<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 SEPTEMBER 30, 1997
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.
<TABLE>
<CAPTION>
CLASS OUTSTANDING AT 11/10/97
----- -----------------------
<S> <C>
Common Stock, $.01 Par Value 2,796,403
Class A Common Stock, $.01 Par Value 753,086
</TABLE>
<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 September 30, 1997
(Unaudited) and March 31, 1997 1
Consolidated Statements of Operations (Unaudited) for
the Three and Six Months ended September 30, 1997 and
1996 2
Consolidated Statements of Cash Flows (Unaudited) for
the Six Months Ended September 30, 1997 and 1996 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>
SEPTEMBER 30, MARCH 31,
1997 1997
(UNAUDITED) (AUDITED)
------------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents ................. $ 3,339,280 $ 3,004,356
Accounts Receivable, less allowance for
doubtful accounts of $228,827 as of
September 30, 1997 and $174,838 as of
March 31, 1997 .......................... 6,006,015 5,548,899
Inventories (Note 2) ...................... 7,304,577 7,665,210
Prepaid Expenses........................... 311,438 348,538
Prepaid Income Taxes ...................... 313,150 329,713
Deferred Income Taxes ..................... 147,893 124,944
Other Current Assets ...................... 210,272 140,193
----------- -----------
TOTAL CURRENT ASSETS ........................ 17,632,625 17,161,853
Property and Equipment, less accumulated
depreciation and amortization of
$13,742,291 as of September 30, 1997 and
$12,120,857 as of March 31, 1997 .......... 8,888,380 9,827,042
Excess of Cost over Fair Value of Net Assets
Acquired, less accumulated amortization of
$1,661,451 as of September 30, 1997 and
$1,561,260 as of March 31, 1997 ........... 6,699,364 6,799,555
Other Assets ................................ 145,524 177,155
----------- -----------
TOTAL ASSETS................................. $33,365,893 $33,965,605
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current Maturities of Long-Term Debt
(Note 3) ................................ $ 1,146,250 $ 1,752,500
Accounts Payable and Accrued Liabilities .. 3,971,697 3,849,267
----------- -----------
TOTAL CURRENT LIABILITIES ................... 5,117,947 5,601,767
Long-Term Debt (Note 3) ..................... 810,000 1,080,000
Deferred Income Taxes ....................... 1,321,298 1,272,247
----------- -----------
TOTAL LIABILITIES ........................... 7,249,245 7,954,014
----------- -----------
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, nonvoting: $.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 Earnings ......................... 5,656,736 5,566,451
Cumulative Translation Adjustment ......... (532,192) (546,964)
----------- -----------
27,388,133 27,283,076
Less: Common Stock (201,800 shares) Held in
the Treasury, at cost ..................... (1,271,485) (1,271,485)
----------- -----------
Total Stockholders' Equity .................. 26,116,648 26,011,591
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .. $33,365,893 $33,965,605
=========== ===========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30,
1997 1996 1997 1996
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES ................................. $9,864,495 $10,304,402 $18,505,836 $22,168,556
Cost of Sales ................................ 7,698,131 8,460,458 15,333,721 18,018,442
---------- ----------- ----------- -----------
Gross Profit ................................. 2,166,364 1,843,944 4,172,115 4,150,114
Selling, General and Administrative
Expenses ................................... 2,013,337 1,807,285 3,987,659 3,780,092
Restructuring Charge ......................... - 130,000 - 130,000
---------- ----------- ----------- -----------
Operating Income (Loss) ...................... 153,027 (93,341) 184,456 240,022
Interest Income .............................. 32,056 19,208 60,136 41,361
Interest Expense ............................. 38,389 73,068 84,164 149,859
---------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES ........................ 146,694 (147,201) 160,428 131,524
Provision (Benefit) for Income Taxes ......... 63,699 (75,607) 70,143 (43,677)
---------- ----------- ----------- -----------
Income (Loss) From Continuing Operations ..... 82,995 (71,594) 90,285 175,201
Loss From Discontinued Operations
(net of tax benefit of $86,000) ............ - 160,000 - 160,000
---------- ----------- ----------- -----------
NET INCOME (LOSS) ............................ $ 82,995 $ (231,594) $ 90,285 $ 15,201
========== =========== =========== ===========
EARNINGS (LOSS) PER COMMON SHARE AND
COMMON SHARE EQUIVALENTS
Continuing Operations .................... $ 0.02 $ (0.02) $ 0.03 $ 0.05
Discontinuing Operations ................. - (0.05) - (0.05)
---------- ----------- ----------- -----------
NET INCOME (LOSS)........................... $ 0.02 $ (0.07) $ 0.03 $ 0.00
========== =========== =========== ===========
Weighted average number of common shares
and common share equivalents outstanding ... 3,347,689 3,360,996 3,347,689 3,372,061
========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements
2
<PAGE> 5
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
1997 1996
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
NET INCOME....................................................... $ 90,285 $ 15,201
Adjustments to reconcile net income to net cash provided by
operating activities:
Discontinued Operations...................................... -- 160,000
Depreciation................................................. 1,301,660 1,237,408
Amortization................................................. 100,191 99,480
Gain on sale of fixed assets.................................. (5,200) --
Decreases (increases) in:
Accounts receivable......................................... (453,067) 553,154
Inventories................................................. 364,432 504,316
Prepaid expenses............................................ 37,281 21,540
Prepaid income taxes........................................ 17,143 (344,842)
Other current assets........................................ (70,079) (61,606)
Other assets................................................ 31,631 --
(Decreases) increases in:
Accounts payable and accrued liabilities.................... 120,646 (434,067)
Deferred income taxes....................................... 25,191 (99,255)
---------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES................... 1,560,114 1,651,329
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of fixed assets............................. 5,200 --
Capital expenditures........................................... (354,150) (1,017,062)
Advances to discontinued operations............................ -- (160,000)
---------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES..................... (348,950) (1,177,062)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase from short-term borrowings........................ -- 750,000
Repayment of long-term borrowings.............................. (876,250) (876,250)
---------- -----------
NET CASH (USED IN) FINANCING ACTIVITIES...................... (876,250) (126,250)
---------- -----------
Effect of exchange rate changes on cash and cash equivalents.... 10 1,347
---------- -----------
Net increase in cash and cash equivalents....................... 334,924 349,364
Cash and Cash Equivalents, Beginning of Period.................. 3,004,356 1,999,609
---------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................ $3,339,280 $ 2,348,973
========== ===========
</TABLE>
See notes to consolidated financial statements
3
<PAGE> 6
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(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 six months ended September
30, 1997 are not necessarily indicative of the results that may be
expected for the year ending March 31, 1998. 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, 1997.
