<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Judiciary Plaza, 450 Fifth Street, N.W.
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1995 COMMISSION FILE NO. O-2655
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DIXON TICONDEROGA COMPANY
-----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-0973760
--------------------------------- ----------------------------------
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification No.
2600 Maitland Center Parkway, Suite 200, Maitland, FL 32751
----------------------------------------------------------------------------
(Address of principal executive offices) Zip Code
(407) 875-9000
Registrant's telephone number, including area code: ----------------------
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 close of the period covered by this report.
Class Outstanding as of June 30, 1995
---------------------------- -----------------------------------------
Common Stock $1 par value 3,192,820
<PAGE>
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
------------------------------------------
INDEX
-----
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Information
Consolidated Balance Sheets --
June 30, 1995 and September 30, 1994 3-4
Consolidated Statements of Operations --
For The Three Months and Nine Months
Ended June 30, 1995 and 1994 5
Consolidated Statements of Cash Flows --
For The Nine Months Ended June 30, 1995
and 1994 6-7
Notes to Consolidated Financial Statements 8-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-14
PART II. OTHER INFORMATION
Item 6. Exhibits 15
Signatures 16
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
------- CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, September 30,
1995 1994
------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 352,246 $ 1,822,764
Receivables, less allowance for
doubtful accounts of $658,441
at June 30, 1995 and $564,905
at September 30, 1994 26,816,167 20,335,421
Inventories 31,961,943 28,881,083
Assets held for sale 242,231 256,947
Other current assets 1,838,106 1,924,754
----------- -----------
Total current assets 61,210,693 53,220,969
----------- -----------
CONDOMINIUMS UNDER DEVELOPMENT 783,973 773,067
----------- -----------
PROPERTY, PLANT and EQUIPMENT:
Land and buildings 12,124,542 11,867,046
Machinery and equipment 16,349,280 18,983,203
Furniture and fixtures 901,101 843,316
----------- -----------
29,374,923 31,693,565
Less accumulated depreciation (16,592,039) (18,308,662)
----------- -----------
12,782,884 13,384,903
OTHER ASSETS 1,286,887 1,473,059
----------- -----------
$76,064,437 $68,851,998
=========== ===========
<PAGE>
June 30, September 30,
1995 1994
------------ -------------
CURRENT LIABILITIES:
Notes payable $21,758,694 $11,054,169
Current maturities of long-term debt 4,415,106 4,431,570
Accounts payable 5,039,066 5,258,085
Accrued liabilities 7,086,340 8,626,772
----------- -----------
Total current liabilities 38,299,206 29,370,596
----------- -----------
LONG-TERM DEBT 18,317,812 19,140,668
----------- -----------
OTHER NONCURRENT LIABILITIES 25,004 233,818
----------- -----------
DEFERRED INCOME TAXES 1,096,636 1,144,799
----------- -----------
MINORITY INTEREST 2,541,181 3,421,253
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, par $1, authorized
100,000 shares, none issued --- ---
Common stock, par $1, authorized
8,000,000 shares; issued 3,447,966
shares as of June 30, 1995 and
3,424,873 as of September 30, 1994 3,447,966 3,424,873
Capital in excess of par value 2,124,167 2,042,639
Retained earnings 13,295,570 11,577,719
Cumulative translation adjustment (2,147,325) (531,455)
----------- -----------
16,720,378 16,513,776
Less - treasury stock, at cost
(255,146 shares at June 30, 1995, and
265,270 shares at September 30, 1994) (935,780) (972,912)
----------- -----------
15,784,598 15,540,864
----------- -----------
$76,064,437 $68,851,998
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES $28,445,499 $27,915,779 $69,210,316 $65,952,818
----------- ----------- ----------- -----------
COST AND EXPENSES:
Cost of goods sold 18,327,627 18,966,629 45,390,700 45,496,712
Selling and
administrative
expenses 6,968,486 6,417,064 17,734,809 15,923,197
----------- ----------- ----------- -----------
25,296,113 25,383,693 63,125,509 61,419,909
----------- ----------- ----------- -----------
OPERATING INCOME 3,149,386 2,532,086 6,084,807 4,532,909
INTEREST EXPENSE 995,385 1,144,946 2,589,685 2,978,043
----------- ----------- ----------- -----------
INCOME BEFORE
INCOME TAXES AND
MINORITY INTEREST 2,154,001 1,387,140 3,495,122 1,554,866
INCOME TAXES 733,260 385,757 1,233,864 497,061
----------- ----------- ----------- -----------
1,420,741 1,001,383 2,261,258 1,057,805
MINORITY INTEREST 154,049 --- 543,408 ---
----------- ----------- ----------- -----------
NET INCOME $ 1,266,692 $ 1,001,383 $ 1,717,850 $ 1,057,805
=========== =========== =========== ===========
EARNINGS PER COMMON
SHARE $ .40 $ .31 $ .54 $ .33
=========== =========== =========== ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING 3,189,446 3,216,586 3,176,267 3,184,158
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1995 AND 1994
<CAPTION>
1995 1994
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 1,717,850 $ 1,057,805
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,780,744 1,872,427
Deferred taxes 291,665 (163,499)
Income attributable to currency translation (332,986) ---
Income attributable to minority interest 543,408 ---
Changes in assets and liabilities:
Receivables, net (8,292,977) (10,704,032)
Inventories (4,202,211) 30,173
Other current assets (28,150) (430,855)
Accounts payable and accrued liabilities (1,286,285) 1,948,329
Condominiums (10,906) 120,712
Other assets (166,706) (511,004)
----------- -----------
Net cash provided by (used in) operations (9,986,554) (6,779,944)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of plant and equipment, net (1,774,462) (1,514,707)
Proceeds from sale of assets --- 599,866
----------- -----------
Net cash provided by (used in)
investing activities (1,774,462) (914,841)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from notes payable 11,926,235 3,535,816
Net proceeds from (principal reductions
of) long-term debt (855,427) 3,964,073
Exercise of stock options 167,657 53,001
Other non-current liabilities (101,283) 28,509
----------- -----------
Net cash provided by (used in)
financing activities 11,137,182 7,581,399
----------- -----------
Effect of exchange rate changes on cash (846,684) (138,024)
----------- -----------
<PAGE>
Net decrease in cash and
cash equivalents (1,470,518) (251,410)
Cash and cash equivalents,
beginning of period 1,822,764 332,041
----------- -----------
Cash and cash equivalents,
end of period $ 352,246 $ 80,631
=========== ===========
Supplemental Disclosures:
Cash paid during the period:
Interest (net of amount capitalized) $ 2,201,755 $ 2,439,984
Income taxes 1,392,130 218,358
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE>
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presentation:
The condensed consolidated financial statements included herein have been
prepared by the Registrant, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Registrant believes that the disclosures are adequate to make the information
presented not misleading. It is suggested that these financial statements be
read in conjunction with the financial statements and the notes thereto
included in the Registrant's latest annual report on Form 10-K. In the
opinion of the Registrant, all adjustments (solely of a normal recurring
nature) necessary to present fairly the financial position of the Dixon
Ticonderoga Company and subsidiaries as of June 30, 1995, and the results of
their operations and cash flows for the nine months ended June 30, 1995, and
1994, have been included. The results of operations for such interim periods
are not necessarily indicative of the results for the entire year.
