<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 MARCH 31, 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 March 31, 1995
- ---------------------------- -----------------------------------------
Common Stock $1 par value 3,182,697
<PAGE>
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
------------------------------------------
INDEX
-----
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Information
Consolidated Balance Sheets --
March 31, 1995 and September 30, 1994 3-4
Consolidated Statements of Operations --
For The Three Months and Six Months
Ended March 31, 1995 and 1994 5
Consolidated Statements of Cash Flows --
For The Six Months Ended March 31, 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 11-15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
- ------- CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, September 30,
1995 1994
------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 515,528 $ 1,822,764
Receivables, less allowance for
doubtful accounts of $514,609
at March 31, 1995 and $564,905
at September 30, 1994 17,624,734 20,335,421
Inventories 32,538,978 28,881,083
Assets held for sale 247,136 256,947
Other current assets 2,180,293 1,924,754
----------- -----------
Total current assets 53,106,669 53,220,969
----------- -----------
CONDOMINIUMS UNDER DEVELOPMENT 783,973 773,067
----------- -----------
PROPERTY, PLANT and EQUIPMENT:
Land and buildings 11,171,809 11,867,046
Machinery and equipment 16,727,531 18,983,203
Furniture and fixtures 909,916 843,316
----------- -----------
28,809,256 31,693,565
Less accumulated depreciation (16,621,162) (18,308,662)
----------- -----------
12,188,094 13,384,903
OTHER ASSETS 1,379,565 1,473,059
----------- -----------
$67,458,301 $68,851,998
=========== ===========
<PAGE>
<CAPTION>
March 31, September 30,
1995 1994
------------ -------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $16,926,363 $11,054,169
Current maturities of long-term debt 4,415,106 4,431,570
Accounts payable 4,988,360 5,258,085
Accrued liabilities 4,991,855 8,626,772
----------- -----------
Total current liabilities 31,321,684 29,370,596
----------- -----------
LONG-TERM DEBT 18,667,266 19,140,668
----------- -----------
OTHER NONCURRENT LIABILITIES 119,837 233,818
----------- -----------
DEFERRED INCOME TAXES 986,772 1,144,799
----------- -----------
MINORITY INTEREST 2,192,252 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 3,447,967
shares as of March 31, 1995 and
3,424,873 as of September 30, 1994 3,447,966 3,424,873
Capital in excess of par value 2,124,659 2,042,639
Retained earnings 12,028,878 11,577,719
Cumulative translation adjustment (2,458,101) (531,455)
----------- -----------
15,143,402 16,513,776
Less - treasury stock, at cost
(265,270 shares) (972,912) (972,912)
----------- -----------
14,170,490 15,540,864
----------- -----------
$67,458,301 $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 SIX MONTHS ENDED
MARCH 31, MARCH 31,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES $19,371,467 $19,472,303 $40,764,818 $38,037,039
----------- ----------- ----------- -----------
COST AND EXPENSES:
Cost of goods sold 12,589,621 13,486,274 27,063,073 26,530,083
Selling and
administrative
expenses 5,190,580 4,937,382 10,766,324 9,506,133
----------- ----------- ----------- -----------
17,780,201 18,423,656 37,829,397 36,036,216
----------- ----------- ----------- -----------
OPERATING INCOME 1,591,266 1,048,647 2,935,421 2,000,823
INTEREST EXPENSE 838,219 914,320 1,594,300 1,833,097
----------- ----------- ----------- -----------
INCOME BEFORE
INCOME TAXES AND
MINORITY INTEREST 753,047 134,327 1,341,121 167,726
INCOME TAXES 272,268 105,136 500,604 111,304
----------- ----------- ----------- -----------
480,779 29,191 840,517 56,422
MINORITY INTEREST 331,577 --- 389,359 ---
----------- ----------- ----------- -----------
NET INCOME $ 149,202 $ 29,191 $ 451,158 $ 56,422
=========== =========== =========== ===========
EARNINGS PER COMMON
SHARE $ .05 $ .01 $ .14 $ .02
=========== =========== =========== ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING 3,176,000 3,152,047 3,167,762 3,150,863
=========== =========== =========== ===========
</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 THREE MONTHS ENDED MARCH 31, 1995 AND 1994
<CAPTION>
1995 1994
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 451,158 $ 56,422
Adjustment to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,188,991 1,215,670
Deferred taxes 310,192 (140,902)
Income attributable to currency translation (197,390) ---
Income attributable to minority interest 389,359 ---
Changes in assets and liabilities:
Receivables, net 808,317 (1,450,238)
Inventories (5,520,594) (771,179)
Other current assets (381,113) (488,587)
Accounts payable and accrued liabilities (3,326,775) (638,558)
Condominiums (10,906) 120,712
Other assets (166,997) (144,856)
----------- -----------
Net cash provided by (used in) operations (6,455,758) (2,241,516)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of plant and equipment, net (648,953) (737,552)
Proceeds from sale of assets --- 469,883
----------- -----------
Net cash provided by (used in)
investing activities (648,953) (267,669)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (reductions of)
notes payable 6,952,871 (1,266,999)
Net proceeds from (principal reductions
of) long-term debt (502,843) 4,081,834
Exercise of stock options 98,814 9,500
Other non-current liabilities (11,283) 9,449
----------- -----------
Net cash provided by (used in)
financing activities 6,537,559 2,833,784
----------- -----------
Effect of exchange rate changes on cash (740,084) (151,467)
<PAGE>
Net increase (decrease) in cash
and cash equivalents (1,307,236) 173,132
Cash and cash equivalents,
beginning of period 1,822,764 332,041
----------- -----------
Cash and cash equivalents,
end of period $ 515,528 $ 505,173
=========== ===========
Supplemental Disclosures:
Cash paid during the period:
Interest (net of amount capitalized) $ 2,043,623 $ 1,807,304
Income taxes 1,292,542 93,026
</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 March 31, 1995, and the results of
their operations and cash flows for the six months ended March 31, 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 March 31, 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):
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
------------ -------------
<S> <C> <C>
Raw materials $11,752 $12,273
Work in process 4,894 4,494
Finished goods 15,893 12,114
------- -------
$32,539 $28,881
======= =======
</TABLE>
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 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 $375,000 as of March 31, 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 $35 million 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%.
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
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
<PAGE>
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 March 31, 1995, decreased $101,000 from the
same quarter last year. The changes by segment are as follows:
<TABLE>
<CAPTION>
% Increase (Decrease)
Increase ---------------------
(Decrease) Total Volume Price/Mix
---------- ----- ------ ---------
<S> <C> <C> <C> <C>
Consumer U.S. $ 886 9 6 3
Consumer Foreign (1,177) (30) (28) (2)
Graphite & Lubricants 96 3 (3) 6
Refractory 94 3 2 1
</TABLE>
Revenue in Canada and Mexico decreased $66,000 and $935,000, respectively,
due to the decline of their currencies' value compared to the U.S. dollar.
The effect of the devaluation of the Mexican peso contributed principally to
the decline in domestic volume. As expected, customers in Mexico deferred
buying to allow the peso to stabilize. The effect of the postponement in
Mexico domestic sales was mitigated by increased sales to the U.S. of certain
products enjoying lower cost (in terms of U.S. dollars).
Revenues for the six months ended March 31, 1995, increased $2,728,000 over
the same period last year. The changes by segment are as follows:
<TABLE>
<CAPTION>
% Increase (Decrease)
Increase ---------------------
(Decrease) Total Volume Price/Mix
---------- ----- ------ ---------
<S> <C> <C> <C> <C>
Consumer U.S. $ 2,935 14 13 1
Consumer Foreign (1,249) (20) (12) (8)
Graphite & Lubricants 433 8 6 2
Refractory 737 14 16 (2)
</TABLE>
U.S. Consumer volume increases were primarily in the mass retail and office
supply mega-store markets. Revenue in Canada and Mexico decreased $106,000
and $995,000, respectively, due to the decline of their local currencies'
value. Mexico's revenues decreased $1,122,000 with approximately half due to
the devaluation of the peso (price/mix) and half due to lower domestic volume
as discussed above.
<PAGE>
Revenues decreased $2,022,000 from the prior quarter as follows:
<TABLE>
<CAPTION>
% Increase (Decrease)
Increase ---------------------
(Decrease) Total Volume Price/Mix
---------- ----- ------ ---------
<S> <C> <C> <C> <C>
Consumer U.S. $(2,800) (21) (20) (1)
Consumer Foreign 412 17 40 (23)
Graphite & Lubricants 373 13 15 (2)
Refractory (6) - 14 (14)
</TABLE>
Foreign Consumer revenue was adversely affected by the Mexican peso
devaluation, reflecting a decrease of $880,000 from the prior quarter. This
devaluation and its accompanying effect of lowering domestic customer demand
held Foreign revenue to a modest increase of $412,000 in what is historically
a strong quarter due to higher educational market sales. Strong exports from
Mexico to the U.S., however, mitigated the effects of this lower domestic
volume.
Real Estate revenues were not significant in any period presented.
OPERATING INCOME increased $543,000 over the same quarter last year. U.S.