2. INVENTORIES
The components of inventories were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 MARCH 31, 1997
------------------ --------------
<S> <C> <C>
Finished Goods $3,810,275 $4,248,769
Work in Process 932,232 768,927
Raw Materials 2,562,070 2,647,514
---------- ----------
TOTAL $7,304,577 $7,665,210
========== ==========
</TABLE>
3. NOTE PAYABLE & LONG-TERM DEBT
The Company has available through August 1998 a secured revolving line of
credit in the amount of $3,000,000 to be used for general corporate
purposes. The Company has remaining availability under this general
facility of $3,000,000 at September 30, 1997 and March 31, 1997,
respectively. In addition, the Company had a line of credit for capital
expenditures which converted into a five year term loan in March 1995.
This loan requires equal quarterly payments of $135,000, which began on
June 17, 1995, with a final maturity of March 17, 2000. Outstanding
borrowings on this Capital Expenditures Loan at September 30, 1997 were
$1,350,000. Both facilities bear interest at the three month London
Interbank Offered Rate ("LIBOR") plus 150 basis points. The interest rates
in effect at September 30, 1997 and March 31, 1997 were 6.8% and 6.4%,
respectively.
4
<PAGE> 7
3. NOTE PAYABLE & LONG-TERM DEBT (CONT'D.)
On March 17, 1993, the Company acquired all of the outstanding stock of
Alubec Industries and borrowed $4,850,000 in long-term debt to partially
finance the acquisition. The long-term debt is payable in equal quarterly
installments of $303,125 through 1998 and bears interest at 5.9%. The
balance outstanding on this term loan at September 30,1997 was $606,250.
The conditions of the Company's bank borrowings and long-term debt call
for the Company to maintain certain financial ratios regarding debt
service coverage. At September 30, 1997, the Company was in compliance
with these ratios.
Annual maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
SEPTEMBER 30, PAYMENTS
------------- --------
<S> <C>
1997 $1,146,250
1998 540,000
1999 270,000
----------
TOTAL $1,956,250
==========
</TABLE>
4. ADOPTION OF SFAS 131
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 131. Disclosures about Segments
of an Enterprise and Related Information, which will be effective for the
Company beginning April 1, 1998. SFAS No. 131 redefines how operating
segments are determined and requires expanded quantitative and qualitative
disclosures relating to a companies operating segments. The Company has
not yet made a determination of how this statement will effect its
reporting.
5
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE SIX MONTHS ENDED SEPTEMBER
30, 1996
NET REVENUES:
Net Revenues for the six months ended September 30, 1997 were $19.5 million,
compared to $22.2 million for the comparable period of one year ago. For the
three months ended September 30, 1997, net revenues were $9.9 million, compared
to $10.3 million one year ago.
The decline for both the three and six month period is attributable to weak
sales of metallized paper and metallic hot stamping foils. Sales of metallized
paper declined to $4.5 million for the six month period compared to sales of
$6.1 million for the year earlier. For the second quarter, sales of metallized
paper were $2.2 million, compared to $2.3 million in the prior year.
The decline in metallized paper is attributable to weak orders from trading card
customers and continued slow demand for metallized paper for liquor and tobacco
packaging. Also, there is significant price competition in these markets for
remaining businesses, which has also depressed revenues. The decline in trading
card orders effected the first quarter: the decline in the second quarter was
attributable to the more widespread market factors mentioned above.
Revenues of metallic hot stamping foils were $5.8 million for the six months
ended September 30, 1997, compared to $7.7 million for the comparable period one
year earlier. For the second quarter, revenues of metallic foils were $3.0
million, compared to $3.9 million in the prior year.
The decline in the metallic hot stamping market was attributable to price
cutting by the Company's competitors, and to business lost by the Company as a
result of delivery times slower than those offered by its competition.
