfected first lien on and security interest in all of the
Pledged Securities, and such security interest is superior and prior in right to
the rights of all third persons. The parties acknowledge that no filings or
recordings (including without limitation filings under the Uniform Commercial
Code) are necessary to be made under present law in order to perfect, protect
and preserve the security interest of the Payee in the Pledged Securities
created by this Note and Pledge Agreement or intended so to be. Notwithstanding
the foregoing, the Maker makes no representations or warranties hereunder
regarding any claims, liens, security interests or encumbrances created by or
in favor of the Payee.
-3-
<PAGE> 4
b. The Maker and his representatives, successors and assigns,
hereby irrevocably waive and release all preemptive, first-refusal and other
similar rights of the Maker to purchase any or all of the Pledged Securities
upon any sale thereof by the Payee hereunder, whether such right to purchase
arises under the Certificate of Incorporation or any By-law of the Payee, by
agreement, by operation of law or otherwise.
c. All of the foregoing representations, warranties and
agreements shall survive the execution and delivery of this Note and Pledge
Agreement and the making of the loan hereunder.
3. Representations and Warranties of the Payee. The Payee
represents and warrants to the Maker that the Payee is transferring to the Maker
good title to all of the Pledged Securities identified in Section 1, free and
clear of all claims, liens, security interests and other encumbrances, and that
the Payee has the unqualified legal right to transfer the same to the Maker.
4. Reservation of Voting Rights. Upon the occurrence of an Event
of Default that shall be continuing, the Payee shall, after a formal
declaration of such default delivered to the Maker in accordance with the
notice provisions of Section 9(e) of the Officer Subscription Agreement (but
not before), be entitled to exercise any and all voting power with respect to
the Pledged Securities. At all other times, the Maker shall be entitled to
exercise as it deems appropriate, but in a manner consistent with the
provisions of this Note and Pledge Agreement, all voting power with respect to
the Pledged Securities.
5. Additional Collateral Security. If upon the bankruptcy of the
Maker any sum shall be paid upon or with respect to any of the Pledged
Securities, such sum shall be paid over to the Payee to be held by the Payee as
additional collateral security for satisfaction of the Obligations, or in the
case of any cash amount paid over, the Maker may at its option elect to reduce
the Obligations with such payment. If any stock dividend shall be declared on
any of the Pledged Securities, or any shares of stock or fractions thereof
shall be issued pursuant to any stock split involving any of the Pledged
Securities, or any distribution of capital shall be made on any of the Pledged
Securities, or any property shall be distributed upon or with respect to the
Pledged Securities pursuant to any recapitalization or reclassification of the
capital of the Payee or pursuant to a reorganization thereof, the shares or
other property so distributed shall be delivered to the Payee to be held by it
in pledge as additional collateral security for thee Obligations.
6. Remedies in General. Upon the occurrence of an Event of Default
that shall be continuing, the Payee shall have, without obligation to resort to
other security or to seek recourse against any guarantor or other party
secondarily liable, the right at any time and from time to time to sell,
resell, assign and deliver, in the Payee's discretion, all or any of the
Pledged Securities, in one or more parcels at the same or different times, and
all right, title, interest, claim and demand therein and right of redemption
thereof, at public or
-4-
<PAGE> 5
private sale, subject to the restrictions, if any, set forth in Section 7
hereof, for cash, upon credit or for immediate or future delivery, and at such
price or prices and on such terms as the Payee may determine, the Maker hereby
agreeing that upon any such sale any and all equity and right of redemption
shall be automatically waived and released without any further action on the
part of the Maker, and in connection therewith the Payee may grant options, all
without any demand, advertisement or notice, all of which are hereby expressly
waived. In the event of any such sale, the Payee shall, at least 15 days before
the sale, give the Maker notice of its intention to sell, which notice the Maker
acknowledges is reasonable. Upon each such sale, the Payee and the Maker may
purchase all or any of the Pledged Securities being sold, free of any equity or
right of redemption. The proceeds of each such sale shall be applied to the
payment of all costs and expenses of every kind for sale or delivery, including
reasonable compensation to the agents and attorneys of the Payee, and all other
expenses, liabilities and advances made or incurred by the Payee in connection
therewith, and after deducting such costs and expenses from the proceeds of
sale, the Payee shall apply any residue to the payment of the Obligations in
such order as the Payee may deem fit, the Maker remaining liable for any
deficiency. The balance, if any, remaining after payment in full of the
Obligations shall be paid over to the Maker.
7. Right to Execute Endorsements. The Payee shall have the right,
for and in the name, place and stead of the Maker and acting as its
attorney-in-fact if necessary, to execute endorsements, assignments and other
instruments of conveyance or transfer with respect to all or any of the Pledged
Securities whenever any such execution is required or permitted hereunder.