Consumer products increased $125,000 on higher volume, despite increased
selling and distribution costs connected with aggressive efforts in the mass
retail and office supply mega-store markets. Foreign Consumer products
operating income increased $368,000, primarily in Mexico. Increased
shipments to the U.S. and related currency gains helped to maintain efficient
manufacturing conditions and higher operating profits, despite the large
decrease in Mexican domestic sales.
Operating income for the six months ended March 31, 1995, increased $935,000
over the same period last year. U.S. and Foreign Consumer accounted for most
of this increase for the reasons stated above.
Operating income for the quarter ended March 31, 1995, increased $247,000
over the first quarter. U.S. Consumer products decreased $556,000 due to the
prior quarter historically reflecting higher seasonal revenue. Foreign
Consumer increased $520,000 on higher seasonal revenue and the increased
operating profits from manufacturing for U.S. shipments in Mexico.
Lubricants and Refractory products increased $172,000 and $95,000,
respectively, on higher revenues.
INTEREST EXPENSE decreased $76,000 and $239,000 in the quarter and six months
ended March 31, 1995, over the comparable periods last year. The effect of
decreases in consolidated debt were partially offset by higher average rates
of interest in the U.S.
INCOME TAXES increased in all periods presented due to the increase in pre-
tax income.
<PAGE>
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
year, principally due to its recent operating success and the completion of
major financing initiatives. 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 under
normal terms. As is the case historically, cyclical inventory levels
increased to service the upcoming "back-to-school" buying season in the
Company's Consumer segment.
Investing activities included approximately $649,000 in purchases of property
and equipment for the first six months of 1995 (as compared with $738,000 in
the prior year). Generally, 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.
Before the end of fiscal 1995, 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.
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 up to $10 million in
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 March 31, 1995, the
Registrant has approximately $9 million of unused lines of credit available
under this financing agreement.
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, commencing August
1994. 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 August 1994
and 1995 subordinated note payments of $3.3 million each. The Company
intends to satisfy future subordinated note payments in 1996 and later from
funds provided by 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 and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits:
(28)a. First Modification of Revolving Credit Loan and Security
Agreement and Term Loan Agreement
(28)b. Employment Agreement between Dixon Ticonderoga Company
and Gino N. Pala
(28)c. Employment Agreement between Dixon Ticonderoga Company
and Richard F. Joyce
(b) Reports on Form 8-K:
The Company filed a current report on Form 8-K, dated March 3, 1995,
regarding its Shareholders Rights Plan. The rights under the plan were
registered on Form 8-A filed March 15, 1995.
<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: May 15, 1995 By: /s/ Gino N. Pala
----------------------------
Gino N. Pala
Chairman of the Board,
President, Chief Executive
Officer and Director
Dated: May 15, 1995 By: /s/ Richard A. Asta
----------------------------
Richard A. Asta
Executive Vice President of
Finance and Chief Financial
Officer
Dated: May 15, 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> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 515,528
<SECURITIES> 0
<RECEIVABLES> 18,139,343
<ALLOWANCES> 514,609
<INVENTORY> 32,538,978
<CURRENT-ASSETS> 53,106,669
<PP&E> 28,809,256
<DEPRECIATION> 16,621,162
<TOTAL-ASSETS> 67,458,301
<CURRENT-LIABILITIES> 31,321,684
<BONDS> 0
<COMMON> 3,447,966
0
0
<OTHER-SE> 10,722,524
<TOTAL-LIABILITY-AND-EQUITY> 67,458,301
<SALES> 40,764,818
<TOTAL-REVENUES> 40,764,818
<CGS> 27,063,073
<TOTAL-COSTS> 27,063,073
<OTHER-EXPENSES> 10,766,324
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,594,300
<INCOME-PRETAX> 1,341,121
<INCOME-TAX> 500,604
<INCOME-CONTINUING> 451,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 451,158
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
<PAGE>
FIRST MODIFICATION OF REVOLVING CREDIT LOAN
AND SECURITY AGREEMENT AND TERM LOAN AGREEMENT
This First Modification of Revolving Credit Loan and
Security Agreement and Term Loan Agreement (this "First Modifica-
tion") is made as of February 10, 1995 by and among DIXON TICON-
DEROGA COMPANY, a Delaware corporation ("DTC"), and DIXON TICON-
DEROGA INC., an Ontario corporation ("DTI"; DTC and DTI, collec-
tively, the "Borrower"), to 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 (said Agreement, as it may be amended or otherwise
modified from time to time, being hereinafter called the "Revolv-
ing Credit Agreement"), pursuant 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 condi-
tions 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 the Lender to agree
to certain modifications of the interest rate applicable to the
Loans (as such term is defined in the Revolving Credit Agreement).
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements hereinafter set forth, the parties hereto
agree as follows:
SECTION 1. DEFINED TERMS. Capitalized terms used in
this First Modification and not otherwise defined herein, shall
have the meanings ascribed to them in the Revolving Credit Agree-
ment.
SECTION 2. DEFINITIONS.
(a) Section 1 (DEFINITIONS) of the Revolving Credit
Agreement is amended to add the following new definitions:
"Adjusted LIBOR Rate" shall mean the LIBOR Rate
plus Two and One-Half Percent (2.5%) per annum.
"Adjusted Prime Rate" shall be the Prime Rate plus
One-Half of One Percent (0.5%) per annum.
<PAGE>
"Eurodollar Business Day" shall mean any Business
Day on which dealings in U.S. dollars deposits are con-
ducted by and between banks in the London interbank
market.
"Interest Rate Election Notice" shall mean a notice
described in section 2.5(c) hereof.
"LIBOR Rate" shall mean, for any LIBOR Period, an
interest rate per annum obtained by dividing (a) the
rate of interest determined by the Lender to be the ar-
ithmetic average (rounded upward, if necessary, to the
nearest one-sixteenth (1/16) of one percentage point of
the rate per annum) at which deposits in immediately
available and freely transferable Dollars are offered by
first class banks in the London interbank market to the
Charlotte, North Carolina, offices of First Union at
10:00 a.m. (Charlotte, North Carolina, time) three (3)
Eurodollar Business Days prior to 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 the
LIBOR Loan to be outstanding during such LIBOR Period,
by (b) the percentage equal to One Hundred Percent
(100%) (expressed as a decimal fraction) minus the Re-
serve Requirement for 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.
"LIBOR Loan" shall mean, at any time, any outstand-
ing Loan or portion thereof that bears interest at the
Adjusted LIBOR Rate at such time.
"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, except that each such
LIBOR Period that commences on the last Eurodollar Busi-
ness Day of a calendar month (or on any day for which
there is no numerically corresponding day in the appro-
priate subsequent calendar month) shall end on the last
Eurodollar Business Day of the appropriate subsequent
calendar month; provided that (a) no LIBOR Period may
extend beyond the Commitment Termination Date, and (b)
if a LIBOR Period would end on a day which is not a
Eurodollar Business Day, such LIBOR Period 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 immediately preceding
Eurodollar Business Day.
<PAGE>
"Prime Rate Loan" shall mean, at any time, any
outstanding Loan or portion thereof that bears interest
at the Adjusted Prime Rate at such time.
"Reserve Requirement" shall mean, for any LIBOR
Loan for any LIBOR Period therefor, the daily average of
the stated maximum rate (expressed as a decimal) at
which reserves (including any marginal, supplemental, or
emergency reserves) are required to be maintained during
such LIBOR Period under Regulation D by the Lender or
First Union against "Eurocurrency liabilities" (as such
term is used in Regulation D), but without benefit or
credit of proration, exemptions, or offsets that might
otherwise be available to the Lender or First Union from
time to time under Regulation D. Without limiting the
effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by
the Lender or First Union against (a) any category of
liabilities that includes deposits by reference to which
the LIBOR Rate is to be determined; or (b) any category
of extension of credit or other assets that includes
LIBOR Loans.
SECTION 3. INTEREST RATE ON REVOLVING CREDIT LOANS.
Section 2.5 (Interest) of the Revolving Credit Agreement is delet-
ed in its entirety and replaced with the following:
2.5 INTEREST. Subject to the provisions of
section 13.3 below, the Borrower shall pay interest to
the Lender on the principal amount of Revolving Credit
Loans outstanding under this Agreement as described
below. In addition to interest due and payable under
subsections (a) and (b) of this section and as provided
elsewhere in this Agreement, all interest accrued on any
Revolving Credit Loan shall be due and payable on each
date when all or any amount of the unpaid principal
balance of such Revolving Credit Loan shall be due
(whether by maturity, optional or mandatory prepayment,
acceleration, or otherwise).
(a) PRIME RATE OPTION. For Revolving Credit Loans
which are Prime Rate Loans, interest shall be payable at
the Adjusted Prime Rate. All changes in the rate of
interest due to a change in the Prime Rate shall take
effect on the same day on which the Prime Rate changes.
Interest on Prime Rate Loans will be calculated on a
daily basis (computed on the basis of actual days
elapsed over a year of 360 days) and shall be calculated
and be due and payable monthly in arrears on the first
Business Day of each calendar month.
<PAGE>
(b) LIBOR OPTION. For Revolving Credit Loans
which are LIBOR Loans, interest shall be payable at a
rate per annum equal to the Adjusted LIBOR Rate. Inter-
est on LIBOR Loans shall be due and payable monthly in
arrears on the first Business Day of each calendar
month, irrespective of the date upon which the applica-
ble LIBOR Period ends.