In contrast, revenues of holographic products showed strong improvement,
increasing to $4.8 million for the six months ended September 30, 1997, compared
to $3.5 million for the year earlier period. For the second quarter, revenues of
holographic products were $2.6 million, compared to $1.6 million in the year
earlier period.
The Company's holographic business has improved: however, the market showing the
greatest improvement was security and identification cards, in which business
almost doubled from year earlier levels. Sales of decorative holographic
products also improved, but to a lesser extent.
6
<PAGE> 9
COST OF SALES AND GROSS PROFITS:
Gross Profits for the six months ended September 30, 1997 were $4.2 million,
even with the levels achieved in the prior year. For the second quarter, gross
profit was $2.2 million, compared to $1.8 million in the prior year.
Cost reduction in the second quarter cost of goods was attributable to the
effect of lower raw material prices in hot stamping and holographic foil
manufacturing, offset by the effect of lower sales of metallized paper.
For the year to date period, improvements of $700,000 in gross profit from hot
stamping and holographic foil manufacturing were offset by an equal amount from
sales declines in metallized paper.
Gross margin for the six months ended September 30, 1997 was 21.4%, compared to
18.7% for the prior year. Gross margin for the second quarter was 22.0%,
compared to 17.9% for the comparable period last year.
OPERATING EXPENSES:
Selling, General, and Administrative expenses were $4.0 million for the six
months ended September 30, 1997, compared to $3.8 million for the six months
ended September 30, 1996. For the second quarter, Selling, General and
Administrative expenses were $2.0 million, compared to $1.8 million for the
comparable period last year. The increase is attributable to increased
advertising and marketing expense.
OPERATING PROFIT:
Operating Profit for the six months was $184,000, compared to $240,000 for the
prior year. For the second quarter, operating profit was $153,000, compared to a
loss of $93,000 for the quarter ended September 30, 1996.
The shortfall in operating profit year to date is attributable to the shortfall
in earnings from the metallized paper business, all of which occurred in the
first quarter. The improvement in the second quarter is attributable to the
increase in gross profits from the hot stamping and holographic foil businesses.
Also, in the second quarter of fiscal 1997, the Company incurred a restructuring
charge of $130,000 as a result of down sizing its production work force in New
Jersey.
INTEREST EXPENSE, NET:
Net Interest Expense for the six months ended September 30, 1997 was $24,000,
compared to $108,000 for the year earlier period. Lower debt and higher average
cash balances were responsible for the decline.
7
<PAGE> 10
INCOME TAXES:
The effective income tax rate for the six month period was 43.7%, compared to
(33.2%) in the prior comparable period. The reason for the increase in rates
over the prior period is directly attributable to permanent tax differences
calculated on the higher pretax income base.
NET INCOME AND EARNINGS PER SHARE:
Net Income for the six months ended September 30, 1997 was $90,000, compared to
$15,000 for the comparable period last year. Net income last year was depressed
by a $160,000 charge taken in the second quarter as part of the liquidation of
the Company's discontinued operations.
For the quarter ended September 30, 1997, net income was $83,000, compared to a
loss of $232,000 in the comparable period last year. The improvement is
attributable to improved operating profits and the charge taken for discontinued
operations last year.
Earnings per share for the six months ended September 30, 1997 were $.03 on 3.3
million shares outstanding, compared to $.00 for the prior year period.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES:
As of September 30, 1997, the Company had cash of $3.3 million and working
capital of $12.5 million, compared to cash of $3.0 million and working capital
of $11.6 million at March 31, 1997. The increase in cash and working capital is
attributable to cash generated from operations and low capital investment during
the period. Depreciation and amortization for the six months were $1.4 million
while capital investment was only $354,000. The Company also repaid $876,000 in
long-term debt during the period.
STOCKHOLDER'S EQUITY:
Stockholder's equity increased by $105,000 during the period. The increase was
comprised of net income plus a small decrease in the cumulative translation
adjustment.
8
<PAGE> 11
PART II
OTHER INFORMATION
<TABLE>
<S> <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
10.1 Employment Agreement with James L. Rooney
dated August 16, 1997.
10.2 Revised Employment Agreement with Robert Coghan
dated August 27, 1997.
Exhibit 11 Computation of Earnings Per Share
</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/ JAMES L. ROONEY Dated: November 10, 1997
- ----------------------------- -----------------
James L. Rooney
Chief Executive Officer
/s/ DAVID W. JAFFIN Dated: November 10, 1997
- ----------------------------- -----------------
David W. Jaffin,
Chief Financial Officer
10
<PAGE> 13
EXHIBIT INDEX
-------------
Exhibit No. Description
- ----------- -----------
10.1 Employment Agreement with James L. Rooney
dated August 16, 1997.
10.2 Revised Employment Agreement with Robert Coghan
dated August 27, 1997.
11 Computation of Earnings Per Share
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Agreement is made as of the 16 day of August, 1997 by and between
HoloPak Technologies, Inc. a Delaware corporation ("HoloPak" or the "Company")
and James L. Rooney (the "Employee").
RECITALS
The Company desires to employ the Employee, and the Employee desires to
become an employee of the Company, upon the terms and conditions hereinafter set
forth.
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment.
The Company hereby employs the Employee as Chief Executive Officer and
the Employee hereby accepts such employment. During the term of employment under
this Agreement (the "Employment Term"), the Employee shall perform such duties
as are requested from time to time by the Board of Directors of the Company or
the Chairman of the Board of Directors of the Company. The Employee shall also
be appointed to the Board of Directors of the Company, subject to approval by
the Board of Directors, to serve until his successor is elected and qualified.