2. Inventories:
Since amounts for inventories under the LIFO method are based on annual
determinations of quantities and costs as of the end of the fiscal year, the
inventories at June 30, 1995 (for which the LIFO method of accounting are
used) are based on certain estimates relating to quantities and costs as of
year end.
Inventories consist of (in thousands):
June 30, September 30,
1995 1994
------------ -------------
Raw materials $12,663 $12,273
Work in process 4,889 4,494
Finished goods 14,410 12,114
------- -------
$31,962 $28,881
======= =======
3. Accounting for long-lived assets:
The Financial Accounting Standards Board issued Statement No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of". This statement, which must be adopted no later than fiscal
1997, establishes accounting standards with respect to the impairment of
long-lived assets. Its adoption is not expected to materially affect the
future results of operations or financial position of the Company.
<PAGE>
4. Accounting for income taxes:
The difference between income taxes calculated at the U.S statutory federal
income tax rate and the provision in the condensed consolidated financial
statements is primarily due to the net effect in 1994 of utilization of U.S.
net operating loss carryforwards, foreign and state income taxes and other
permanent items.
5. Contingencies:
The Registrant, in the normal conduct of its business, is a party in certain
litigation. In the opinion of management (after taking into account
accruals), the ultimate outcome of this litigation will not materially affect
the Company's future results of operations or financial position. Included
in this litigation is a claim against the Company under New Jersey's
Environmental Clean-up Responsibility Act, by a 1984 purchaser of industrial
property from the Company. The Company has evaluated the merits of the case
and believes the outcome will not be material to the future results of
operations as well as the financial position of the Company.
The Registrant is aware of several environmental matters related to certain
facilities purchased or to be sold. The Registrant assesses the extent of
these matters on an ongoing basis. In the opinion of management (after
taking into account accruals), the resolution of these matters will not
materially affect the Company's future results of operations or financial
position.
In conjunction with the sale of a discontinued business in a previous year,
the Registrant guaranteed a loan to the buyer. The loan balance is
approximately $350,000 as of June 30, 1995. In the opinion of management,
the guarantee will not ultimately have any material effect on the Company's
future results of operations or financial condition.
6. New financing arrangements:
The Company's loan and security agreement with its primary lender was amended
in February 1995, whereby its interest rate was reduced from the prime rate
plus 1% to either the prime rate plus 0.5% or the prevailing LIBOR rate plus
2.5%.
In July 1995, this agreement was further amended to provide up to an
additional $5 million in the Company's revolving working capital line of
credit.
7. Shareholders rights plan:
In March 1995, the Company declared a dividend distribution of one Preferred
Stock Purchase Right on each share of Company common stock. Each Right will
entitle the holder to buy one-thousandth of a share of a new series of
preferred stock at a price of $30.00 per share. The Rights will be
exercisable only if a person or group (other than the Company's chairman,
Gino N. Pala, and his family members) acquires 20% or more of the outstanding
shares of common stock of the Company or announces a tender offer following
which it would hold 30% or more of such outstanding common stock. The Rights
<PAGE>
entitle the holders other than the acquiring person to purchase Company
common stock having a market value of two times the exercise price of the
Right. If, following the acquisition by a person or group of 20% or more of
the Company's outstanding shares of common stock, the Company were acquired
in a merger or other business combination, each Right would be exercisable
for that number of the acquiring company's shares of common stock having a
market value of two times the exercise price of the Right.
The Company may redeem the Rights at one cent per Right at any time until 10
days following the occurrence of an event that causes the Rights to become
exercisable for common stock. The rights expire in ten years.
8. Executive employment agreements:
The Company has entered into employment agreements with two executives which
provide for the continuation of salary (currently aggregating $27,500 per
month) and related employee benefits for a period of 24 months following
their termination of employment under certain changes in control of the
Company. In addition, all options held by the executives would become
immediately exercisable upon the date of termination and remain exercisable
for 90 days thereafter.
<PAGE>
Item 2.