(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 Loan 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) 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 therefor);
and (2) the amount and type of conversion or renewal.
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.
(d) RESTRICTIONS ON LIBOR OPTION. Notwithstanding
subsection (c) above, the right of the Borrower to elect
the interest rate option applicable to any Loan or Loans
shall be subject to the following restrictions:
(i) a continuation or conversion of a LIBOR
Loan or any conversion of a Prime Rate Loan to a
LIBOR Loan must be in an amount such that the ag-
gregate amount of the succeeding LIBOR Loan made
by the Lender is a minimum of One Million Dollars
($1,000,000), or a higher integral multiple of
Five Hundred Thousand Dollars ($500,000); provid-
ed, however, that (A) not more than two (2) tranc-
hes of at least One Million Dollars ($1,000,000)
each of Revolving Credit Loans which are LIBOR
Loans may be outstanding at any time, and (B) not
<PAGE>
more than one (1) tranche of at least One Million
Dollars ($1,000,000) of the Term Loan which is a
LIBOR Loan may be outstanding at any time.
(ii) no conversion of a Prime Rate Loan to a
LIBOR Loan or continuation of a LIBOR Loan upon
the expiration of the LIBOR Period therefor shall
be permitted during the continuance of an Event of
Default;
(iii) the Borrower may not elect an interest
rate option for a LIBOR Loan with a LIBOR Period
extending beyond the Commitment Termination Date;
(iv) only the Term Loan and advances pursu-
ant to section 2.1 may be designated as LIBOR
Loans;
(v) anything herein to the contrary notwith-
standing, if, on or prior to the determination of
an interest rate for any LIBOR Loan for any peri-
od:
A. the Lender determines (which deter-
mination shall be conclusive absent manifest
error) that quotations of interest rates for
the relevant deposits are not being provided
by the relevant Persons in the relevant
amounts or for the relevant maturities for
purpose of determining the rate of interest
for such LIBOR Loan under this Agreement; or
B. the Lender determines (which deter-
mination shall be conclusive absent manifest
error) that the rate of interest referred to
in the definition of LIBOR Rate upon the ba-
sis of which the rate of interest on any
LIBOR Loan for such period is determined does
not accurately reflect the cost to the Lender
incurred in the London interbank market of
making or maintaining such LIBOR Loan for
such period,
then the Lender shall give the Borrower prompt no-
tice thereof, and so long as such condition re-
mains in effect, the Lender shall be under no ob-
ligation to make further LIBOR Loans or to convert
Prime Rate Loans into LIBOR Loans;
(vi) notwithstanding any other provision of
this Agreement to the contrary, upon the occur-
rence and during the continuance of any Event of
Default or event which, with the giving of notice
<PAGE>
or passage of time, or both, would constitute an
Event of Default, all LIBOR Loans then outstanding
shall immediately and automatically be converted
into Prime Rate Loans;
(vii) notwithstanding any other provision in
this Agreement to the contrary, in the event that
the Lender determines that it is unlawful for the
Lender (A) to honor its obligations to fund LIBOR
Loans hereunder, or (B) to maintain such LIBOR
Loans hereunder, then the Lender shall promptly
notify the Borrower thereof and the Lender's obli-
gation to fund LIBOR Loans and to convert any
Prime Rate Loans into LIBOR Loans hereunder shall
be suspended until such time as the Lender may
again make and maintain LIBOR Loans, and all LIBOR
Loans shall be converted into Prime Rate Loans in
accordance with this subsection (c); and
(viii) if any LIBOR Loans are to be convert-
ed pursuant to clause (vii) of this subsection,
the LIBOR Loans shall be automatically converted
into Prime Rate Loans on the last day of the then
current LIBOR Period for such LIBOR Loans and,
unless and until the Lender gives notice to the
Borrower that the circumstances specified in
clause (vii) hereof which gave rise to such con-
version no longer exist, all Loans which would
otherwise be advanced by the Lender as LIBOR Loans
shall be advanced instead as Prime Rate Loans and
all Loans which would otherwise be converted into
LIBOR Loans shall be converted instead into (or
shall remain as) Prime Rate Loans.
(e) ADDITIONAL COMPENSATION FOR LIBOR LOANS. Upon
notice to the Borrower from the Lender, the Borrower
shall pay to the Lender such amount as the Lender deter-
mines shall be sufficient to compensate the Lender for
any loss, cost or expense incurred as a result of:
(i) any payment of a LIBOR Loan on a date
other than the last day of the LIBOR Period for
such Loan, including, but not limited to accelera-
tion of the Loans by the Lender pursuant to sec-
tion 13.2 hereof; or
(ii) any failure by the Borrower to borrow
or convert a LIBOR Loan on the date for borrowing
or converting, as the case may be, specified in
the relevant notice under this section 2.5;
such compensation to include, without limitation, an
amount equal to, if any, (X) any loss sustained by the
<PAGE>
Lender as a result of reinvesting or redeploying any
amount prepaid at a rate lower than the Lender's cost of
match funding such amount, calculated for the period
consisting of the remainder of the relevant LIBOR period
or (Y) any direct breakage or unwinding costs resulting
from the liquidation of deposits that match funded any
amount not borrowed for the duration of the relevant
LIBOR Period. The Lender's determination of any such
amounts, as specified in the Lender's notice to the Bor-
rower, shall be conclusive absent bad faith or manifest
error.
(f) PAYMENT OF ADDITIONAL COMPENSATION. Any pay-
ment or prepayment of any LIBOR Loan, in whole or in
part, made otherwise than on the last day of the appli-
cable LIBOR Period shall be accompanied by such sums as
necessary to compensate the Lender as provided in sub-
section (e) hereof, as the Lender may upon request ad-
vise the Borrower; provided, however, that any estimate
communicated by the Lender to the Borrower of the loss-
es, costs and expenses resulting from such payment or
prepayment shall not be binding upon the Lender, who
will subsequently adjust the estimated amount as deter-
mined pursuant to subsection (e) hereof. Each such pay-
ment or prepayment shall be applied first to reimburse
the Lender for any losses sustained by the Lender as
provided in subsection (e) hereof.
SECTION 4. INTEREST RATE ON THE TERM LOAN; NEW TERM
NOTE. The interest rate provisions of the Term Note applicable to
the Term Loan shall be modified to conform to the modifications
made herein to the Revolving Credit Agreement in respect of Re-
volving Credit Loans. Simultaneously with the execution and
delivery of the this First Modification, the Borrower has executed
and delivered to FUCC the "First Modified Term Note" attached
hereto as Exhibit "A", which Note shall replace and become sub-
stituted for the Term Note referred to in the Term Loan Agreement.
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 Bor-
rower represents warrants to, and agrees with, the Lender and for
the benefit of First Union that (i) it has no defenses, set-offs,
or counterclaims of any kind or nature whatsoever against the
Lender or First Union with respect to the Obligations, any of the
agreements among the parties hereto, including, without limita-
tion, the obligations of the Borrower under the Loan Agreements,
the Notes, this First Modification or any other Loan Document, or
any action previously taken or not taken by the Lender with re-
spect thereto or with respect to any Lien or Collateral in connec-
<PAGE>
tion therewith to secure the Obligations, and (ii) this First
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 here-
of.
SECTION 7. 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 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 First Modification.
SECTION 9. COUNTERPARTS. This First Modification may
be executed in any number of counterparts which, when taken to-
gether, shall constitute one original.
SECTION 10. GOVERNING LAW; SEVERABILITY; DEFINED TERMS.
This First 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 First Modification shall
be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this First Modification
shall be prohibited by or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibi-
tion or invalidity and without invalidating the remaining provi-
sions of this First Modification.
11. WAIVER OF TRIAL BY JURY. Each of the Borrower and
the Lender hereby knowingly, voluntarily, irrevocably and inten-
tionally waives the right it may have to a trial by jury in re-
spect to any action, proceeding, counterclaim or other litigation
based hereon, or arising out of, under or in connection with this
First Modification, the Loan Agreements or any other Loan Docu-
ment, 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 First Modification.
SECTION 12. TITLES. The Section titles contained in
this First Modification are and shall be without substantive
meaning or content of any kind whatsoever and are not part of this
First Modification.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
First Modification to be executed as of the date first above
written.
DIXON TICONDEROGA COMPANY
By: /s/ Kenneth A. Baer
-------------------------------
Name: Kenneth A. Baer
Title: Treasurer
[Corporate Seal]
DIXON TICONDEROGA INC.
By: /s/ Kenneth A. Baer
-------------------------------
Name: Kenneth A. Baer
Title: Treasurer
[Corporate Seal]
FIRST UNION COMMERCIAL CORPORATION
By: /s/ Roanne Disalvatore
-------------------------------
Name: Roanne Disalvatore
Title: Vice President
<PAGE>
EXHIBIT A
FIRST MODIFIED TERM NOTE
Atlanta, Georgia
U.S. $9,250,000.03 February 10, 1995
1. PARTIES.
1.1 Dixon Ticonderoga Company, a Delaware
corporation, and Dixon Ticonderoga Inc., an Ontario corporation,
jointly and severally (collectively, the "Borrower").