2. Performance.
During the Employment Term, the Employee shall devote his entire
business efforts to the performance of his duties hereunder.
3. Term.
Unless otherwise terminated in accordance with Sections 5 or 6, the
Employment Term shall be for an initial term of eighteen months commencing on
September 1, 1997.
4. Compensation for Employment.
(a) The basic annual compensation of the Employee for his employment
services to the Company and to all of its affiliated companies during the
Employment Term shall be $200,000 (the "Salary"), which the Company shall pay to
the Employee in accordance with its normal payroll policy.
<PAGE> 2
(b) Commencing as of September 1, 1997 (the "Bonus Starting Date") and
continuing during the Employment Term, the Company shall pay the Employee a
bonus in accordance with this paragraph (b). For each fiscal year during the
Employment Term, the Board, in its sole discretion, shall establish a budget for
pre-tax income in accordance with generally accepted accounting principles
consistently applied ("GAAP") and the Employee's bonus will vary as a percentage
of Salary in relation to the percentage achievement of budget as follows:
<TABLE>
<CAPTION>
Percentage of
Budget Target Percentage of Salary
Attained Earned as Bonus
-------------------------------------------------------
<S> <C>
less than 80% 0%
80%-90% 10%
90%-100% 20%
100%-110% 30%
110%-120% 40%
120% less than or equal to 50%
</TABLE>
For a percentage of budget achievement between the benchmarks, the percentage of
Salary shall be linearly interpolated, provided that no bonus shall be paid for
achievement less than 80% of budget and the maximum bonus shall be 50% of Salary
in any event. In the case of a partial fiscal year, the Company shall adjust the
bonus to correspond to the Company's budget and the salary for the portion of
the applicable fiscal year that shall be included in the Employment Term.
Notwithstanding the foregoing, the Employee's initial bonus period (the "Initial
Bonus Period") shall be the period starting with the Bonus Starting Date and
ending September 1, 1998, and the Company shall use its budget for that period
(a copy of which the Company has provided to the Employee) to determine the
Employee's eligibility for a bonus, and then apply the applicable bonus
percentage to that portion of the Employee's annual Salary that relates to the
Initial Bonus Period.
(c) During the Employment Term, the Company shall also provide the
Employee with those fringe benefits that are specified on Exhibit "A" hereto
(the "Fringe Benefits"). The Company shall also reimburse the Employee for any
reasonable business expenses incurred on the Company's behalf in connection with
the performance of his services during the Employment Term.
(d)(i) HoloPak will grant to the Employee under its Non-Qualified Stock
Option Plan (the "Plan") options to purchase shares of Common Stock ("Options")
for 100,000 shares of HoloPak Common Stock at an exercise price of $3.25 per
share. The Options will vest and become exercisable in three equal installments
as follows: (i) 33,334 shares on March 1, 1998, (ii) 33,333 shares on September
1, 1998 and (iii) 33,333 shares on March 1, 1999. The Options will be subject to
the terms of the Plan and an Option Grant Letter, a copy of which has been
provided to the Employee.
-2-
<PAGE> 3
(ii) The Employee will be an eligible participant in the Plan
and, therefore, will be eligible for grants of stock options in addition to the
Options referred to above. The administrator of the Plan, which is currently a
committee of the Board of Directors, will determine from time to time whether
any such additional options shall be granted to the Employee and the exercise
price, vesting schedule and other terms of any such additional options that may
be granted.
(e) HoloPak's commitment to grant the Options is subject to HoloPak's
obtaining approval of such items by HoloPak's Board of Directors.
5. Termination Without Compensation.
(a) Partial or Total Disability. If the Employee is unable to perform
his duties and responsibilities hereunder to the full extent required hereunder
by reason of non-employment related illness, injury or incapacity for six months
(during which time he shall continue to be compensated hereunder), the Company
may terminate the Employment Term, and the Company shall not have any further
liability or obligation to the Employee hereunder except for any unpaid Salary,
any unpaid bonus earned by Employee pursuant to Section 4(b) hereof for the
bonus period in which termination of employment occurs, adjusted pro rata based
upon the portion of such bonus period in which the Employee was actually
employed by the Company hereunder and any Fringe Benefits accrued to the date of
termination, provided, however, that Employee reserves any rights that he may
have against the Company with respect to any claims for damages and/or benefits
under any Workers' Compensation Act, or otherwise, arising out of injuries,
illness or incapacity incurred as a result of his employment with the Company
(an "Employment Injury"). In the event of any dispute under this Section 5(a),
the Employee shall submit to a physical examination by a licensed physician
mutually satisfactory to the Company and the Employee, the cost of such
examination to be paid by the Company, and the determination of such physician
shall be determinative. If, after termination due to disability as provided
herein, the Employee obtains, at his sole expense, medical certification from a
licensed physician reasonably satisfactory to the Company that such disability
has ended, the Company shall offer to employ the Employee pursuant to the terms
of this Agreement for the remainder of the initial term or any renewal term in
effect at the time of termination, except that the Company shall not be required
to reemploy the Employee at the same officer position if the Company shall have
elected another person to such position during the period of the Employee's
disability and such other person continues in such position at the time of the
Employee's return to employment.