-------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
REVENUES for the quarter ended June 30, 1995, increased $530,000 from the
same quarter last year. The changes by segment are as follows:
% Increase (Decrease)
Increase ---------------------
(Decrease) Total Volume Price/Mix
---------- ----- ------ ---------
Consumer U.S. $ 1,913 13 10 3
Consumer Foreign (1,553) (23) (24) 1
Graphite & Lubricants 85 3 12 (9)
Refractory 85 3 9 (6)
Foreign Consumer revenue decreased $1,800,000 due to the decline in value of
the Mexican peso compared to the U.S. dollar; however, this decline was more
than offset by price increases during the period. Although the peso has
stabilized from the activity in the first two fiscal quarters, revenue in
Mexico is still depressed when compared to the same quarter last year. U.S.
Consumer revenue reflects strong growth in the mass retail and office supply
mega-store markets.
Revenues for the nine months ended June 30, 1995, increased $3,257,000 over
the same period last year. The changes by segment are as follows:
% Increase (Decrease)
Increase ---------------------
(Decrease) Total Volume Price/Mix
---------- ----- ------ ---------
Consumer U.S. $ 4,848 14 12 2
Consumer Foreign (2,802) (22) (16) (6)
Graphite & Lubricants 517 6 8 (2)
Refractory 823 9 7 2
Real Estate and Other (129) - - -
U.S. Consumer revenue volume increases were primarily due to customers in the
aforementioned mass retail and office supply mega-store markets. Revenue in
Mexico and Canada decreased $2,800,000 and $100,000, respectively, due to the
decline of their currencies' value compared to the U.S. dollar. In Mexico
only part of this decline was offset by increased peso selling prices.
<PAGE>
Revenues increased $9,074,000 from the prior quarter as follows:
% Increase (Decrease)
Increase ---------------------
(Decrease) Total Volume Price/Mix
---------- ----- ------ ---------
Consumer U.S. $ 6,495 64 61 3
Consumer Foreign 2,374 86 84 2
Graphite & Lubricants (85) (3) 4 (7)
Refractory 290 9 4 5
U.S. and Foreign Consumer products reflects the seasonality of these
segments. Historically, this quarter represents approximately 30% of annual
revenues being shipped.
Real Estate revenues were not significant in any period presented.
OPERATING INCOME increased $617,000 over the same quarter last year. U.S.
Consumer increased $500,000 on higher revenue. Foreign Consumer products
decreased $80,000 primarily due to the subsidiary in Mexico, where domestic
sales remained below prior year levels. Refractory products increased
$130,000 reflecting higher gross profit margins.
Operating income for the nine months ended June 30, 1995, increased
$1,552,000 over the same period last year. U.S. Consumer increased $770,000
on higher revenues partially offset by additional selling and distribution
costs expended in order to service the mass retail and office supply mega-
store markets. Foreign Consumer increased $330,000 primarily due to
increased shipments to the U.S. and related currency gains and manufacturing
efficiencies. Refractory products increased $235,000 on higher revenues and
improved product mix.
Operating income increased $1,559,000 over the prior quarter. U.S. Consumer
products increased $1,460,000 primarily due to the aforementioned seasonality
of revenues.
INTEREST EXPENSE decreased $150,000 and $388,000 for the quarter and nine
months ended June 30, 1995, from the comparable periods last year. These
decreases were primarily due to reduced bank borrowing in Mexico reflecting
the proceeds from the prior year sale of stock in this subsidiary. When
compared to the prior quarter, interest expense increased $98,000, primarily
due to higher borrowings to support seasonal sales.
INCOME TAXES increased in 1995 due to higher pre-tax income and utilization
of net operating loss carryforwards in the prior year.
The Financial Accounting Standards Board issued Statement No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of". This statement, which must be adopted no later than fiscal
1997, establishes accounting standards with respect to the impairment of
long-lived assets. Its adoption is not expected to materially affect the
future results of operations or financial position of the Company.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The financial condition of the Company improved dramatically in the past two
years, principally due to its recent operating success and the completion of
major financing initiatives. While consolidated pre-tax income has improved
by approximately $2 million, cash flows used in operating activities in the
first half of fiscal 1995 increased due to higher working capital
requirements (primarily inventories) to support increasing business segments.
Despite higher consolidated revenues, the Company managed to maintain its
strong collection practices which have reduced average days outstanding in
accounts receivable under normal terms.
Investing activities included approximately $1,774,000 in purchases of
property and equipment for the first nine months of 1995 (as compared with
$1,515,000 in the prior year). Except as discussed below, all major capital
projects are discretionary in nature and thus no material purchase
commitments exist. The Company anticipates its normal capital expenditures
to accelerate during the year and approximate $2 million, less than its
annual depreciation expense. These expenditures will include strategic
manufacturing equipment purchases as well as customary projects, and will
continue to be funded from operations and existing financing arrangements.
The Company intends to begin construction of a new corporate headquarters
facility in Florida. The estimated total cost of the project is
approximately $3 million with construction costs financed through a separate
fixed-rate permanent mortgage arrangement. Approximately $700,000 in land
and design costs have been incurred and included in the purchases of property
disclosed above.
The Company previously completed major financing arrangements, in the amount
of $35 million, which refinanced certain short-term obligations and provided
additional working capital. The arrangements provide additional financing
and permit the Company to meet all current debt obligations. The related
credit agreement provides for the maintenance of certain financial covenants
and ratios, with which the Company is presently in compliance. In February
1995, the interest rate under this arrangement was reduced (as discussed in
Note 6 to Consolidated Financial Statements). Increases in borrowings under
this arrangement are used to finance cyclical working capital requirements
discussed above. At June 30, 1995, the Registrant has approximately $4
million of unused lines of credit available under this financing agreement.
In July 1995, the Company's working capital line of credit was increased by
$5 million (as discussed in Note 6 to Consolidated Financial Statements).