1.2 First Union Commercial Corporation, a North
Carolina corporation (the "Lender").
2. DEFINED TERMS. All capitalized terms not defined in
this Note shall have the definitions given to such terms in the
Term Loan Agreement, or if not defined therein, the definitions
given to such terms in the Revolving Credit Agreement. For
purposes of this Note, in addition to the terms defined elsewhere
in this Note, the following terms shall have the meanings set forth
below:
"LIBOR Period" shall mean the period commencing on
the date any portion of the Term Loan is converted to a LIBOR
Tranche and ending on the numerically corresponding day in the
first, second, third or sixth calendar month thereafter, except
that each such LIBOR Period that commences on the last Eurodollar
Business Day of a calendar month (or on any day for which there is
no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Eurodollar Business Day of
the appropriate subsequent calendar month; provided that (a) no
LIBOR Period may extend beyond the Maturity Date, and (b) if a
LIBOR Period would end on a day which is not a Eurodollar Business
Day, such LIBOR Period shall be extended to the next Eurodollar
Business Day unless such Eurodollar Business Day would fall in the
next calendar month, in which event such LIBOR Period shall end on
the immediately preceding Eurodollar Business Day.
"LIBOR Rate" shall have the meaning given to such
term in the Revolving Credit Agreement, except that the reference
in said definition to "LIBOR Loan" is hereby replaced with "LIBOR
Tranche".
"LIBOR Tranche" shall mean that portion of the Term
Loan, if any, accruing interest at the Adjusted LIBOR Rate.
"Prime Tranche" shall mean that portion of the Term
Loan, if any, accruing interest at the Adjusted Prime Rate.
<PAGE>
"Reserve Requirement" shall have the meaning given
to such term in the Revolving Credit Agreement, except that the
first reference in said definition to "LIBOR Loan" is hereby
replaced with "LIBOR Tranche".
"Revolving Credit Agreement" shall mean that certain
Revolving Credit Loan, Foreign Exchange and Security Agreement
dated May 12, 1994, by and among Borrower and Lender, as modified
by that First Modification of Revolving Credit Loan and Security
Agreement and Term Loan Agreement of even date herewith, and as
hereafter modified, amended, supplemented or replaced from time to
time.
"Term Loan" shall mean the loan evidenced by this
Note and made pursuant to the Term Loan Agreement.
"Term Loan Agreement" shall mean that certain Term
Loan Agreement dated May 12, 1994, by and among Borrower and
Lender, as modified by the First Modification of Revolving Credit
Loan and Security Agreement and Term Loan Agreement of even date
herewith, and as hereafter modified, amended, supplemented or
replaced from time to time.
3. BORROWER'S PROMISE TO PAY. For value received,
Borrower promises to pay to the order of Lender, its successors or
assigns, NINE MILLION TWO HUNDRED FIFTY THOUSAND AND THREE/100
DOLLARS ($9,250,000.03) (the "Principal"), or so much thereof as
may be advanced hereunder, plus interest (the "Interest") on the
Principal from time to time remaining unpaid.
4. PAYMENTS.
4.1 Subject to the provisions of Section 4.2 below,
Borrower shall pay Interest to Lender on the Principal amount
outstanding hereunder at a rate determined in accordance with
Subsections 3.1(a) or (b) below (the "Applicable Interest Rate").
(a) PRIME RATE OPTION. Pursuant to the Prime
Rate Option, interest shall accrue on the Prime Tranche at the per
annum rate equal to the Adjusted Prime Rate. The Adjusted Prime
Rate shall change each time the Prime Rate (as hereinafter defined)
is changed. All changes in the Adjusted Prime Rate due to a change
in the Prime Rate shall take effect on the same day on which the
Prime Rate changes. Interest accruing on the Prime Tranche shall
be calculated on a daily basis (computed on the basis of the actual
number of days elapsed over a year of 360 days) and shall be due
and payable monthly, in arrears, on the first Business Day of each
calendar month.
(b) LIBOR OPTION. Pursuant to the LIBOR
Option, interest shall accrue on the LIBOR Tranche at the per annum
rate equal to the Adjusted LIBOR Rate. Interest on the LIBOR
Tranche shall be due and payable monthly, in arrears, on the first
<PAGE>
Business Day of each calendar month, irrespective of the date upon
which the applicable LIBOR Period ends.
(c) CONVERSION OF RATE OPTIONS. On the terms
and subject to the conditions of this Note and the Term Loan
Agreement, Borrower may elect (A) at any time to convert the Term
Loan, or any portion thereof consisting of a Prime Tranche into a
LIBOR Tranche, or (B) at the end of any LIBOR Period with respect
to a LIBOR Tranche, to convert such LIBOR Tranche into a Prime
Tranche or to renew such LIBOR Tranche for an additional LIBOR
Period. Except as set forth in Subsection 4.1(d), the LIBOR
Tranche and Prime Tranche of the Term Loan may be renewed or
converted in whole or in part. Each such election shall be made by
delivery to 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 Tranche and at least one (1)
Business Day prior to the effective date of any conversion to a
Prime Tranche, 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 Tranche to a Prime Tranche, the last day
of the LIBOR Period therefor); and (2) the amount and type of
conversion or renewal. If, within the time period required under
this Subsection 4.1(c), Lender shall not have received an Interest
Rate Election Notice from Borrower of an election to renew a LIBOR
Tranche for an additional LIBOR Period, then, upon the expiration
of the LIBOR Period therefor, such LIBOR Tranche shall be converted
automatically to a Prime Tranche.
(d) RESTRICTIONS ON LIBOR OPTION.
Notwithstanding Subsection 4.1(c) above, the right of Borrower to
elect the interest rate option applicable to the Term Loan, or any
portion thereof, shall be subject to the following restrictions:
(i) a continuation or conversion of a
LIBOR Tranche or any conversion of a Prime Tranche to a LIBOR
Tranche must be in an amount such that the aggregate amount of the
succeeding LIBOR Tranche, if any, made by Lender is a minimum of
One Million Dollars ($1,000,000), or a higher integral multiple of
Five Hundred Thousand Dollars ($500,000); provided, however, that
not more than one (1) tranche of at least One Million Dollars
($1,000,000) of the Term Loan which is a LIBOR Tranche may be out-
standing at any time.
(ii) no conversion of a Prime Tranche to
a LIBOR Tranche or continuation of a LIBOR Tranche upon the
expiration of the LIBOR Period therefor shall be permitted during
the continuance of an Event of Default;
(iii) Borrower may not elect an interest
rate option for a LIBOR Tranche with a LIBOR Period extending
beyond the Maturity Date;
<PAGE>
(iv) anything herein to the contrary
notwithstanding, if, on or prior to the determination of an
interest rate for any LIBOR Tranche for any period:
A. Lender determines (which determi-
nation shall be conclusive absent manifest error) that
quotations of interest rates for the relevant deposits
are not being provided by the relevant Persons in the
relevant amounts or for the relevant maturities for
purpose of determining the rate of interest for such
LIBOR Tranche under this Note; or
B. Lender determines (which determi-
nation shall be conclusive absent manifest error) that
the rate of interest referred to in the definition of
LIBOR Rate upon the basis of which the rate of interest
on any LIBOR Tranche for such period is determined does
not accurately reflect the cost to Lender incurred in the
London interbank market of making or maintaining such
LIBOR Tranche for such period,
then Lender shall give Borrower prompt notice thereof, and so long
as such condition remains in effect, Lender shall be under no ob-
ligation to renew any LIBOR Tranche or to convert the Term Loan or
any portion thereof consisting of a Prime Tranche into a LIBOR
Tranche;
(v) notwithstanding any other provision
of this Note to the contrary, upon the occurrence and during the
continuance of any Event of Default or event which, with the giving
of notice or passage of time, or both, would constitute an Event of
Default, any LIBOR Tranche then outstanding shall immediately and
automatically be converted into the Prime Tranche;
(vi) notwithstanding any other provision
in this Note to the contrary, in the event that Lender determines
that it is unlawful for Lender (A) to honor its obligations to
convert any portion of the Term Loan to a LIBOR Tranche or renew
any previously converted LIBOR Tranche hereunder, or (B) to
maintain such LIBOR Tranche hereunder, then Lender shall promptly
notify Borrower thereof and Lender's obligation to convert any
portion of the Term Loan to a LIBOR Tranche or renew any previously
converted LIBOR Tranche or to convert the Term Loan or any portion
thereof consisting of a Prime Tranche into a LIBOR Tranche hereun-
der shall be suspended until such time as Lender may again make and
maintain LIBOR loans, and any LIBOR Tranche shall be converted into
a Prime Tranche in accordance with this Subsection 4.1(c); and
(vii) if any LIBOR Tranche is to be
converted pursuant to clause (vi) of this Subsection 4.1(d), the
LIBOR Tranche shall be automatically converted into a Prime Tranche
on the last day of the then current LIBOR Period for such LIBOR
Tranche and, unless and until Lender gives notice to Borrower that
<PAGE>
the circumstances specified in clause (vi) hereof which gave rise
to such conversion no longer exist, that portion of the Term Loan
which would otherwise be a LIBOR Tranche shall be a Prime Tranche
and that portion of the Term Loan which would otherwise be
converted into a LIBOR Tranche shall be converted instead into (or
shall remain as) the Prime Tranche.