(b) Death. If the Employee dies, this Employment Agreement (except for
the provisions of Sections 6, 10 and 11 hereof) shall terminate, and thereafter
the Company shall not have any further liability or obligation to the Employee,
his executors, administrators, heirs, assigns or any other person claiming under
or through him except for unpaid Salary, any unpaid bonus earned by Employee
pursuant to Section 4(b) hereof for the bonus period in which Employee's death
occurs, adjusted pro rata based upon the portion of such bonus period in which
the Employee was actually employed by the Company hereunder and any Fringe
Benefits accrued to the date of his death.
-3-
<PAGE> 4
(c) Cause. The Company may terminate the Employment Term for "cause" by
giving the Employee 60 days' written notice of the termination date, and
thereafter the Company shall not have any further liability or obligation to the
Employee. For purposes of this Agreement, "cause" shall mean the failure of the
Employee to observe or perform (other than by reason of illness, injury or
incapacity) any of the material terms or provisions of this Agreement,
dishonesty, willful misconduct, material neglect of the Company's business,
conviction of a felony or other crime involving moral turpitude,
misappropriation of funds or habitual insobriety. Any such willful misconduct or
material neglect shall constitute "cause" only if the action (or omission) at
issue shall be continuing 30 days after the Company gives the Employee written
notice of such willful misconduct or material neglect constituting "cause".
6. Termination With Compensation.
(a) Non-Renewal of Term. The Employment Term may be terminated by
either party hereto as of the end of the initial term or any renewal term then
in effect by giving written notice of the intention to terminate the Employment
Term at least 90 days prior to the proposed termination date. If the Company
terminates the Employment Term under such circumstances, the Company shall
provide the Employee with the Termination Compensation specified in Section
6(c).
(b) Without Cause. The Company shall have the right to terminate the
Employment Term without cause at any time by giving the Employee 60 days'
written notice of the termination date. Under such circumstances, the Company
shall provide the Employee with the Termination Compensation specified in
Section 6(c).
(c) Termination Compensation. The "Termination Compensation" shall
consist of payment of the Employee's Salary under Section 4(a), at the level in
effect at the date of termination, for the longer of (A) any remaining part of
the initial term of the Employment Term or (B) 6 months. The Employee shall not
be entitled to any Termination Compensation under this Section 6 unless the
Employee executes and delivers to the Company after a notice of termination a
release in a form satisfactory to the Company in its sole discretion by which
the Employee releases the Company and its affiliates, and the Company so
releases the Employee, from any obligations and liabilities of any type
whatsoever, except for the Company's obligation to provide the Salary specified
in this Section 6, any unpaid bonus earned by Employee pursuant to Section 4(b)
hereof for the bonus period in which termination of employment occurs, adjusted
pro rata based upon the portion of such bonus period in which the Employee was
actually employed by the Company hereunder and any liability for any Employment
Injury. The parties hereto acknowledge that the Salary to be provided under this
Section 6 is to be provided in consideration for the above-specified release.
(d) Exclusivity. Upon any termination by the Company under Section 6(a)
or Section 6(b), the Company shall not have any obligation to the Employee, his
executors, administrators, heirs, assigns or any other person claiming under or
through him other than to provide the Termination Compensation under the terms
and conditions of Section 6(c) and any obligation that the Company may have for
any Employment Injury.
-4-
<PAGE> 5
7. Agreement Not to Compete.
(a) During the Non-Competition Period (defined below), the Employee
shall not, within the Restricted Area (defined below) directly or indirectly, in
any capacity, without the express written consent of the Chairman of the Board
of Directors of the Company, render his services, engage in any business
activity or have a financial interest in, any business (other than as the holder
of not more than one percent of the total outstanding stock of any publicly-held
company) that is competitive with any of those business activities in which
HoloPak, Transfer Print Foils, Inc., Alubec Industries Inc. or any person,
partnership, association, corporation or other entity (each a "Person")
controlled by any of them (any such party is referred to herein as a "HoloPak
Party") shall have been engaged during his employment by the Company, nor shall
the Employee assist any person or entity that is engaged in such business,
including by making HoloPak Information (defined below) available to any such
person or entity. In addition, the Employee shall not directly or indirectly
solicit or otherwise encourage any of employees of any HoloPak Party to
terminate their employment with the applicable HoloPak Party. Notwithstanding
the above, the Employee may become employed or consult in the areas of adhesive
coating, extrusion coating, silicone coating, laminating, printing, paper or
film manufacturing upon termination of his employment, except to the extent that
the Company can prove such subsequent employment is in direct competition with a
HoloPak Party. As used herein, the "Restricted Area" means (i) the United States
of America and (ii) Canada. If a court determines that the foregoing
restrictions are too broad or otherwise unreasonable under applicable law,
including with respect to time or space, the court is hereby requested and
authorized by the parties hereto to review the foregoing restriction to include
the maximum restrictions allowable under applicable law. The "Non-Competition
Period" means the period during which the Employee is employed hereunder. In
addition, (A) in the case of termination of employment pursuant to Section 6
hereof, the "Non-Competition Period" shall be extended from the date of such
termination of employment for a period equal to the greater of (x) the period in
which any payment of compensation (except for an employment related injury) is
made to Employee pursuant to this Agreement and (y) one year, or (B) in the case
of termination of employment pursuant to Section 5 hereof, the "Non-Competition
Period" shall be extended from the date of such termination of employment for a
period of one year.