C. Remedies, Termination, Waiver and Miscellaneous.
1. Remedies Cumulative: Indemnities, etc. The rights, powers and
remedies provided herein in favor of the Payee shall not be deemed exclusive,
but shall be cumulative, and shall be in addition to all other rights and
remedies in favor the Payee existing at law or in equity, including without
limitation all of the rights, powers and remedies available to a secured
creditor under the Uniform Commercial Code as in effect in Delaware or any other
appropriate jurisdiction. The Maker shall indemnify and save harmless the Payee
from and against any and all liabilities, losses and damages that any of them
may incur in the exercise or performance of any of its or their rights, powers
or remedies set forth herein, provided, however, that the Maker shall have no
obligation to indemnify any such indemnities against any liability, loss or
damage resulting from such indemnitee's own gross negligence or bad faith.
2. No Waiver: Amendments. No delay on the part of the Payee in
exercising any of its options, powers or rights, and no partial or single
exercise thereof, shall constitute a waiver thereof or of any other option,
power or right. None of the terms and conditions of this Note and Pledge
Agreement may be amended, modified or waived orally but only in a writing signed
by the Payee and the Maker.
-5-
<PAGE> 6
3. Termination of Agreement: Return of Collateral. Upon the full
payment and performance of all of the Obligations, this Note and Pledge
Agreement shall expire and the Maker (except to the extent otherwise
contemplated hereby) shall be entitled to the return of all of the Pledged
Securities and other property and cash held in pledge hereunder that have not
been used or applied to the payment of the Obligations.
4. Further Assurances: Immunities, etc. With respect to the
Pledged Securities and any security interest of the Payee, the Maker shall
file, record, make, execute and deliver all such acts, deeds, things, notices
and instruments as may be necessary or desirable in the opinion of the Payee in
order to vest more fully in and assure to the Payee the security interest in
the Pledged Securities created hereby or intended so to be and the enforcement
and realization of all of the benefits of the rights, remedies and powers of
the Payee hereunder relating to the Pledged Securities. Without limiting the
generality of the foregoing, if at any time hereafter, whether or not due to
any change in circumstances (including without limitation any change in
applicable law or any decision hereafter made by a court construing any
applicable law), it is, in the opinion of counsel for the Payee, necessary or
desirable to file or record this Note and Pledge Agreement or any financing
statement or other instrument relating hereto, the Maker shall pay all fees,
costs and expenses of such recording or filing and execute and deliver any
instruments that the Payee may deem necessary or appropriate to make such
filing or recording effective. The Maker hereby irrevocably appoints the Payee
the attorney-in-fact of the Maker to perform, in the name of the Maker or the
Payee or otherwise, any and all acts, including without limitation the signing
and filing of financing statements and amendments thereto, that the Payee may
deem necessary or appropriate to effect and continue the security interests
created hereby or intended so to be or otherwise to preserve and protect the
Pledged Securities and the security interest of the Payee therein, but nothing
herein contained or otherwise shall require the Payee to take any such action.
The duty of the Payee in respect of the Pledged Securities shall be strictly
confined to one of reasonable care in the custody of the certificates therefor
so long as they are in the custody of the Payee. Without limiting the
generality of the preceding sentence, the Payee shall not be under any duty to
anyone to send any notices, perform any services, vote, exercise any options or
elections with respect to, pay any taxes or charges associated with, or
otherwise take any action of any kind with respect,to, any of the Pledged
Securities.
5. Transfers Of Interest. Upon any assignment or other transfer by
the Payee of any of the Obligations, the Payee may transfer its interest in the
Pledged Securities, or any part thereof, to the assignee or transferee, who
shall thereupon become vested with all the rights, remedies, powers, security
interests and liens herein granted to the Payee in respect of the Pledged
Securities or the transferred part thereof, subject, however, to the
restrictions contained herein.
6. Expenses. The Pledged Securities secure, and the Maker shall pay
on demand, all reasonable expenses (including but not limited to reasonable
attorneys' fees and costs for legal services, costs of insurance and payments of
taxes or other charges) of,
-6-
<PAGE> 7
or incidental to, the custody, care, sale or realization on any of the Pledged
Securities or in any way relating to the enforcement or protection of the
rights of the Payee hereunder.
7. Notices. All notices, requests, demands, directions,
declarations and other communications provided for herein shall be in writing
and shall be deemed effectively given (a) upon personal delivery to the party to
be notified, (b) three days after notice shall be deposited with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified (i) if to the Maker, at the address
specified for such party on the signature page hereof, and (ii) if to the Payee
at 9 Cotters Lane, East Brunswick, New Jersey 08816. or (c) upon confirmation
that notice shall have been received by fax at the fax number specified for such
party with its address. Any party may change its address or fax number for
notice purposes by giving advance notice hereunder to the other party in
accordance with this Section 7.
8. Governing Law: Consent to Jurisdiction, etc. This Agreement
and the rights and obligations of the parties hereunder shall be governed by
and construed and enforced in accordance with the laws of the State of
Delaware. The Maker and the Payee hereby consent to the jurisdiction of the
courts of the State of Delaware in any action or proceeding that may be brought
against the Maker or the Payee under or in connection with this Note and Pledge
Agreement or any of the transactions contemplated hereby or to enforce any
undertaking contained herein, and if any such action or proceeding shall be
brought against such party, it shall not raise any objection to such
jurisdiction or to the laying of the venue thereof in the City of Wilmington.