(e) ADDITIONAL COMPENSATION FOR LIBOR TRANCHE
CONVERSION. Upon notice to Borrower from Lender, Borrower shall
pay to Lender such amount as Lender determines shall be sufficient
to compensate Lender for any loss, cost or expense incurred as a
result of:
(i) any payment of a LIBOR Tranche on a
date other than the last day of the LIBOR Period for such LIBOR
Tranche, including, but not limited to acceleration of the Loans by
Lender pursuant to the provisions of this Note or the Term Loan
Agreement; or
(ii) any failure by Borrower to borrow or
convert a LIBOR Tranche or any LIBOR Tranche to a Prime Tranche on
the date for converting, as specified in the relevant notice under
this Section 4.1;
such compensation to include, without limitation, an amount equal
to, if any, (X) any loss sustained by Lender as a result of
reinvesting or redeploying any amount prepaid at a rate lower than
Lender's cost of match funding such amount, calculated for the
period consisting of the remainder of the relevant LIBOR Period or
(Y) any direct breakage or unwinding costs resulting from the
liquidation of deposits that match funded any amount not borrowed
for the duration of the relevant LIBOR Period. Lender's
determination of any such amounts, as specified in Lender's notice
to Borrower, shall be conclusive absent bad faith or manifest
error.
(f) PAYMENT OF ADDITIONAL COMPENSATION. Any
payment or prepayment of any LIBOR Tranche, in whole or in part,
made otherwise than on the last day of the applicable LIBOR Period
shall be accompanied by such sums as necessary to compensate Lender
as provided in Subsection 4.1(e) hereof, as Lender may upon request
advise Borrower; provided, however, that any estimate communicated
by Lender to Borrower of the losses, costs and expenses resulting
from such payment or prepayment shall not be binding upon Lender,
who will subsequently adjust the estimated amount as determined
pursuant to Subsection 4.1(e) hereof. Each such payment or
prepayment shall be applied first to reimburse Lender for any
losses sustained by Lender as provided in Subsection 4.1(e) hereof.
4.2 Upon the occurrence of an Event of Default (as
hereafter defined) in this Note, Interest shall be payable at the
annual rate of the Prime Rate plus four percent (4%) (the "Default
Rate").
<PAGE>
4.3 In addition to and concurrently with the
monthly payments of Interest, Borrower shall pay monthly
installments of Principal in an amount equal to (a) $83,333.33 from
March 1, 1995 through May 1, 1996; (b) $125,000 from June 1, 1996
through May 1, 1998; and (c) $138,888.92 from June 1, 1998 through
May 1, 2001.
4.4 The entire unpaid Principal and any accumulated
unpaid Interest thereon shall be due and payable on the earlier of
(a) May 12, 2001, (b) the Commitment Termination Date, or (c) the
date upon which the Obligations become due and payable pursuant to
the Term Loan Agreement. The date upon which the earlier of (a),
(b) or (c) in the foregoing sentence occurs shall be herein
described as the "Maturity Date".
4.5 The term "Prime Rate" shall mean the interest
rate publicly announced from time to time by First Union National
Bank of North Carolina as its prime rate of interest, subject to
change on a daily basis. First Union National Bank of North
Carolina lends at both above and below its prime rate. The Prime
Rate is a reference rate and is not necessarily the lowest or best
rate the First Union National Bank of North Carolina may from time
to time charge its customers. In the event First Union National
Bank of North Carolina shall abolish or abandon the practice of
announcing its prime rate or should the same be unascertainable,
the "Prime Rate" shall mean the interest rate designated and
identified as the Prime Rate published in the most recent edition
of The Charlotte Edition of The Wall Street Journal in its "Money
Rates" table and defined therein as the base rate on corporate
loans at large U.S. money center commercial banks, and if more than
one such rate is reported on any date, the higher or highest (if
more than two) of such rates shall constitute the Prime Rate
herein. A certificate executed and acknowledged by any officer of
Lender shall be conclusive of the Prime Rate, absent manifest
error.
4.6 All payments hereunder shall be made in lawful
money of the United States of America.
4.7 Notwithstanding anything to the contrary
contained in this Note, if at any time until payment in full of
this Note the Applicable Interest Rate exceeds the highest rate of
interest permissible under applicable Florida law which a court of
competent jurisdiction shall, in a final determination, deem
applicable hereto (the "Maximum Lawful Rate"), then in such event
and so long as the Maximum Lawful Rate would be so exceeded, the
rate of interest payable hereunder shall be equal to the Maximum
Lawful Rate, provided, however, that if at any time thereafter the
Applicable Interest Rate is less than the Maximum Lawful Rate,
Borrower shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by
Lender from the making of advances hereunder is equal to the total
<PAGE>
interest which Lender would have received had the Applicable
Interest Rate been (but for the operation of this paragraph) the
interest rate payable since the date of this Note. Thereafter, the
interest rate payable hereunder shall be the Applicable Interest
Rate unless and until the Applicable Interest Rate again exceeds
the Maximum Lawful Rate, in which event this paragraph shall again
apply. In no event shall the total interest received by Lender
pursuant to the terms hereof exceed the amount which Lender could
lawfully have received had the interest due hereunder been
calculated for the full term hereof at the Maximum Lawful Rate. In
the event the Maximum Lawful Rate is calculated pursuant to this
paragraph, such interest shall be calculated at a daily rate equal
to the Maximum Lawful Rate divided by the number of days in the
year in which such calculation is made. In the event that a court
of competent jurisdiction shall make a final determination that
Lender has received interest hereunder in excess of the Maximum
Lawful Rate, Lender shall promptly apply such excess first to any
interest due and not yet paid under this Note, then to the
principal amount of this Note, then to any interest due and not yet
paid under the Revolving Credit Note, then to the outstanding
principal amount of the Revolving Credit Note, and thereafter shall
refund any excess to Borrower.
4.8 Lender may, in determining the maximum rate of
interest allowed under applicable law, as amended from time to
time, take advantage of: (i) the rate of interest permitted by
Florida Statutes, Chapter 665 (Florida Savings Association and
Savings Bank Act), by reason of both Section 687.12 Florida
Statutes ("Interest rates; parity among licensed lenders or
creditors") and 12 United States Code, Sections 85 and 86, and (ii)
any other law, rule, or regulation in effect from time to time,
available to Lender which exempts Lender from any limit upon the
rate of interest it may charge or grants to Lender the right to
charge a higher rate of interest than that allowed by Florida
Statutes, Chapter 687.
5. APPLICATION OF PAYMENTS. So long as no default has
occurred in this Note, all payments hereunder shall first be
applied to Interest, then to Principal. Upon the occurrence of an
Event of Default in this Note, all payments hereunder shall first
be applied to costs pursuant to Section 9.3, then to Interest and
the remainder to Principal.
6. PREPAYMENT. In addition to the regularly scheduled
installments of Principal required pursuant to Section 4.3 hereof,
the Principal portion of this Note accruing interest at the
Adjusted Prime Rate, if any, may be prepaid in whole or in part in
increments of $25,000.00 without penalty, provided Borrower gives
Lender not less than thirty (30) days prior written notice thereof.
Any prepayment shall be accompanied by an amount equal to the
Interest accrued thereon to the date of receipt of such prepayment
in collected funds. Prepayments shall be applied in the inverse
order of Principal payments required by this Note.
<PAGE>
7. OTHER INSTRUMENTS. The term "Loan Documents" have
the same meaning given to such term in the Term Loan Agreement, and
which term shall include, but not be limited to the Mortgage and
Security Agreements and Deeds of Trust (collectively, the
"Mortgages") dated May 12, 1994, from Dixon Ticonderoga Company, a
Delaware corporation and Dixon Ticonderoga Inc., an Ontario
corporation, as mortgagors or grantors, as applicable, in favor of
Lender, as mortgagee, grantee or beneficiary, as applicable, as
modified or amended from time to time, encumbering certain real and
personal property described therein and in the Revolving Credit
Agreement. Reference is made to the provisions of the Loan
Documents for a description of the further rights of the Lender.
8. PLACE OF PAYMENT. All payments hereunder shall be
made at Lender's offices at 200 South Biscayne Boulevard, 11th
Floor; MC: FL6090, Miami, Florida 33131, or such other place as
Lender may from time to time designate in writing.
9. DEFAULT AND REMEDIES.
9.1 If any payment of Principal, Interest, or other
sum due Lender hereunder or under any of the Loan Documents
including, but not limited to, the Term Loan Agreement, Mortgages
or Revolving Credit Agreement, is not paid as and when due, or if
any other "Event of Default" occurs under any of the Loan
Documents, or if any obligation of Borrower under any of the Loan
Documents is not fully performed within any applicable cure period,
then such event shall be an "Event of Default" hereunder.
9.2 Notwithstanding any provision in this Note or
any Loan Document to the contrary, upon the occurrence of an Event
of Default in this Note, the Lender, at its option, may declare the
entire unpaid Principal balance of this Note, together with accrued
Interest, to be immediately due and payable without notice or
demand, and may avail itself of any or all of the remedies provided
for in any and all of the Loan Documents.