(b) The terms of this Section 7 shall apply to the Employee and any
Person controlled by the Employee, including any relative of the Employee, to
the same extent as if they were parties hereto, and the Employee shall take
whatever actions may be necessary to cause any such Persons or entities to
adhere to the terms of this Section 7.
8. Inventions, Designs and Product Developments.
All inventions, innovations, designs, ideas and product developments
(collectively, the "Developments"), developed or conceived by the Employee,
solely or jointly with others, whether or not patentable or copyrightable, at
any time during the Employment Term and that relate to the actual or planned
business activities of any HoloPak Party and all of the Employee's right, title
and interest therein, shall be the exclusive property of the applicable HoloPak
Party. The Employee
-5-
<PAGE> 6
hereby assigns, transfers and conveys to any applicable HoloPak Party all of his
right, title and interest in and to any and all such Developments. As requested
from time to time by the Board, the Employee shall disclose fully, as soon as
practicable and in writing, all Developments to the Chairman of the Board of
Directors of the Company. At any time and from time to time, upon the request of
any of the Board, the Employee shall execute and deliver to the Company any and
all instruments, documents and papers, give evidence and do any and all other
acts that, in the opinion of counsel for the Company, are or may be necessary or
desirable to document such transfer or to enable any applicable HoloPak Party to
file and prosecute applications for and to acquire, maintain and enforce any and
all patents, trademark registrations or copyrights under United States or
foreign law with respect to any such Developments or to obtain any extension,
validation, reissue, continuance or renewal of any such patent, trademark or
copyright. The applicable HoloPak Party will be responsible for the preparation
of any such instruments, documents and papers and for the prosecution of any
such proceedings and will reimburse the Employee for all reasonable expenses
incurred by him in compliance with the provisions of this Section.
9. Confidential Information.
(a) The Employee has had and will have possession of or access to
confidential information relating to the business of one or more HoloPak
Parties, including writings, equipment, processes, drawings, reports, manuals,
invention records, financial information, business plans, customer lists, the
identity of or other facts relating to prospective customers, inventory lists,
arrangements with suppliers and customers, computer programs, or other material
embodying trade secrets, customer or product information or technical or
business information of certain HoloPak Parties. All such information, other
than any information that is in the public domain through no act or omission of
the Employee or which he is authorized to disclose, or that the Employee had in
his possession prior to his employment with the Company is referred to
collectively as the "HoloPak Information." During and after the Employment Term,
the Employee shall not knowingly, willfully or intentionally (i) use or exploit
in any manner the HoloPak Information for himself or any Person other than a
HoloPak Party, (ii) remove any HoloPak Information, or any reproduction thereof,
from the possession or control of any HoloPak Party or (iii) treat HoloPak
Information otherwise than in a confidential manner.
(b) All HoloPak Information developed, created or maintained by the
Employee, alone or with others while employed by the Company, and all HoloPak
Information maintained by the Employee thereafter, shall remain at all times the
exclusive property of the applicable HoloPak Party. The Employee shall return to
the Company all HoloPak Information, and reproductions thereof, whether prepared
by him or others, that are in his possession immediately upon request and in any
event upon the completion of his employment by the Company.
10. Remedies.
The Employee expressly acknowledges that the remedy at law for any
breach of Sections 7, 8 or 9 will be inadequate and that upon any such breach or
threatened breach, the Company (or the applicable HoloPak Party) shall be
entitled as a matter of right to injunctive relief in any court of
-6-
<PAGE> 7
competent jurisdiction, in equity or otherwise, and to enforce the specific
performance of the Employee's obligations under these provisions without the
necessity of proving the actual damage or the inadequacy of a legal remedy.
Subject to the remainder of this Section 10, the rights conferred upon the
Company (and any HoloPak Party) by the preceding sentence shall not be exclusive
of, but shall be in addition to, any other rights or remedies which HoloPak may
have at law, in equity or otherwise.
11. Survival.
Notwithstanding the termination of the Employment Term pursuant to
Section 5 or 6, the obligations of the Employee under Sections 7, 8 and 9 hereof
shall survive and remain in full force and effect and the Company shall be
entitled to relief against the Employee pursuant to the provisions of Section 10
hereof.
12. General.
(a) Governing Law. The terms of this Agreement shall be governed by the
laws of the State of New Jersey.
(b) Interpretation. Unless the context of this Agreement clearly
requires otherwise, (i) references to the plural include the singular, and to
the singular include the plural, (b) "or" has the inclusive meaning frequently
identified with the phrase "and/or" and (c) "including" has the inclusive
meaning frequently identified with the phrase "but not limited to." The section
and other headings contained in this Agreement are for reference purposes only
and shall not control or affect the construction of this Agreement or the
interpretation thereof in any respect. Section, subsection, schedule and exhibit
references are to this Agreement unless otherwise specified. Each accounting
term used herein that is not specifically defined herein shall have the meaning
given to it under GAAP.
(c) Binding Effect. All of the terms and provisions of this Agreement
shall be binding upon and inure to the benefit and be enforceable by the
respective heirs, representatives, successors (including any successor as a
result of a merger or similar reorganization) and assigns of the parties hereto,
except that the duties and responsibilities of the Employee hereunder are of a
personal nature and shall not be assignable in whole or in part by the Employee.