As of June 30, 1995, the Company also has $13.7 million of Senior
Subordinated Notes outstanding with several insurance companies. The note
agreement, as amended, provides for the payment of approximately $3.3 million
annually, each August. This agreement also provides for the maintenance of
certain financial covenants and ratios, with which the Company is presently
in compliance. The new revolving credit agreement described above provides
for the aforementioned subordinated note payments. The Company intends to
satisfy future subordinated note payments from funds provided by these
existing financing arrangements, from operations and/or an infusion of new
equity or debt.
<PAGE>
In addition to these ongoing efforts, management believes that additional
cash flows can be generated through the sale of certain remaining idle
assets. The new and existing sources of financing, financing strategies
discussed above and cash expected to be generated from future operations
will, in management's opinion, be sufficient to fulfill all current and
anticipated requirements of the Company's ongoing businesses. Moreover, any
contemplated future sale of Company assets will contribute to lower borrowing
levels, without any anticipated material negative impact upon operating
results.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits
------- --------
(a) Exhibits:
(28)a. Second Modification of Revolving Credit Loan and
Security Agreement and Term Loan Agreement
(28)b. Third Modification of Revolving Credit Loan and
Security Agreement
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DIXON TICONDEROGA COMPANY
Dated: August 14, 1995 By: /s/ Gino N. Pala
----------------------------
Gino N. Pala
Chairman of the Board,
President, Chief Executive
Officer and Director
Dated: August 14, 1995 By: /s/ Richard A. Asta
----------------------------
Richard A. Asta
Executive Vice President of
Finance and Chief Financial
Officer
Dated: August 14, 1995 By: /s/ John Adornetto
----------------------------
John Adornetto
Vice President/Corporate
Controller and Chief
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets, the Consolidated Statement of Operations and the
Consolidated Statement of Cash Flows, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 352,246
<SECURITIES> 0
<RECEIVABLES> 27,474,608
<ALLOWANCES> 658,441
<INVENTORY> 31,961,943
<CURRENT-ASSETS> 61,210,693
<PP&E> 29,374,923
<DEPRECIATION> 16,592,039
<TOTAL-ASSETS> 76,064,437
<CURRENT-LIABILITIES> 38,299,206
<BONDS> 0
<COMMON> 3,447,966
0
0
<OTHER-SE> 12,336,632
<TOTAL-LIABILITY-AND-EQUITY> 76,064,437
<SALES> 69,210,316
<TOTAL-REVENUES> 69,210,316
<CGS> 45,390,700
<TOTAL-COSTS> 45,390,700
<OTHER-EXPENSES> 17,734,809
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,589,685
<INCOME-PRETAX> 3,495,122
<INCOME-TAX> 1,233,864
<INCOME-CONTINUING> 1,717,850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,717,850
<EPS-PRIMARY> .54
<EPS-DILUTED> .54
</TABLE>
<PAGE>
SECOND MODIFICATION OF REVOLVING CREDIT LOAN
AND SECURITY AGREEMENT AND TERM LOAN AGREEMENT
This Second Modification of Revolving Credit Loan and
Security Agreement and Term Loan Agreement (this "First Modifica-
tion") is made as of June 30, 1995 by and among DIXON TICONDEROGA
COMPANY, a Delaware corporation ("DTC"), and DIXON TICONDEROGA
INC., an Ontario corporation ("DTI"; DTC and DTI, collectively,
the "Borrower"), and FIRST UNION COMMERCIAL CORPORATION, a North
Carolina corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower has entered into a Revolving
Credit Loan, Foreign Exchange and Security Agreement, dated as of
May 12, 1994, as amended by First Modification of Revolving Credit
Loan and Security Agreement dated as of February 10, 1995 (said
Agreement, as so amended and as it may be amended or otherwise
modified from time to time hereafter, being hereinafter called the
"Revolving Credit Agreement"), pursuant to which Lender has ex-
tended financial accommodations to Borrower in the form of a
$25,000,000 revolving line of credit, letter of credit and foreign
exchange facility in accordance with, and subject to, the terms
and conditions of the Revolving Credit Agreement; and
WHEREAS, the Borrower has entered into a Term Loan
Agreement, dated as of May 12, 1994 (said Agreement, as it may be
amended or otherwise modified from time to time, being hereinafter
called the "Term Loan Agreement"; and, together with the Revolving
Credit Agreement, being hereinafter called the "Loan Agreements"),
pursuant to which Lender has extended a term loan to Borrower in
the principal amount of $10,000,000; and
WHEREAS, the Borrower has requested Lender to engage in
an interest rate swap transaction with the Borrower in order to
obtain the benefits of a fixed rate of interest on a portion of
the Loans (as such term is defined in the Revolving Credit Agree-
ment); and
WHEREAS, the Lender requires, as a condition of Lender
entering into such swap transaction, that certain modifications be
made to the Loan Agreements;
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
SECTION 1. Incorporation of Defined Terms. Capitalized
terms used in this Second Modification and not otherwise defined
herein, shall have the meanings ascribed to them in the Revolving
Credit Agreement.
<PAGE>
SECTION 2. New and Amended Definitions.
(a) Section 1 (Definitions) of the Revolving Credit
Agreement is amended to add the following new definitions:
"Banking Day" means, in respect of any city, any
day on which commercial banks are open for business
(including dealings in foreign exchange and foreign
currency deposits) in that city.
"Interest Rate Swap Agreement" shall mean the ISDA
Master Agreement, including all schedules, confirmations
and exhibits thereto, entered into as of the date hereof
between Lender and the Borrower, as such agreement may
be amended or otherwise modified from time to time here-
after.
"Reference Banks" means four prime banks in the
London interbank market.
(b) The definitions of "Eurodollar Business Day",
"LIBOR Period", "LIBOR Rate", "Loan Documents" and "Obligations"
in Section 1 (Definitions) of the Revolving Credit Agreement are
amended to read as follows:
"Eurodollar Business Day" means a day on which
commercial banks and foreign exchange markets settle
payments in New York City.