9.3 In addition to payments of Interest and
Principal, if there is a default in this Note, Lender shall be
entitled to recover from Borrower all of Lender's costs of
collection, including Lender's attorneys' fees, paralegals' fees
and legal assistants' fees (whether for services incurred in
collection, litigation, bankruptcy proceedings, appeals, or
otherwise), and all other costs incurred in connection therewith.
10. LATE CHARGE. A late charge of five percent (5%) of
any payment required hereunder shall be imposed on each and every
payment, including the final payment due hereunder, not received by
Lender within ten (10) days after it is due. The late charge is
not a penalty, but liquidated damages to defray administrative and
related expenses due to such late payment. The late charge shall
be immediately due and payable and shall be paid by Borrower to
<PAGE>
Lender without notice or demand. This provision for a late charge
is not and shall not be deemed a grace period, and Lender has no
obligation to accept a late payment. Further, the acceptance of a
late payment shall not constitute a waiver of any default then
existing or thereafter arising in this Note.
11. WAIVERS. Borrower and any endorsers, sureties,
guarantors, and all others who are, or may become liable for the
payment hereof severally: (a) waive presentment for payment,
demand, notice of demand, notice of non-payment or dishonor,
protest and notice of protest of this Note, and all other notices
in connection with the delivery, acceptance, performance, default,
or enforcement of the payment of this Note, (b) consent to all
extensions of time, renewals, postponements of time of payment of
this Note or other modifications hereof from time to time prior to
or after the maturity date hereof, whether by acceleration or in
due course, without notice, consent or consideration to any of the
foregoing, (c) agree to any substitution, exchange, addition, or
release of any of the security for the indebtedness evidenced by
this Note or the addition or release of any party or person
primarily or secondarily liable hereon, (d) agree that Lender shall
not be required first to institute any suit, or to exhaust its
remedies against the undersigned or any other person or party to
become liable hereunder or against the security in order to enforce
the payment of this Note and (e) agree that, notwithstanding the
occurrence of any of the foregoing (except by the express written
release by Lender of any such person), the undersigned shall be and
remain, jointly and severally directly and primarily liable for all
sums due under this Note.
12. SET-OFFS. Borrower and any endorsers, sureties,
guarantors, and all others who are, or who may become liable for
the payment hereof, severally expressly grant to Lender a
continuing first lien security interest in and authorize and
empower Lender, at its sole discretion, at any time after the
occurrence of a default hereunder to appropriate and, in such order
as Lender may elect, apply to the payment hereof or to the payment
of any and all indebtedness, liabilities and obligations of such
parties to Lender or any of Lender's affiliates, whether now
existing or hereafter created or arising or now owned or howsoever
after acquired by Lender or any of Lender's affiliates (whether
such indebtedness, liabilities and obligations are or will be joint
or several, direct or indirect, absolute or contingent, liquidated
or unliquidated, matured or unmatured, including, but not limited
to, any letter of credit issued by First Union National Bank of
Florida, a national banking association, for the account of any
such parties), any and all money, general or specific deposits, or
collateral of any such parties now or hereafter in the possession
of Lender.
13. SUBMISSION TO JURISDICTION. Borrower, and any
endorsers, sureties, guarantors and all others who are, or who may
become, liable for the payment hereof severally, irrevocably and
<PAGE>
unconditionally (a) agree that any suit, action, or other legal
proceeding arising out of or relating to this Note may be brought,
at the option of Lender, in a court of record of the State of
Florida in Dade County, in the United States District Court for the
Southern District of Florida, or in any other court of competent
jurisdiction; (b) consent to the jurisdiction of each such court in
any such suit, action or proceeding; and (c) waive any objection
which it or they may have to the laying of venue of any such suit,
action, or proceeding in any of such courts.
14. MISCELLANEOUS PROVISIONS.
14.1 The term Lender as used herein shall mean any
holder of this Note.
14.2 Time is of the essence in this Note.
14.3 The captions of sections of this Note are for
convenient reference only, and shall not affect the construction or
interpretation of any of the terms and provisions set forth in this
Note.
14.4 If more than one person signs this Note, each
is and shall be jointly and severally liable hereunder.
14.5 This Note shall be construed, interpreted,
enforced and governed by and in accordance with the laws of the
State of Florida (excluding the principles thereof governing
conflicts of law), and federal law, in the event federal law
permits a higher rate of interest than Florida law.
14.6 If any provision or portion of this Note is
declared or found by a court of competent jurisdiction to be
unenforceable or null and void, such provision or portion thereof
shall be deemed stricken and severed from this Note, and the
remaining provisions and portions thereof shall continue in full
force and effect.
14.7 This Note may not be amended, extended,
renewed or modified nor shall any waiver of any provision hereof be
effective, except by an instrument in writing executed by an
authorized officer of the Lender. Any waiver of any provision
hereof shall be effective only in the specific instance and for the
specific purpose for which given.
14.8 MODIFIED NOTE. This Note modifies, replaces
and supersedes that certain Promissory Note (the "Original Note")
dated as of May 12, 1994, executed by Borrower and made payable to
the order of Lender, in the original principal amount of
$10,000,000.00, without enlargement of the existing principal
balance thereunder. It is the intention of Borrower and Lender
that while this Note modifies, replaces and supersedes the Original
Note, it is not in payment or satisfaction of the Original Note,
<PAGE>
but rather is the substitution of one evidence of debt for another
without any intent to extinguish said debt. Should there be any
conflict between the terms of the Original Note and the terms of
this Note, the terms of this Note shall control. The Original Note
is attached hereto and shall only be negotiated with this Note.
15. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER (BY
ACCEPTANCE OF THIS INSTRUMENT) HEREBY KNOWINGLY, IRREVOCABLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM
BASED ON THIS NOTE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE OR ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY
PARTY HERETO OR TO ANY LOAN DOCUMENT. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR BORROWER AND LENDER ENTERING INTO THE SUBJECT LOAN
TRANSACTION.
THE PROPER FLORIDA DOCUMENTARY STAMP TAXES AND INTANGIBLE
TAXES HAVE BEEN PAID ON THE ORIGINAL NOTE, AND EVIDENCE OF SUCH
PAYMENT APPEARS ON THE MORTGAGE AND SECURITY AGREEMENT RECORDED IN
OFFICIAL RECORDS BOOK 901, AT PAGE 466, OF THE PUBLIC RECORDS OF
ST. LUCIE COUNTY, FLORIDA. THIS NOTE MODIFIES THE ORIGINAL NOTE
WITHOUT ENLARGEMENT OF THE EXISTING PRINCIPAL BALANCE UNDER THE
ORIGINAL NOTE, AND IS EXEMPT FROM FURTHER TAXATION PURSUANT TO
SECTIONS 201.09 AND 199.145(4), FLORIDA STATUTES, AND RULE 12B-
4.054(1), F.A.C.
DIXON TICONDEROGA COMPANY,
a Delaware corporation
By:
-------------------------------
Name:
Title:
[CORPORATE SEAL]
DIXON TICONDEROGA INC.,
an Ontario corporation
By:
--------------------------------
Name:
Title:
[CORPORATE SEAL]
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 1st day of January 1995 between DIXON
TICONDEROGA COMPANY, a Delaware corporation (the "Company"), and GINO N. PALA
(the "Executive").
BACKGROUND STATEMENTS:
I. The Executive is presently employed by the Company as
President and Chief Executive Officer.
II. The Board of Directors of the Company (the "Board") recognizes
that the Executive's contribution to the growth and success of the Company
during the past several years has been substantial. The Board desires to
provide for the continued employment of the Executive and to make certain
changes in the Executive's employment arrangements with the Company which the
Board has determined will reinforce and encourage the continued attention and
dedication to the Company of the Executive as a member of the Company's
management, in the best interests of the Company and its shareholders. The
Executive is willing to commit himself to continue to serve the Company on
the terms and conditions herein provided.
III. In order to effect the foregoing, the Company and the Executive
wish to enter into an employment agreement on the terms and conditions set
forth below. Accordingly, in consideration of the promises and the
respective covenants and agreements of the parties herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. Term. The employment of the Executive by the Company will
commence on the date hereof and end on December 31, 1998, unless further
extended or sooner terminated as hereinafter provided. On December 31, 1998,
and on the last day of the same month each year thereafter, the term of the
Executive's employment hereunder shall be automatically extended one
additional year unless, prior to such date, the Company shall have delivered
to the Executive or the Executive shall have delivered to the Company written
notice that the term of the Executive's employment hereunder will not be
extended.
2. Position and Duties. The Executive shall serve as President
and Chief Executive Officer of the Company and shall have such
responsibilities and authority as may from time to time be assigned to the
Executive by the Board. The Executive shall devote substantially all his
working time and efforts to the business and affairs of the Company.
3. Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be based at the principal
executive offices of the Company except for required travel on the Company's
business to an extent substantially consistent with present business travel
obligations.