Any HoloPak Party other than the Company is a third party beneficiary of this
Agreement and may enforce the provisions of this Agreement that pertain to such
HoloPak Party, including Sections 7, 8 and 9, to the same extent as if a party
hereto.
(d) Notices. All notices required to be given under this Agreement
shall be in writing and shall be deemed to have been given when personally
delivered or when mailed by registered or certified mail, postage prepaid,
return receipt requested, or when sent by Federal Express or other overnight
delivery service, addressed as follows (or to such other address that a party
may provide from time to time by notice to the other parties):
-7-
<PAGE> 8
TO EMPLOYEE:
James L. Rooney
1272 Camelot Lane
Lemont, IL 60439
TO HOLOPAK:
HoloPak Technologies, Inc.
9 Cotters Lane
East Brunswick, NJ 08816
Attention: Chairman of the Board
TO THE COMPANY:
Transfer Print Foils, Inc.
9 Cotters Lane
East Brunswick, NJ 08816
Attention: Chief Executive Officer
(e) Entire Agreement; Termination of Prior Agreement; Modification.
This Agreement (including Exhibit A hereto) and the additional agreements
specified in Sections 4(d) and 4(e) (to the extent that the parties enter into
any of such agreements) constitute the entire agreement of the parties hereto
with respect to the subject matter hereof. This Agreement may not be modified or
amended in any way except in writing by the parties hereto.
(f) Duration. Notwithstanding the termination of the Employment Term
and of the Employee's relationship with the Company, this Agreement shall
continue to bind the parties for so long as any obligations remain under this
Agreement, and in particular, the Employee shall continue to be bound by the
terms of Sections 7, 8 and 9.
(g) Waiver. No waiver of any breach of this Agreement shall be
construed to be a waiver as to succeeding breaches.
(h) Severability. If any provision of this Agreement or application
thereof to anyone under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provisions or applications of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision in any other jurisdiction.
(i) Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures hereto were upon the same instrument.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have hereunto duly executed this Agreement the day and year first written above.
HOLOPAK TECHNOLOGIES, INC.
By: /s/ David W. Jaffin /s/ James L. Rooney
------------------------------ -------------------------
Name: David W. Jaffin James L. Rooney
Title: Chief Financial Officer
and Secretary
-9-
<PAGE> 10
EXHIBIT A
FRINGE BENEFITS
1. Typical Officer Benefits: Inclusion in the benefit plans generally
given to executive officers of the Company from time to time, including
any benefits provided with respect to health, life and disability
insurance and participation in any of the Company's profit sharing and
pension plans. In addition, the Company shall waive the waiting period
for participation in the profit sharing and 401(k) plans to the extent
permitted by law to allow Employee to participate in such plans at the
earliest possible date.
2. Vacation: Four weeks of paid vacation for each one-year period of
employment under this Agreement.
3. Automobile Allowance: Company automobile allowance consistent with the
allowance given to executive officers of the Company.
4. Leased Apartment: The Company will pay for a rented apartment located
within a 20-mile radius of the Company's headquarters, for use by the
Employee at a cost not to exceed $1,500 per month. In the event that
suitable living arrangements are not available at the allotted cost,
the parties may mutually agree upon an increased allowance amount.
5. Round Trip Airfare: The Company will pay for two coach class roundtrip
airline tickets from Newark to Chicago per month.
-10-
<PAGE> 1
EXHIBIT 10.2
AMENDMENT NO. 1 TO
EMPLOYMENT AGREEMENT
This AMENDMENT NO. 1 (the "Amendment") is made as of this ____ day of
August, 1997, by and among HOLOPAK TECHNOLOGIES, INC., a Delaware corporation
(formerly known as TPF Holding Company, the "Company"), TRANSFER PRINT FOILS,
INC., a New Jersey corporation ("TPF") and ROBERT COGHAN (the "Employee") to
amend the Employment Agreement among the Company, TPF and the Employee, dated
January 4, 1990 (the "Employment Agreement").
RECITALS
WHEREAS, pursuant to the Employment Agreement, the Employee is
employed as Chief Executive Officer of the Company and President of TPF, the
parties wish to amend and clarify certain terms of the Employment Agreement. Any
capitalized terms used herein and not otherwise defined shall have the meanings
given them in the Employment Agreement.
NOW, THEREFORE, in consideration of the premises and the
covenants herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Effective as of September 1, 1997, the Employee resigns as Chief
Executive Officer of the Company and TPF and, effective as of September 26,
1997, the Employee resigns from the Board of Directors of the Company and TPF.
The Employee shall serve as President of TPF, pursuant to the terms of the
Employment Agreement, as amended hereby, for the period commencing on September
1, 1997 and ending on December 31, 1999 (the "Initial Term"). Effective as of
December 31, 1999, the Employee agrees to resign from all positions held by him
with the Company and TPF, except as otherwise contemplated hereby. Thereafter,
the Company shall retain the Employee as, and the Employee agrees to serve as, a
consultant to the Company for the period commencing on January 1, 2000 and
ending on December 31, 2001 (the "Consulting Term"). The "Employment Term," as
such term is used in the Employment Agreement, as amended hereby, shall be the
period commencing on September 1, 1997 and ending on December 31, 2001, unless
the Employment Agreement, as amended hereby, is otherwise terminated in
accordance with Sections 8 or 9 of the Employment Agreement. If the Company
terminates the Employee pursuant to Section 9 of the Employment Agreement, the
Employee's compensation as set forth herein shall continue for the remainder of
the Employment Term, including any commissions earned or to be earned hereunder.
