<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, 1998
OR
__ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to _____________________
Commission File Number 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) (732) 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 8/4/98
Common Stock, $ .01 Par Value 2,796,403
Class A Common Stock, $ .01 Par Value 753,086
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HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX
Page Number
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998
(Unaudited) and March 31, 1998 1
Consolidated Statements of Operations for the Three
Months ended June 30, 1998 and 1997 (Unaudited) 2
Consolidated Statements of Cash Flows for the Three
Months Ended June 30, 1998 and 1997 (Unaudited) 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 8
SIGNATURES 9
EXHIBITS
<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1998 1998
(UNAUDITED) (AUDITED)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and Cash Equivalents .................................................................... $ 2,389,200 $ 1,939,764
Accounts Receivable, less allowance
for doubtful accounts of $217,387 as of June 30, 1998 and $217,604 as of March 31, 1998 ... 5,428,970 5,740,100
Inventories (Note 2) ......................................................................... 7,278,820 7,413,759
Prepaid Expenses ............................................................................. 558,826 477,020
Prepaid Income Taxes ......................................................................... 178,451 104,876
Deferred Income Taxes ........................................................................ 125,000 129,834
Other Current Assets ......................................................................... 51,966 40,120
------------ ------------
TOTAL CURRENT ASSETS ............................................................................. 16,011,233 15,845,473
Property and Equipment, less accumulated depreciation of $14,866,191 as of June 30, 1998 and ..... 8,094,030 8,169,074
$14,382,827 as of March 31, 1998
Excess of Cost over Fair Value of Net Assets Acquired, less
accumulated amortization of $1,811,778 as of June 30, 1998 and $1,761,669 as of March 31, 1998 6,549,037 6,599,146
Other Assets ..................................................................................... 145,961 147,102
------------ ------------
Total Assets .................................................................................... $ 30,800,261 $ 30,760,795
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Note Payable (Note 3) ......................................................................... $ 500,000 $ --
Current Maturities of Long-Term Debt (Note 3) ................................................. 945,000 1,080,000
Accounts Payable and Accrued Liabilities ...................................................... 3,163,967 3,079,475
------------ ------------
TOTAL CURRENT LIABILITIES ........................................................................ 4,608,967 4,159,475
Long-Term Debt (Note 3) ......................................................................... -- --
Deferred Income Taxes ............................................................................ 980,849 1,027,353
------------ ------------
TOTAL LIABILITIES ................................................................................ 5,589,816 5,186,828
------------ ------------
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 ............................................................................ 5,180,395 5,302,398
Cumulative Translation Adjustment ............................................................. (962,054) (720,535)
------------ ------------
26,481,930 26,845,452
Less: Common Stock (201,800 shares) Held In Treasury, at cost ............................... (1,271,485) (1,271,485)
------------ ------------
Total Stockholders' Equity ....................................................................... 25,210,445 25,573,967
Total Liabilities and Stockholders' Equity ....................................................... $ 30,800,261 $ 30,760,795
============ ============
</TABLE>
See unaudited notes to consolidated financial statements.
1
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HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
NET REVENUES ....................................... $ 8,760,306 $ 9,641,341
Cost of Sales ...................................... 7,044,715 7,635,590
----------- -----------
Gross Profit ....................................... 1,715,591 2,005,751
Selling, General and Administrative Expenses ....... 1,897,170 1,974,322
----------- -----------
Operating (Loss) Income ............................ (181,579) 31,429
Interest Income .................................... 31,638 28,080
Interest Expense ................................... 27,285 45,775
----------- -----------
(LOSS) INCOME
BEFORE INCOME TAXES (BENEFIT) ............. (177,226) 13,734
(Benefit) Provision for Income Taxes ............... (55,223) 6,444
----------- -----------
NET (LOSS) INCOME .................................. $ (122,003) $ 7,290
=========== ===========
BASIC AND DILUTED (LOSS) EARNINGS PER SHARE (NOTE5):
NET (LOSS) INCOME .............................. $ (0.04) $ 0.00
=========== ===========
Weighted-average number of common shares
and common share equivalents outstanding ........ 3,347,689 3,347,689
</TABLE>
See unaudited notes to consolidated financial statements.