"LIBOR Period" shall mean the period commencing on
the date a LIBOR Loan is made and ending on the numeri-
cally corresponding day in the first, second, third or
sixth calendar month thereafter; provided that (a) no
LIBOR Period may extend beyond the Commitment Termina-
tion Date, and (b) if a LIBOR Period would end on a day
which is not a Eurodollar Business Day, such LIBOR Peri-
od shall be extended to the next Eurodollar Business Day
unless, in the case of a LIBOR Loan, such Eurodollar
Business Day would fall in the next calendar month, in
which event such LIBOR Period shall end on the immedi-
ately preceding Eurodollar Business Day.
"LIBOR Rate" means, for any LIBOR Period, the
amount obtained by dividing (a) the interest rate per
annum for deposits in U.S. Dollars which appears on the
Telerate Page 3750 as of 11:00 A.M. London time, on the
day that is two London Banking Days preceding the first
day of such LIBOR Period for a period equal to such
LIBOR Period by (b) the percentage equal to One Hundred
Percent (100%) (expressed as a decimal fraction) minus
the Reserve Requirement for such LIBOR Period; provided,
however, that if such rate does not so appear on the
Telerate Page 3750, then "LIBOR Rate" means, for any
LIBOR Period, the amount obtained by dividing (x) the
interest rate per annum at which deposits in U.S. Dol-
lars are offered by the Reference Banks (in the manner
<PAGE>
determined below) to prime banks in the London interbank
market at approximately 11:00 A.M., London time on the
day that is two London Banking Days preceding the first
day of such LIBOR Period for a period equal to such
LIBOR Period and in an amount substantially equal to the
amount of such LIBOR Loan to be outstanding such LIBOR
Period by (y) the percentage equal to One Hundred Per-
cent (100%) (expressed as a decimal fraction) minus the
Reserve Requirement for such LIBOR Period. In determin-
ing the interest rate per annum in clause (x) above:
(i) the Lender will request the principal London office
of each of the Reference Banks to provide a quotation of
its rate and if at least two such quotations are provid-
ed, such rate will be the arithmetic mean of such quota-
tions; and (ii) if fewer than two such quotations are
provided as requested, such rate in clause (x) above
will instead be equal to the arithmetic mean of the
interest rates per annum quoted by major banks in New
York City, selected by the Lender at approximately 11:00
A.M., New York City time, on the day that is two London
Banking Days preceding the first day of such LIBOR Peri-
od for loans in U.S. Dollars to leading European banks
for a period equal to such LIBOR Period and in an amount
substantially equal to the amount of such LIBOR Loan to
be outstanding during such LIBOR Period. Each calcula-
tion by the Lender of the applicable LIBOR Rate shall be
conclusive and binding for all purposes, absent manifest
error.
"Loan Documents" shall mean and collectively refer
to this Agreement, the Term Loan Agreement, the Mortgag-
es, the Notes, the Letter of Credit Agreement, all For-
eign Exchange Contracts, the Sweep Account Security
Agreement, the Interest Rate Swap Agreement, the Envi-
ronmental Indemnity and Compliance Agreement and all
Supplemental Documentation and any and all agreements,
instruments and documents, including, without limita-
tion, notes, guaranties, mortgages, deeds to secure
debt, deeds of trust, chattel mortgages, pledges, powers
of attorney, consents, assignments, contracts, notices,
security agreements, trust account agreements and all
other written matters whether heretofore, now or hereaf-
ter executed by or on behalf of the Borrower and/or
delivered to Lender, First Union, or First Union-NC with
respect to this Agreement, or with respect to the trans-
actions contemplated by this Agreement, together with
any amendments, modifications and supplements thereto,
and any renewals or extensions thereof, in whole or in
part.
"Obligations" shall mean and include the Loans, the
obligations of the Borrower under this Agreement and all
other loans, advances, debts, liabilities, obligations,
<PAGE>
covenants and duties owing, arising, due or payable from
the Borrower to the Lender, First Union and/or First
Union-NC, of any kind or nature, whether or not ev-
idenced by any note, guaranty or other instrument, aris-
ing under this Agreement, the Term Loan Agreement, the
Notes, the Mortgages, the Foreign Exchange Contracts,
the Sweep Account Security Agreement, the Interest Rate
Swap Agreement, or the other Loan Documents, whether
direct or indirect (including those acquired by assign-
ment), absolute or contingent, primary or secondary, due
or to become due, now existing or hereafter arising and
however acquired. The term includes, but without limi-
tation, all interest, charges, expenses, fees, attorn-
eys' and paralegals' fees and any other sums chargeable
to the Borrower by the Lender, First Union or First
Union-NC under this Agreement or any of the other Loan
Documents. The term also includes, but without limita-
tion, the obligations of the Borrower under the Interest
Rate Swap Agreement for any and all "Loss", "Settlement
Amount" and "Unpaid Amounts" as such terms are defined
in the Interest Rate Swap Agreement.
SECTION 3. Additional Cross-Default. Paragraph (d) of
Section 1 (Events of Default) of the Revolving Credit Agreement is
amended in its entirety to read as follows:
(d) The occurrence of any (1) default or
event of default on the part of the Borrower (including
specifically, but without limitation, due to non-pay-
ment) under the terms of the Subordinated Debt Loan
Documents or any other agreement, document or instrument
pursuant to which the Borrower has incurred any Indebt-
edness (other than the Obligations), which default is
not cured within the time, if any, permitted therefor in
the agreement, document or instrument governing such
Indebtedness, or (2) "Potential Event of Default" or
"Event of Default", as such terms are defined in the
Interest Rate Swap Agreement;
SECTION 4. Maximum Facilities. Section 2.2 of the
Revolving Credit Agreement (Maximum Revolving Credit Facility) is
amended in its entirety to read as follows:
2.2 Maximum Revolving Credit Facility. Notwith-
standing anything to the contrary contained in this
Agreement or any of the other Loan Documents but subject
to the sublimits on borrowing contained in Exhibit A
attached hereto, the aggregate amount of Revolving Cred-
it Loans, Letter of Credit Obligations and Foreign Ex-
change Contracts shall not exceed Twenty-Five Million
U.S. Dollars ($25,000,000) at any time outstanding LESS
the aggregate amount, determined by the Lender in its
sole discretion, of the obligations of the Borrower
<PAGE>
under the Interest Rate Swap Agreement for any and all
"Loss", "Settlement Amount" and "Unpaid Amounts" as such
terms are defined in the Interest Rate Swap Agreement.