Service of process in any such action or proceeding may be duly effected upon
the Maker or the Payee by service in accordance with the provisions of the
Uniform Interstate and International Procedure Act as in effect in New Jersey.
9. Certain Waivers; Integration, etc.
a. The Maker waives presentment for payment, demand, notice
of nonpayment, notice of protest, protest and notice of dishonor of this Note,
and all other notices in connection with the Pledge and the delivery,
acceptance, performance, default or enforcement of the payment of this Note.
The Maker further waives presentment for payment, protest, dishonor and notice
of dishonor and of protest with respect to this Note and Pledge Agreement.
b. The Maker hereby waives any and all present and future
laws and rules of court exempting any of the Pledged Securities or any other
property, real or personal, or any of the proceeds arising from any sale of
such property, from attachment, levy, sale or execution, or providing for any
stay of execution, appraisement, exemption from civil process or extension of
time for payment.
c. This instrument states the entire agreement of the
parties concerning the subject matter hereof, and it is acknowledged that there
are no customs, usages
-7-
<PAGE> 8
representations, or assurances referring to the subject matter, and no
inducements leading to the execution or delivery hereof, other than those
expressed herein.
10. Miscellaneous. This Note and Pledge Agreement shall bind and
inure to the benefit of the Maker and the Payee and their respective heirs,
executors, administrators, personal representative, successors and assigns,
except that the Maker shall not have the right to assign any of the Maker's
rights hereunder or interest herein without the written consent of the Payee.
No persons other than the Maker and the Payee and the respective assignees of
the Payee are intended to be benefited hereby or shall have any rights
hereunder, as third-party beneficiaries or otherwise. The Maker acknowledges
that this Note and Pledge Agreement and the obligations of the Maker hereunder
and the security interest created or intended to be created hereby have
constituted, and were intended by the Maker to constitute, a material
inducement to the Payee to enter into this Note and Pledge Agreement and make
the loan contemplated hereby, knowing that the Payee will rely upon this
Agreement. The Maker intends this to be a sealed instrument and to be legally
bound hereby. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, and all such counterparts shall
together constitute but one and the same instrument. Any provision of this
Note and Pledge Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without affecting the validity or
enforceability of the remainder of this Agreement or the validity or
enforceability of such provision in any other jurisdiction. Words of any
gender herein shall include any other
-8-
<PAGE> 9
genders, and the singular shall include the plural and vice versa, whenever the
same is necessary to produce a fair and meaningful construction.
IN WITNESS WHEREOF, the Maker has executed this Note and Pledge
Agreement, or has caused the same to be executed in its name, under seal and
intending to be legally bound as of the day and year first written above.
MAKER
Robert E. Coghan
-----------------------------
Name:
17 La Costa Court
Skillman, NJ 08858
---------------------------------
---------------------------------
Address
Barbara F. Dowling
- -----------------------------
BARBARA F. DOWLING HOLOPAK TECHNOLOGIES, INC.
Notary Public of New Jersey
My Comm. Expires Feb. 9, 2001
By: David W. Jaffin
-----------------------------
Name: David W. Saffin
Title: Chief Financial Office
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<PAGE> 1
EXHIBIT 11
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30
1996 1995
--------- ---------
<S> <C> <C>
Weighted Average Number of
Common Shares Outstanding 3,347,689 3,517,989
Common Share Equivalents Based
Upon the Treasury Stock Method 25,043 ---
Common Share Equivalents Based
Upon the Modified Treasury
Stock Method --- ---
--------- ---------
Total Common Shares and
Common Share Equivalents
Outstanding 3,372,732 3,517,989
--------- ---------
Net Income $ 246,795 $ 334,847
--------- ---------
Earnings Per Common Share and
Common Share Equivalents:
Net Income $ 0.07 $ 0.10
========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 945,328
<SECURITIES> 0
<RECEIVABLES> 8,008,070
<ALLOWANCES> 42,000
<INVENTORY> 8,297,904
<CURRENT-ASSETS> 19,293,920
<PP&E> 10,569,093
<DEPRECIATION> 0
<TOTAL-ASSETS> 36,961,245
<CURRENT-LIABILITIES> 6,146,340
<BONDS> 0
0
0
<COMMON> 35,495
<OTHER-SE> 26,695,943
<TOTAL-LIABILITY-AND-EQUITY> 36,961,245
<SALES> 11,864,154
<TOTAL-REVENUES> 11,864,154
<CGS> 9,557,984
<TOTAL-COSTS> 1,972,807
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 42,000
<INTEREST-EXPENSE> 76,791
<INCOME-PRETAX> 278,725
<INCOME-TAX> 31,930
<INCOME-CONTINUING> 246,795
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 246,795
<EPS-PRIMARY> .07
<EPS-DILUTED> 0
</TABLE>