2
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HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1998 1997
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
NET (LOSS) INCOME ....................................................................... $ (122,003) $ 7,290
Adjustments to reconcile net (loss) income to net cash provided by operating activites:
Depreciation ....................................................................... 582,980 636,695
Amortization ....................................................................... 50,109 50,082
Decreases (Increases) In:
Accounts receivable .............................................................. 249,194 (209,901)
Inventories ...................................................................... 67,063 373,769
Prepaid expenses ................................................................. (85,698) 114,400
Prepaid Income taxes ............................................................. (74,002) (20,122)
Other current assets ............................................................. (11,846) 12,169
Other assets ..................................................................... (29,359) 15,806
(Decreases) Increases In:
Accounts payable and accrued liabilities ......................................... 108,097 70,599
Deferred income taxes ............................................................ (32,238) (17,192)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES ....................................... 702,297 1,033,595
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ................................................................ (597,756) (183,380)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES ........................................... (597,756) (183,380)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term borrowings ................................................... (135,000) (438,125)
Net increase in short-term borrowings ............................................... 500,000 --
----------- -----------
Net cash provided by (used in) financing activities ............................. 365,000 (438,125)
----------- -----------
Effect of exchange rate changes on cash and cash equivalents ............................ (20,105) (2,974)
----------- -----------
Net increase in cash and cash equivalents ............................................... 449,436 409,116
Cash and Cash Equivalents, Beginning of Period ......................................... 1,939,764 3,004,356
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................................................ $ 2,389,200 $ 3,413,472
=========== ===========
</TABLE>
See unaudited notes to consolidated financial statements.
3
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HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED JUNE 30, 1998 AND 1997
(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, 1998 are not necessarily indicative of the
results that may be expected for the year ending March 31, 1999. 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, 1998.
2. INVENTORIES
The components of inventories were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998 MARCH 31, 1998
------------- --------------
<S> <C> <C>
Finished Goods $3,522,883 $3,859,107
Work in Process 903,654 839,991
Raw Materials 2,852,283 2,714,661
--------- ---------
TOTAL $7,278,820 $7,413,759
========== ==========
</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 $2,500,000 at June 30,1998 and $3,000,000 at March 31,
1998, respectively. The Company is presently in the process of
renewing this facility. In addition, the Company has a five year term
loan. 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 June 30,
1998 and March 31, 1998 were $945,000 and $1,080,000, respectively.
Both facilities bear interest at the three month London Interbank
Offered Rate ("LIBOR") plus 150 basis points. The interest rates in
effect at June 30, 1998 and March 31, 1998 were 6.9%.
4
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3. NOTE PAYABLE & LONG-TERM DEBT (CONT'D)
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 and certain amounts of tangible net worth. At March
31, 1998, the Company was not in compliance with a financial ratio;
however, the Company obtained a waiver on this covenant as of March 31,
1998. The bank has not waived the covenants for future potential
noncompliance and, therefore, all amounts under this agreement have
been classified as current liabilities.
4. ADOPTION OF SFAS NO. 130
In 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." Comprehensive income is defined as the total
change in shareholders' equity during the period other than from
transactions with shareholders. For the Company, comprehensive income
is comprised of net income and the net change in the accumulated
foreign currency translation adjustment account. Total comprehensive
income (loss) for the three months ended June 30, 1998 and 1997 was
($241,519) and $21,984, respectively.
5. ADOPTION OF SFAS NO. 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 1999 Fiscal Year End. SFAS No. 131
redefines how operating segments are determined and requires expanded
quantitative and qualitative disclosures relating to a company's
operating segments. The Company is currently assembling the data and
evaluating the impact of SFAS No. 131 on its current disclosures.
6. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share". This standard revises certain
methodology for computing earnings per common share and requires the
reporting of two earnings per share figures: basic earnings per share
and diluted earnings per share. Basic earnings per share is computed
by dividing net income by the weighted-average number of shares
outstanding. Diluted earnings per share is computed by dividing net
income by the sum of the weighted-average number of shares outstanding
plus the dilutive effect of shares issuable through the exercise of
stock options. All earnings per share figures presented herein have
been computed in accordance with the provisions of SFAS No. 128. For
the Company, both basic and diluted earnings per share equal
previously reported primary earnings per share. There was no dilutive
effect for the three months ended June 30, 1998 and June 30, 1997.
7. YEAR 2000
Many of the Company's system must be modified due to the
computer program limitations in recongnizing dates beyond 1999. If not
corrected, the system could fail or cause erroneous results by, at or
after January 1, 2000. Substantial changes to, and some replacements
of present systems will be needed to mitigate potential Year 2000
issues. Costs will be expensed as incurred in accordance with Emerging
Issues Task Force (EITF) Issue No 96-14. "Accounting for the Costs
Associated with Modifying Computer Software for the Year 2000". The
Company is in the process of identifying and implementing solutions
for the Company's systems and surveying its top vendors to assess its
plans for the Year 2000 readiness. The Company plans to have critical
systems for the Year 2000 ready by mid-1999. The modification of
systems will be performed by a composite of both Company personnel and
external consultants. Management is in the process of determining the
total anticipated cost for compliance with Year 2000 issues.