SECTION 5. Interest Rate on Revolving Credit Loans.
Subsection (c) of Section 2.5 (Interest) of the Revolving Credit
Agreement is deleted in its entirety and replaced with the follow-
ing:
(c) Conversion of Rate Options. On the terms and
subject to the conditions of this Agreement, the Borrow-
er may elect (A) at any time to convert a Revolving
Credit Loan which is a Prime Rate Loan into a LIBOR
Loan, or (B) at the end of any LIBOR Period with respect
to a LIBOR Loan, to convert such LIBOR Loan into a Prime
Rate Loan or to renew such LIBOR Loans for an additional
LIBOR Period. Except as set forth in subsection (d) of
this section, Loans may be renewed or converted in whole
or in part. Each such election shall be made by deliv-
ery to the Lender of an Interest Rate Election Notice
prior to 10:00 a.m. (Charlotte, North Carolina, time) at
least three (3) Eurodollar Business Days prior to the
effective date of any conversion to or renewal of a
LIBOR Loan and at least one (1) Eurodollar Business Day
prior to the effective date of any conversion to a Prime
Rate Loan, specifying (1) the date of conversion or
renewal (which date shall be a Eurodollar Business Day,
and in the case of a conversion from a LIBOR Loan to a
Prime Rate Loan, the last day of the LIBOR Period there-
for); (2) the amount and type of conversion or renewal;
and (3) the length of the applicable LIBOR Period. If,
within the time period required under this section 2.5(-
c), the Lender shall not have received an Interest Rate
Election Notice from the Borrower of an election to
renew a LIBOR Loan for an additional LIBOR Period, then,
upon the expiration of the LIBOR Period therefor, such
LIBOR Loan shall be converted automatically to a Prime
Rate Loan.
SECTION 6. Borrowing Base. Exhibit "A" Borrowing
Base/Availability to the Revolving Credit Agreement is amended by
adding at the end of Part II (Availability) of said Exhibit "A",
immediately before the period, the following:
plus one hundred percent of the amount which the Lender,
in its sole discretion, determines to be the aggregate
amount of the "Loss", "Settlement Amount" and "Unpaid
Amount", as such terms are defined in the Interest Rate
Swap Agreement
SECTION 7. Termination of Revolving Credit Agreement.
Sections 12.2 (The Borrower's Right to Terminate) and 12.3 (The
<PAGE>
Lender's Right to Terminate) of the Revolving Credit Agreement are
amended in their entirety to read as follows:
12.2 The Borrower's Right to Terminate. The Bor-
rower may terminate the financing arrangements under
this Agreement and the other Loan Documents at the end
of the Term, by giving the Lender written notice of such
termination, in the manner set forth in section 16.3
below, at least ninety (90) days, prior thereto; provid-
ed, however, that in order for any such notice of termi-
nation by the Borrower pursuant to this section 12.2 to
become effective, the Borrower, on or before such termi-
nation date, shall pay the Obligations in full in imme-
diately available funds and cause all of the Letters of
Credit, Foreign Exchange Contracts and the Interest Rate
Swap Agreement to be canceled or terminated and First
Union released from all liability thereunder.
12.3 The Lender's Right to Terminate. The Lender
may terminate the financing arrangements under this
Agreement and the other Loan Documents at any time,
without demand, notice or legal process of any kind,
upon the occurrence of an Event of Default; provided,
however, that the Lender shall retain the right to pay-
ment of the Obligations in accordance with section 3.1
above; and provided, further, that all of the Lender's
and First Union's rights and remedies under this Agree-
ment and the other Loan Documents shall survive such
termination until all of the Obligations have been paid
in full and all of the Letters of Credit, Foreign Ex-
change Contracts and the Interest Rate Swap Agreement
have been canceled or terminated and First Union re-
leased from all liability thereunder. On or before the
Commitment Termination Date, the Borrower shall pay the
Obligations in full in immediately available funds and
shall cause all of the Letters of Credit, Foreign Ex-
change Contracts and the Interest Rate Swap Agreement to
be canceled or terminated and First Union released from
all liability thereunder.
SECTION 8. Ratification. Except as modified hereby,
the terms and conditions of the Loan Agreements and the other Loan
Documents shall remain in full force and effect and are hereby
ratified and confirmed in all respects.
SECTION 9. Representations and Warranties. The Bor-
rower represents warrants to, and agrees with, the Lender and for
the benefit of First Union and First Union-NC that (i) it has no
defenses, set-offs, or counterclaims of any kind or nature whatso-
ever against the Lender, First Union or First Union-NC with re-
spect to the Obligations, any of the agreements among the parties
hereto, including, without limitation, the obligations of the
Borrower under the Loan Agreements, the Notes, this Second Modif-
ication or any other Loan Document, or any action previously taken
<PAGE>
or not taken by the Lender, First Union and/or First Union-NC with
respect thereto or with respect to any Lien or Collateral in
connection therewith to secure the Obligations, and (ii) this
Second Modification has been duly authorized by all necessary
corporate action on the part of the Borrower, has been duly exe-
cuted by a duly authorized officer of the Borrower, and consti-
tutes the valid and binding obligation of the Borrower, enforce-
able against each entity comprising the Borrower in accordance
with the terms hereof.