<PAGE> 2
The Company cannot terminate the Employee pursuant to Section 8(a) of the
Employment Agreement, provided, however, that at the end of the Employment Term,
there will be no renewal term as provided for in Section 3 of the Employment
Agreement.
2. During the Employment Term, the Employee shall serve at the
direction of the Chairman of the Board of Directors of the Company, and shall
otherwise be bound by the terms set forth in the Employment Agreement, as
amended hereby.
3. (a) During the Initial Term, (i) for the period beginning
September 1, 1997 and ending December 31, 1997, the Employee's basic annual
compensation for services rendered to TPF and the Company under the Employment
Agreement, as amended hereby (the "Salary"), shall remain unchanged from its
current level, paid in accordance with Company policies, and (ii) for the period
beginning January 1, 1998 and ending on the completion of the Initial Term, the
Employee's Salary shall be $175,000, paid in accordance with Company policies.
(b) In addition, during the Initial Term, the Employee shall
receive a commission of 2% on all credited sales by the Employee to his accounts
in excess of $3.5 million each calendar year, payable monthly after attainment
of the $3.5 million threshhold.
(c) During the Consulting Term, the Employee shall receive as
compensation for services rendered to TPF and the Company under the Employment
Agreement, as amended hereby, commission of 1.25% on all credited sales by the
Employee to his accounts, payable in accordance with Company policy regarding
payments of commissions to employee salespersons. The Employee will be credited
with commissions during the Employment Term for all sales orders to the
Employee's accounts regardless of whether the sales order was made by the
Employee or other employees of the Company. The Employee's accounts shall be
considered for purposes of computation of commission as his accounts throughout
the Employment Term. All commissions shall be credited during the year in which
product is actually shipped, provided, however, that the Employee shall receive
credit for commissions on sales orders made during the final year of the
Consulting Term that are shipped within 60 days of the end of the Consulting
Term.
4. The Employee shall select and use his best efforts to train
qualified personnel to assume lead responsibility for all accounts no later than
September 1, 1998. During the Consulting Term, the Employee shall retain the
right to direct the efforts of the personnel servicing his accounts, should
sales from those accounts decline.
- 2 -
<PAGE> 3
5. This Amendment shall become effective as of the date and year stated
above. Except as expressly amended or modified herein, all of the terms and
conditions of the Employment Agreement shall continue in full force and effect.
6. The Employment Agreement, as amended hereby, contains the entire
agreement between the parties pertaining to the subject matter hereof and
supersedes all prior oral or written agreements between the parties with respect
to such matters.
7. This Amendment shall become binding when any one or more
counterparts hereof, individually or taken together, shall bear the signatures
of each of the parties hereto. This Amendment may be executed in any number of
counterparts, each of which shall be an original as against any party whose
signature appears thereon, but all of which together shall constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Amendment as of the date first above written.
HOLOPAK TECHNOLOGIES, INC. TRANSFER PRINT FOILS, INC.
By: /s/ Robert J. Simon By: /s/ Robert J. Simon
---------------------------- ----------------------------
Robert J. Simon Robert J. Simon
Chairman of the Board of Chairman of the Board of
Directors Directors
/s/ Robert Coghan
- --------------------------------
Robert Coghan
- 3 -
<PAGE> 1
EXHIBIT 11
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS ENDED
ENDED SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted Average Number of
Common Shares Outstanding 3,347,689 3,347,689 3,347,689 3,347,689
Common Share Equivalents Based
Upon the Treasury Stock Method -- 13,307 -- 24,372
Total Common Shares and
Common Share Equivalents
Outstanding 3,347,689 3,360,996 3,347,689 3,372,061
---------- ---------- ---------- ----------
Earnings (Loss) Per Common Share and
Common Share Equivalents:
Continuing Operations $ 0.02 $ (0.02) $ 0.03 $ 0.05
Discontinued Operations -- (0.05) -- (0.05)
---------- ---------- ---------- ----------
Net Income (Loss) $ 0.02 $ (0.07) $ 0.03 $ 0.00
========== ========== ========== ==========
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 3,339,280
<SECURITIES> 0
<RECEIVABLES> 6,006,015
<ALLOWANCES> 228,527
<INVENTORY> 7,304,577
<CURRENT-ASSETS> 17,632,625
<PP&E> 8,888,380
<DEPRECIATION> 13,742,291
<TOTAL-ASSETS> 33,365,893
<CURRENT-LIABILITIES> 5,117,947
<BONDS> 810,000
0
0
<COMMON> 27,964
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 33,365,893
<SALES> 19,505,836
<TOTAL-REVENUES> 19,505,836
<CGS> 15,333,721
<TOTAL-COSTS> 15,333,721
<OTHER-EXPENSES> 3,987,659
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,164
<INCOME-PRETAX> 160,428
<INCOME-TAX> 70,143
<INCOME-CONTINUING> 90,285
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,285
<EPS-PRIMARY> .03
<EPS-DILUTED> 0
</TABLE>