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, 1998 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1997
NET REVENUES:
During the three months ended June 30, 1998, net revenues were $8.8 million
compared to $9.6 million for the same period last year, a decrease of 8.3%. The
decrease is attributable to reduced average selling prices as a result of
competitive pricing pressures and decreases in the cost of raw materials passed
on to customers. Unit volume sales increased slightly during the quarter ended
June 30, 1998 compared to the quarter ended June 30, 1997. Revenues from sales
of hot stamping foils decreased from $5.1 million to $4.2 million due to the
decrease in the average selling price per unit as discussed above. Revenues
from sales of holographic products decreased from $2.2 million to $2.1 million
as a result of reduced demand for decorative hot stamping foils partially
offset by increased average selling prices. Revenues for metallized paper
remained substantially the same but were negatively impacted by the weakness of
the Canadian dollar.
COST OF SALES AND GROSS PROFIT:
Cost of sales decreased by $.6 million to $7.0 million from $7.6 million in the
prior year period. The decrease from the first quarter of last year was caused
by the decline in the price of polyester film, the primary raw material in the
manufacturing of both hot stamping and holographic foil.
Gross profit decreased by $.3 million, from $2.0 million in 1997 to $1.7 million
in the 1998 period as a result of the decrease in revenues partially offset by
the decrease in cost of sales. Fixed costs at the Company's Transfer Print
Foils, Inc. subsidiary were absorbed by lower sales thus decreasing the gross
profit as a percentage of sales to 19.6% from 20.8% in the prior year period.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general, and administrative expenses were $1.9 million compared to $2.0
million for the prior year period. The primary reductions occurred in
advertising, insurance and commissions partially offset by increases in
consulting fees and computer related charges.
OPERATING (LOSS) INCOME :
Operating loss for the quarter ended June 30, 1998, was $182,000 compared to
operating income of $31,000 for the same period last year. The decline was
attributable to the decline in sales and gross profits.
6
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INTEREST INCOME (EXPENSE):
Net interest income for the quarter was $4,400 compared to an expense of $17,700
for the prior year period. Lower debt was responsible for the decline, offset
slightly by decreased cash balances.
INCOME TAXES:
Income taxes were a benefit of $55,200 for the quarter ended June 30, 1998,
compared to an income tax provision of $6,400 for the prior year period.
NET INCOME (LOSS) AND EARNING (LOSS) PER SHARE:
Net loss was $122,000 for the quarter ended June 30, 1998 compared to net income
of $7,000 for the prior year period. The 1998 loss per share was $0.04 compared
to 1997 earnings of $0.00. Lower operating profits were responsible for the
decline.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES:
As of June 30, 1998, the Company had cash of $2.4 million and working capital of
$11.4 million, compared to cash of $1.9 million and working capital of $11.7
million as of March 31, 1998. The increase in cash is primarily attributable to
cash generated from operations. The decrease in working capital is the result
of a capital investment during the quarter which increased short-term
borrowings. Depreciation and amortization for the quarter were $ 633,000 while
capital investment was $ 598,000.
The Company has available a general purpose credit line of $3,000,000 with a
remaining availability under this general facility of $2,500,000 at June 30,
1998.
STOCKHOLDER'S EQUITY:
Stockholder's equity decreased by $364,000 primarily due to a decrease in the
cumulative translation adjustment associated with our Canadian subsidiary and
the net loss during the period.
7
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PART II
OTHER INFORMATION
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 10.37 Employment agreement between the
company and Arthur Karmel, dated June 29, 1998.
Exhibit 11 Computation of Earnings (Loss) Per Share
of Common Stock.
b. Report on Form 8-K None
8
<PAGE> 11
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: August 12, 1998
----------------------- ----------------
James L. Rooney
Chief Executive Officer
/s/ ARTHUR KARMEL Dated: August 12, 1998
----------------------- ----------------
Arthur Karmel
Chief Financial Officer
9
<PAGE> 1
[TRANSFER PRINT FOILS, INC. LETTERHEAD]
Exhibit 10.37
EMPLOYMENT AGREEMENT
This Agreement is made as of the 29th day of June by and between
HoloPak Technologies, Inc. a Delaware corporation (the "Company") and Arthur
Karmel (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 Financial 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 by the Chief Executive Officer, Chief Operating Officer or,
from time to time, by the Board of Directors of the Company or the Chairman of
the Board of Directors of the Company.