SECTION 10. Loan Agreement Representations and Warran-
ties. The Borrower hereby certifies that the representations and
warranties contained in the Loan Agreements continue to be true
and correct and that no Event of Default, or event which with the
passage of time or the giving of notice, or both, would constitute
an Event of Default, has occurred.
SECTION 11. Payment of Expenses. Borrower agrees to
pay, upon receipt of an invoice therefor, all fees and expenses of
separate legal counsel for the Lender in connection with the
preparation, negotiation or execution of this Second Modification.
SECTION 12. Counterparts. This Second Modification may
be executed in any number of counterparts which, when taken to-
gether, shall constitute one original.
SECTION 13. Governing Law; Severability; Defined Terms.
This Second Modification shall be governed by, and construed and
interpreted in accordance with, the law of the State of Florida.
Wherever possible, each provision of this Second Modification
shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Second Modifi-
cation shall be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such
prohibition or invalidity and without invalidating the remaining
provisions of this Second Modification.
SECTION 14. WAIVER OF TRIAL BY JURY. EACH OF THE
BORROWER AND THE LENDER HEREBY KNOWINGLY, VOLUNTARILY, IRREVOCABLY
AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT TO ANY ACTION, PROCEEDING, COUNTERCLAIM OR OTHER LITI-
GATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS SECOND MODIFICATION, THE LOAN AGREEMENTS OR ANY OTHER
LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATE-
MENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO.
THIS PROVISION IS A MATERIAL INDUCEMENT OF THE PARTIES TO ENTER
INTO THIS SECOND MODIFICATION.
SECTION 15. Titles. The Section titles contained in
this Second Modification are and shall be without substantive
meaning or content of any kind whatsoever and are not part of this
Second Modification.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Second Modification to be executed as of the date first above
written.
DIXON TICONDEROGA COMPANY
By: /s/ Gino N. Pala
--------------------------------------
Name: Gino N. Pala
Title: President & CEO
[Corporate Seal]
DIXON TICONDEROGA INC.
By: /s/ Gino N. Pala
--------------------------------------
Name: Gino N. Pala
Title: Chairman
[Corporate Seal]
FIRST UNION COMMERCIAL CORPORATION
By: /s/ Roanne Disalvatore
--------------------------------------
Name: Roanne Disalvatore
Title: Vice President
<PAGE>
THIRD MODIFICATION OF REVOLVING CREDIT LOAN
AND SECURITY AGREEMENT
This Third Modification of Revolving Credit Loan
and Security Agreement (this "Third Modification") is made
as of July 31, 1995 by and among DIXON TICONDEROGA COMPANY,
a Delaware corporation ("DTC"), and DIXON TICONDEROGA INC.,
an Ontario corporation ("DTI"; DTC and DTI, collectively,
the "Borrower"), and FIRST UNION COMMERCIAL CORPORATION, a
North Carolina corporation (the "Lender").
W I T N E S S E T H:
WHEREAS, the Borrower has entered into a Revolving
Credit Loan, Foreign Exchange and Security Agreement, dated
as of May 12, 1994, as amended by First Modification of
Revolving Credit Loan and Security Agreement dated as of
February 10, 1995, and Second Modification of Revolving
Credit Loan and Security Agreement dated as of July 30, 1995
(said Agreement, as so amended and as it may be amended or
otherwise modified from time to time hereafter, being
hereinafter called the "Revolving Credit Agreement"), pursu-
ant to which Lender has extended financial accommodations to
Borrower in the form of a $25,000,000 revolving line of
credit, letter of credit and foreign exchange facility in
accordance with, and subject to, the terms and conditions of
the Revolving Credit Agreement; and
WHEREAS, the Borrower has entered into a Term Loan
Agreement, dated as of May 12, 1994 (said Agreement, as it
may be amended or otherwise modified from time to time,
being hereinafter called the "Term Loan Agreement"; and,
together with the Revolving Credit Agreement, being
hereinafter called the "Loan Agreements"), pursuant to which
Lender has extended a term loan to Borrower in the principal
amount of $10,000,000; and
WHEREAS, the Borrower has requested Lender to
increase (i) the maximum amount of Revolving Credit Loans
(as such term is defined in the Revolving Credit Agreement)
that may be outstanding at any time during the period May 1
through October 31 of each year, and (ii) the amount of the
sublimit of Revolving Credit Loans (as such term is defined
in the Revolving Credit Agreement) which may be advanced
against Eligible Inventory (as such term is defined in the
Revolving Credit Agreement); and
WHEREAS, the Lender requires, as a condition of
Lender agreeing to such increases, that certain modifi-
cations be made to the Loan Agreements, including the
establishment of a continuing reserve against the Borrowing
<PAGE>
Base for future installments of principal of the
Subordinated Debt;
NOW, THEREFORE, in consideration of the premises
and the covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
SECTION 1. Incorporation of Defined Terms.
Capitalized terms used in this Third Modification and not
otherwise defined herein, shall have the meanings ascribed
to them in the Revolving Credit Agreement.
SECTION 2. Maximum Revolving Credit Facility.
Section 2.2 is amended in its entirety to read as follows:
2.2 Maximum Revolving Credit Facility.
Notwithstanding anything to the contrary contained
in this Agreement or any of the other Loan
Documents but subject to the sublimits on
borrowing contained in Exhibit A attached hereto,
the aggregate amount of Revolving Credit Loans,
Letter of Credit Obligations and Foreign Exchange
Contracts shall not exceed (i) Twenty-Five Million
U.S. Dollars ($25,000,000) at any time outstanding
during each period commencing November 1 and
ending April 30 and (ii) Thirty Million U.S.