<PAGE>
4. Compensation and Related Matters.
(a) Salary. During the period of the Executive's employment
hereunder, the Company shall pay to the Executive a salary at a rate of
$200,000 per annum in equal installments as nearly as practicable on the
fifteenth and thirtieth days of each month. This salary may be increased
from time to time in accordance with normal business practices of the Company
and, if so increased, shall not thereafter during the term of this Agreement
be decreased. Compensation of the Executive by salary payments shall not be
deemed exclusive and shall not prevent the Executive from participating in
any other compensation or benefit plan of the Company. The salary payments
(including any increased salary payments) hereunder shall not in any way
limit or reduce any other obligation of the Company hereunder, and no other
compensation, benefit or payment hereunder shall in any way limit or reduce
the obligation of the Company to pay the Executive's salary hereunder.
(b) Expenses. During the term of the Executive's employment
hereunder, the Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the Executive in performing services
hereunder, including all expenses of travel and living expenses while away
from home on business or at the request of and in the service of the Company,
provided that such expenses are incurred and accounted for in accordance with
the policies and procedures presently established by the Company.
(c) Other Benefits. The Company shall maintain in full
force and effect, and the Executive shall be entitled to continue to
participate in, all of its employee benefit plans and arrangements in effect
on the date hereof in which the Executive participates or plans or
arrangements providing the Executive with at least equivalent benefits
thereunder (including without limitation each pension and retirement plan and
arrangement, supplemental pension and retirement plan and arrangement, stock
option plan, life insurance and health-and-accident plan and arrangement,
medical insurance plan, disability plan, survivor plan, relocation plan and
vacation plan). The Company shall not make any changes in such plans or
arrangements which would adversely affect the Executive's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executives of the Company and does not result in a proportionately greater
reduction in the rights of or benefits to the Executive as compared with any
other executive of the Company. The Executive shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement made available by the Company in the future to its executives and
key management employees, subject to and on a basis consistent with the
terms, conditions, and overall administration of such plans and arrangements.
Nothing paid to the Executive under any plan or arrangement presently in
effect or made available in the future shall be deemed to be in lieu of the
salary payable to the Executive pursuant to paragraph (a) of this Section.
Any payments or benefits payable to the Executive hereunder in respect of any
calendar year during which the Executive is employed by the Company for less
than the entire such year shall, unless otherwise provided in the applicable
plan or arrangement, be prorated in accordance with the number of days in
such calendar year during which he is so employed. In the event of the
termination of the Executive's employment for any reason, any equity
<PAGE>
membership for the Executive in clubs paid for in whole or in part by the
Company shall be sole property of the Executive.
(d) Vacations. The Executive shall be entitled to the
number of vacation days in each calendar year, and to compensation in respect
of earned but unused vacation days, determined in accordance with the
Company's vacation policy. The Executive shall also be entitled to all paid
holidays given by the Company to its executives.
(e) Services Furnished. The Company shall furnish the
Executive with office space, stenographic assistance, and such other
facilities and services as shall be suitable to the Executive's position and
adequate for the performance of his duties as set forth in Section 2 hereof.
(f) Company Automobile. The Company shall continue to
provide the Executive with a company automobile at the Company's expense
under the arrangements in place immediately prior to the date hereof. In the
event of a termination of Executive's employment for any reason, the Company
shall assign the lease of such automobile to the Executive, who shall
thereafter be obligated to perform all payment and other obligations of the
Company thereunder.
5. Termination. The Executive's employment hereunder may be
terminated without any breach of this Agreement only under the following
circumstances:
(a) Death. The Executive's employment hereunder shall
terminate upon his death.
(b) Disability. If, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties hereunder on a full-time basis for the entire period
of six consecutive months, and within 30 days after written notice of
termination is given (which may occur before or after the end of such
six-month period) shall not have returned to the performance of his duties
hereunder on a full-time basis, the Company may terminate the Executive's
employment hereunder.
(c) Cause. The Company may terminate the Executive's
employment hereunder for Cause. For purposes of this Agreement, the Company
shall have "Cause" to terminate the Executive's employment hereunder upon (A)
the failure by the Executive to substantially perform his duties hereunder
(other than any such failure resulting from the Executive's incapacity due to
physical or mental illness), after demand for substantial performance is
delivered by the Company that specifically identifies the manner in which the
Company believes the Executive has not substantially performed his duties, or
(B) the willful engaging by the Executive in misconduct which is materially
injurious to the Company, monetarily or otherwise, or (C) the violation by
the Executive of any of the provisions of this Agreement. Notwithstanding
the foregoing, the Executive shall not be deemed to have been terminated for
Cause without (i) reasonable notice to the Executive setting forth the
reasons for the Company's intention to terminate for Cause, (ii) an
opportunity for the Executive, together with his counsel, to be heard before
<PAGE>
Board of Directors of the Company, and (iii) delivery to the Executive of a
Notice of Termination as defined in subsection (e) hereof from the Chairman
of the Board of the Company finding that in the good faith opinion of the
Chairman that the Executive was guilty of conduct set forth above in clause
(A), (B), or (C) of the preceding sentence.
(d) Termination by the Executive. The Executive may
terminate his employment hereunder (i) for Good Reason (as defined below), or
(ii) if his health should become impaired to an extent that makes his
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that the Executive shall have furnished
the Company with a written statement from a qualified doctor to such effect
and provided, further, that, at the Company's request, the Executive shall
submit to an examination by a doctor selected by the Company and such doctor
shall have concurred in the conclusion of the Executive's doctor.
For purposes of this Agreement, "Good Reason" shall mean (A) a Change
in Control (as defined below), provided, however, that a termination by the
Executive due to a Change in Control must be within 12 months after the
effective date of such Change in Control, (B) failure by the Company to
comply with any material provision of this Agreement which has not been cured
within 15 days after notice of such noncompliance has been given by the
Executive to the Board of Directors of the Company, (C) following a Change in
Control (as defined below), a change by the Company by 100 miles or more of
the principal location in which Executive is required to perform services, or
(D) any purported termination by the Company of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of subsection 5(e) hereof (and for purposes of this Agreement no
such purported termination by the Company shall be effective).
For purposes of this Agreement, a "Change in Control" shall be deemed
to occur on the occurrence of any of the following events without the prior
written approval of a majority of the entire Board of Directors of Employer
as it exists immediately prior to such event; provided that, in the case of
an event described in (1) or (3) below, such approval occurs before the time
of such event and, in the case of an event described in (2) below, such
approval occurs prior to the time that any other party to the event described
in (2) (or any Affiliate or Associate thereof) acquires 20% or more of the
Voting Power:
(1) The acquisition by an entity, person or group
(including any Affiliates or Associates of such entity, person or group) of
beneficial ownership, as that term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, of capital stock of the Company entitled to
exercise more than 50% of the outstanding voting power of all capital stock
of the Company entitled to vote in elections of directors ("Voting Power");
(2) The effective time of (I) a merger or
consolidation of the Company with one or more other corporations as a result
of which the holders of the outstanding Voting Power of the Company
immediately prior to such merger or consolidation (other than the surviving
or resulting corporation or any Affiliate or Associate thereof) hold less
than 50% of the Voting Power of the surviving or resulting corporation, or
<PAGE>
(II) a transfer of a majority of the voting Power, or a Substantial Portion
of the Property, of the Company other than to an entity of which the company
owns at least 50% of the Voting Power. The term "Substantial Portion" means
75% or more of the aggregate book value of the assets of the Company and its
Affiliates and Associates (for purposes of subparagraphs d(1) and d(2), the
terms "affiliates" and "associates" shall have the same meanings as those
terms are defined in Section 12b-2 under the Securities and Exchange Act of
1934); or
(3) The election to the Board of Directors of the
Company of directors constituting a majority of the number of directors of
the Company then in office.
(e) Notice of Termination. Any termination of the
Executive's employment by the Company or by the Executive (other than
termination pursuant to subsection (a) above) shall be communicated by
written Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean
(i) if the Executive's employment is terminated by his death, the date of his
death, (ii) if the Executive's employment is terminated pursuant to
subsection (b) above, 30 days after Notice of Termination is given (provided
that the Executive shall not have returned to the performance of his duties
on a full-time basis during such 30 day period, (iii) if the Executives
employment is terminated pursuant to subsection (e) above, the date specified
in the Notice of Termination, and (iv) if the Executive's employment is
terminated for any other reason, the date on which the Notice of Termination
is given; provided that if within 30 days after any Notice of Termination is
given the party receiving such Notice of Termina- tion notifies the other
party that a dispute exists concerning the termination, the Date of
Termination shall the dispute is finally determined, either by mutual written
agreement of the parties, by a binding and final arbitration award, or by a
final judgment, order, or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been
perfected).
6. Compensation Upon Termination or During Disability.
(a) Salary During Disability. During any period that the
Executive fails to perform his duties hereunder as a result of incapacity due
to physical or mental illness ("disability period") , the Executive shall
continue to receive his full salary at the rate then in effect for such
period until his employment is terminated pursuant to Section 5(b) hereof,
provided that payments so made to the Executive during the first 180 days of
the disability period shall be reduced by the sum of the amounts, if any,
payable to the Executive at or prior to the time of any such payment under
disability benefit plans of the Company and which were not previously applied
to reduce any such payment.