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 one year commencing on the date
of this Agreement and continuing thereafter for successive one-year renewal
terms.
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 $95,000.00 (the "Salary"), which the Company shall pay
to the Employee in accordance with its normal payroll policy. These are the
initial terms of annual compensation. The amount of salary may change and
compensation will be reflected.
1
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(b) 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 this services during the Employment Term.
(c)(i) HoloPak will grant to the Employee under its Non-Qualified Stock
Option Plan (the "Plan") options to purchase shares of Common Share ("Options")
for 5,000 shares of HoloPak Common Stock at an exercise price of $3.00 per
share. The Options will vest and become exercisable in three equal installments
on the first three (3) anniversaries of this Agreement.
(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.
(d) 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,
unpaid bonus, 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.
2
<PAGE> 3
(b) Death. If the Employees 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, administrator, heirs, assigns or any other person claiming under
or through him except for unpaid Salary, any unpaid bonus earned by Employee 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.
(c) Cause. The Company may terminate the Employment Term for "cause" by
giving the Employee 30 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 the 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 responsibilities 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.
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 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 a above-specified release. Compensation under the
terms and conditions of Section 6(c) and any obligations that the Company may
have for any Employment Injury.
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(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 claiming under or through
him other than to provide the Termination Compensation under the terms and
conditions of Section 6(c) and any obligations that the Company may have for any
Employment Injury.
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. 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 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 rights, title
and interest therein, shall be the exclusive property of the applicable HoloPak
Party. The
4
<PAGE> 5
Employee hereby assigns, transfers and conveys to any applicable HoloPak Party
all of his rights, 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 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 this 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 time 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 competent
jurisdiction, in equity or otherwise, and to enforce the specific performance of
the
5
<PAGE> 6
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 or 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, (ii) "or" has the inclusive meaning frequently
identified with the phrase "and/or" and (iii) "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 of 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.
6
<PAGE> 7
(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 be 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 or time by notice to the other parties):
TO EMPLOYEE:
Arthur Karmel
4 Gary Drive
Englishtown, NJ 07726
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 or Chief Operating Officer
(e) Entire Agreement: Termination of Prior Agreement Modification. This
Agreement (including Exhibit A hereto) and the additional agreements specified
in Sections 4(c) and 4(d) (to the extend 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.
7
<PAGE> 8
(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 upon the same instrument.
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/ J.T. Webb /s/ Arthur Karmel
Name: J.T. Webb Arthur Karmel
Title: Chief Operating Officer
/s/ BONNIE EICHEL
[NOTARY PUBLIC STAMP]
8
<PAGE> 9
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 life and disability insurance,
and participation in any of the Company's profit sharing and pension
plans.
2. Medical Insurance The Company shall waive the three-month waiting
period for participation in Medical, Prescription and Dental benefits.
3. Vacation You will be eligible for 1 week during your first six months
of employment and 2 additional vacation weeks during the balance of our
fiscal year ending March 31, 1999. Effective April 1, 1999 you will
qualify for three weeks vacation followed by four weeks during fifth
year forward.
4. Company Vehicle: A Company automobile, in accordance with Company
policy, will be provided. Insurance, maintenance and Company business
mileage are covered by TPF.
<PAGE> 1
EXHIBIT 11
HOLOPAK TECHNOLOGIES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED JUNE 30,
1998 1997
---------- ----------
<S> <C> <C>
Weighted-Average Number of
Common Shares Outstanding... 3,347,689 3,347,689
Total Common Shares and
Common Share Equivalents
Outstanding ................ 3,347,689 3,347,689
========== ==========
Earnings Per Common Share and
Common Share Equivalents:
Net Income (Loss) ............. $ (0.04) $ 0.00
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-1-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 2,389,200
<SECURITIES> 0
<RECEIVABLES> 5,428,970
<ALLOWANCES> 217,387
<INVENTORY> 7,278,820
<CURRENT-ASSETS> 16,011,233
<PP&E> 8,094,030
<DEPRECIATION> 14,866,191
<TOTAL-ASSETS> 30,800,261
<CURRENT-LIABILITIES> 4,608,967
<BONDS> 0
0
0
<COMMON> 27,964
<OTHER-SE> 25,182,481
<TOTAL-LIABILITY-AND-EQUITY> 30,800,261
<SALES> 8,760,306
<TOTAL-REVENUES> 8,760,306
<CGS> 7,044,715
<TOTAL-COSTS> 7,044,715
<OTHER-EXPENSES> 1,897,170
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,353
<INCOME-PRETAX> (177,226)
<INCOME-TAX> (55,223)
<INCOME-CONTINUING> (122,003)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (122,003)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