Dollars ($30,000,000) at any time outstanding
during each period commencing May 1 and ending
October 31, in each such case LESS the aggregate
amount, determined by the Lender in its sole
discretion, of the obligations of the Borrower
under the Interest Rate Swap Agreement for any and
all "Loss", "Settlement Amount" and "Unpaid
Amounts" as such terms are defined in the Interest
Rate Swap Agreement.
SECTION 3. Borrowing Base. Exhibit "A" Borrowing
Base/Availability to the Revolving Credit Agreement is
amended by changing the number in clause (iii) of the
proviso on page 1 of said Exhibit from $12,500,000 to
$15,000,000, so as to increase the sublimit of aggregate
Revolving Credit Loans which may be advanced against
Eligible Inventory.
SECTION 4. Borrowing Base. Exhibit "A" Borrowing
Base/Availability to the Revolving Credit Agreement is
amended by amending Paragraph A in Part I (Borrowing Base)
of said Exhibit in its entirety to read as follows:
A. Until such time as the Subordinated Debt
shall have been paid in full and completely
discharged, the Lender will establish a reserve
against the Borrowing Base in order to assure that
<PAGE>
there is sufficient Availability to fund each re-
quired principal payment of the Subordinated Debt.
This reserve shall be established and maintained
by adding thereto, on the first day of each cal-
endar month, commencing on August 1, 1995, an
amount equal to one-twelfth (1/12) of the next
succeeding installment of principal required to be
paid on the Subordinated Debt (or in the amount of
the entire principal balance of the Subordinated
Debt if the maturity thereof falls within the
following 12-month period) and by reducing such
accumulated reserve on the date of each principal
payment of Subordinated Debt by the amount the
principal payment so made. As an example of the
operation of this reserve, on August 1, 1995 and
on the first day of each month thereafter through
and including July 1, 1996, the Lender will estab-
lish a reserve equal to one-twelfth of $3,325,000
(the principal amount due on August 1, 1996) and,
if and when the full principal installment of
$3,325,000 is paid, by reducing the reserve by the
amount of such payment; and on August 1, 1996, the
Lender will again and monthly thereafter establish
such a reserve to assure sufficient Availability
for the payment due on August 1, 1997, and so on.
SECTION 5. Ratification. Except as modified
hereby, the terms and conditions of the Loan Agreements and
the other Loan Documents shall remain in full force and
effect and are hereby ratified and confirmed in all
respects.
SECTION 6. Representations and Warranties. The
Borrower represents warrants to, and agrees with, the Lender
and for the benefit of First Union and First Union-NC that
(i) it has no defenses, set-offs, or counterclaims of any
kind or nature whatsoever against the Lender, First Union or
First Union-NC with respect to the Obligations, any of the
agreements among the parties hereto, including, without
limitation, the obligations of the Borrower under the Loan
Agreements, the Notes, this Third Modification or any other
Loan Document, or any action previously taken or not taken
by the Lender, First Union and/or First Union-NC with re-
spect thereto or with respect to any Lien or Collateral in
connection therewith to secure the Obligations, and (ii)
this Third Modification has been duly authorized by all
necessary corporate action on the part of the Borrower, has
been duly executed by a duly authorized officer of the
Borrower, and constitutes the valid and binding obligation
of the Borrower, enforceable against each entity comprising
the Borrower in accordance with the terms hereof.
SECTION 7. Loan Agreement Representations and
Warranties. The Borrower hereby certifies that the
<PAGE>
representations and warranties contained in the Loan
Agreements continue to be true and correct and that no Event
of Default, or event which with the passage of time or the
giving of notice, or both, would constitute an Event of
Default, has occurred.
SECTION 8. Payment of Expenses. Borrower agrees
to pay, upon receipt of an invoice therefor, all fees and
expenses of separate legal counsel for the Lender in
connection with the preparation, negotiation or execution of
this Third Modification.
SECTION 9. Counterparts. This Third Modification
may be executed in any number of counterparts which, when
taken together, shall constitute one original.
SECTION 10. Governing Law; Severability; Defined
Terms. This Third Modification shall be governed by, and
construed and interpreted in accordance with, the law of the
State of Florida. Wherever possible, each provision of this
Third Modification shall be interpreted in such manner as to
be effective and valid under applicable law, but if any
provision of this Third Modification shall be prohibited by
or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or
invalidity and without invalidating the remaining provisions
of this Third Modification.
SECTION 11. WAIVER OF TRIAL BY JURY. EACH OF
THE BORROWER AND THE LENDER HEREBY KNOWINGLY, VOLUNTARILY,
IRREVOCABLY AND INTENTIONALLY WAIVES THE RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT TO ANY ACTION, PROCEEDING,
COUNTERCLAIM OR OTHER LITIGATION BASED HEREON, OR ARISING
OUT OF, UNDER OR IN CONNECTION WITH THIS THIRD MODIFICATION,
THE LOAN AGREEMENTS OR ANY OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT OF THE PARTIES TO ENTER
INTO THIS THIRD MODIFICATION.
SECTION 12. Titles. The Section titles contained
in this Third Modification are and shall be without
substantive meaning or content of any kind whatsoever and
are not part of this Third Modification.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Third Modification to be executed as of the date first
above written.
DIXON TICONDEROGA COMPANY
By: /s/ Gino N. Pala
--------------------------------------
Name: Gino N. Pala
Title: Chief Executive Officer
and President
[Corporate Seal]
DIXON TICONDEROGA INC.
By: /s/ Gino N. Pala
--------------------------------------
Name: Gino N. Pala
Title: Chief Executive Officer
and President
[Corporate Seal]
FIRST UNION COMMERCIAL CORPORATION
By: /s/ Roanne Disalvatore
--------------------------------------
Name: Roanne Disalvatore
Title: Vice President