<PAGE>
(b) Compensation Upon Death. If the Executive's employment
is terminated by his death, the Company shall pay to the Executive's spouse,
or if he leaves no spouse, to his estate, commencing on the next succeeding
day which is the fifteenth day or last day of the month, as the case may be,
and semimonthly thereafter on the fifteenth and last days of each month, an
amount on each payment date equal to 25% of the semimonthly salary payment
payable to the Executive pursuant to Section 4(a) hereof at the time of his
death throughout the remainder of the then current term hereof.
(c) Compensation Upon Termination for Cause. If the
Executive's employment shall be terminated for Cause, the Company shall pay
the Executive his full salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and the Company shall have
no further obligations to the Executive under this Agreement.
(d) Compensation Upon Termination for Company's Breach of
Agreement or For Good Reason. If (A) in breach of this Agreement, the
Company shall terminate the Executive's employment other than pursuant to
Section 5(b) or 5(c) hereof or (B) the Executive shall terminate his
employment for Good Reason, then
(i) the Company shall pay the Executive his full
salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given;
(ii) in lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination, the Company
shall pay as severance pay to the Executive an amount equal to the product of
(A) the Executive's annual salary rate in effect as of the Date of
Termination, multiplied by (B) the greater of the number of years (including
partial years) remaining in the term of employment hereunder or the number
two, such payment to be made (X) if resulting from a termination based on a
change of control of the Company, in a lump sum on or before the fifth day
following the Date of Termination, or (Y) if resulting from any other cause,
in substantially equal semimonthly installments on the fifteenth and last
days of each month commencing with the month in which the Date of Termination
occurs and continuing for six months; and
(iii) the Company shall pay the Executive's Bonus for
the year in which such termination takes place. For purposes of this
paragraph 6(d)(iii), the term "Bonus" shall mean the amount determined by
multiplying the Executive's base salary at the rate in effect at the time
Notice of Termination is given by a percentage that is the average percentage
of base salary that was paid (or payable) to the Executive as a bonus under
any Company bonus plan or arrangement, for the three full fiscal years of the
Company immediately preceding the delivery of the Notice of Termination.
(e) Compensation in Case of Health Impairment. If the
Executive shall terminate his employment under clause (ii) of Section 5(d)
hereof, the Company shall pay the Executive his full salary through the Date
of Termination at the rate in effect at the time Notice of Termination is
given.
<PAGE>
(f) Employee Benefit Plans. Unless the Executive is
terminated for Cause, the Company shall maintain in full force and effect,
for the continued benefit of the Executive for the greater of the number of
years (including partial years) remaining in the term of employment hereunder
or the number three, all employee benefit plans and programs in which the
Executive was entitled to participate immediately prior to the Date of
Termination provided that the Executive's continued participation is possible
under the general terms and provisions of such plans and programs.
(g) Acceleration of Options. If upon the date of
termination of Executive's employment , other than a termination by the
Company for Cause, the Executive holds any options with respect to stock of
Company, all such options will, regardless of whether or not they are vested,
immediately become exercisable upon such date and will be exercisable for 90
days thereafter. To the extent such acceleration of exercise of such options
is not permissible under the terms of any plan pursuant to which the options
were granted, the Employer will pay to the Executive, in a lump sum, within
90 days after termination of employment, an amount equal to the excess, if
any, of the aggregate fair market value of all stock of the Employer subject
to such options, determined on the date of termination of employment, over
the aggregate option price of such stock, and the Executive will surrender
all such options unexercised.
7. Disclosure of Information. The Executive recognizes and
acknowledges that the list of the Company's customers, as it may exist from
time to time, is a valuable, special, and unique asset of the Company's
business. The Executive will not, during or after the term of his
employment, disclose the list of the Company's customers or any part thereof
to any person, firm, corporation, association, or other entity for any reason
or purpose whatsoever. In the event of a breach or threatened breach by the
Executive of the provisions of this paragraph, the Company shall be entitled
to an injunction restraining the Executive from disclosing, in whole or in
part, the list of the Company's customers, or from rendering any services to
any person, firm, corporation, association, or other entity to whom such
list, in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies available to the Company for such breach or
threatened breach, including the recovery of damages from the Executive.
8. Inventions. All ideas, inventions, and other developments
conceived by Executive, alone or with others, during the term of his
employment, whether or not during working hours, that are within the scope of
Company's business operations or that relate to any of Company's work or
projects, are the exclusive property of Company. Executive agrees to assist
Company, at its expense, to obtain patents on any such patentable ideas,
inventions, and other developments, and agrees to execute all documents
necessary to obtain such patents in the name of Company.
9. Restrictive Covenant. Notwithstanding anything in this
Agreement to the contrary, if, during the initial term or thereafter, this
Employment Agreement terminates or if Executive's employment is terminated
under this Agreement, with or without cause, voluntarily or involuntarily, by
either party, Executive agrees that for a period of two years after the
<PAGE>
termination of employment he shall not own, manage, operate, control, be
employed by, act as an agent for, participate in, or be connected in any
manner with the ownership, management, operation, or control of any business
which is engaged in businesses which are or may be competitive to the
business of the Company. It is the intention of the parties that the Company
be given the broadest protection allowed by law with regard to the
restrictions herein contained. In the event of a breach or a threatened
breach by the Executive of provisions in this paragraph, the Company shall be
entitled to an injunction restraining the Executive from such breach or
threatened breach. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from the Executive.
This covenant on the part of the Company and Executive shall be construed as
an agreement independent of any other provision of this Agreement and the
existence of any claim or cause of action by the Executive against the
Company whether predicated upon this Agreement or otherwise shall not
constitute a defense to the enforcement by the Company of this covenant.
10. Successors; Binding Agreement. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Executive, to
expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no
such succession had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as he would be entitled to
hereunder if he terminated his employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbe- fore defined and any
successor to its business and/or assets as aforesaid which executes and
delivers the agreement provided for in this Section 10 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation
of law. This Agreement and all rights of the Executive hereunder shall inure
to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees. If the Executive should die while any amounts would
still be payable to him hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
11. Notice. For the purposes of this Agreement, notices, demands, and
all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive: Gino N. Pala
______________________________
______________________________
<PAGE>
If to the Company: Dixon Ticonderoga Company
c/o Gino N. Pala
2600 Maitland Center Parkway, Suite 200
Maitland, Florida 32751
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
12. Miscellaneous. No provisions of this Agreement may be
modified, waived, or discharged unless such waiver, modification, or
discharge is agreed to in writing signed by the Executive and the Company's
President or such other officer as may be specifically designated by the
Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made
by either party which are not set forth expressly in this Agreement. The
validity, interpretation, construction, and performance of this Agreement
shall be governed by the laws of the State of Florida.
13. Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
14. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
DIXON TICONDEROGA COMPANY,
a Delaware corporation
Attest: By: /s/ Richard F. Joyce
-----------------------------
As its: Executive Vice President
-------------------------
By: /s/ Laura Van Camp
----------------------------
Executive
/s/ Gino N. Pala
--------------------------------
Gino N. Pala
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT made as of the 1st day of January 1995 between DIXON
TICONDEROGA COMPANY, a Delaware corporation (the "Company"), and RICHARD F.
JOYCE (the "Executive").
BACKGROUND STATEMENTS:
I. The Executive is presently employed by the Company
as Executive Vice President.
II. The Board of Directors of the Company (the "Board") recognizes
that the Executive's contribution to the growth and success of the Company
during the past several years has been substantial. The Board desires to
provide for the continued employment of the Executive and to make certain
changes in the Executive's employment arrangements with the Company which the
Board has determined will reinforce and encourage the continued attention and
dedication to the Company of the Executive as a member of the Company's
management, in the best interests of the Company and its shareholders. The
Executive is willing to commit himself to continue to serve the Company on
the terms and conditions herein provided.
III. In order to effect the foregoing, the Company and the Executive
wish to enter into an employment agreement on the terms and conditions set
forth below. Accordingly, in consideration of the promises and the
respective covenants and agreements of the parties herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
1. Term. The employment of the Executive by the Company will
commence on the date hereof and end on December 31, 1998, unless further
extended or sooner terminated as hereinafter provided. On December 31, 1998,
and on the last day of the same month each year thereafter, the term of the
Executive's employment hereunder shall be automatically extended one
additional year unless, prior to such date, the Company shall have delivered
to the Executive or the Executive shall have delivered to the Company written
notice that the term of the Executive's employment hereunder will not be
extended.
2. Position and Duties. The Executive shall serve as Executive
Vice President of the Company and shall have such responsibilities and
authority as may from time to time be assigned to the Executive by the Board
or the Chief Executive Officer of the Company. The Executive shall devote
substantially all his working time and efforts to the business and affairs of
the Company.
3. Place of Performance. In connection with the Executive's
employment by the Company, the Executive shall be based at the principal
executive offices of the Company except for required travel on the Company's
business to an extent substantially consistent with present business travel
obligations.
<PAGE>
4. Compensation and Related Matters.
(a) Salary. During the period of the Executive's employment
hereunder, the Company shall pay to the Executive a salary at a rate of
$130,000 per annum in equal installments as nearly as practicable on the
fifteenth and thirtieth days of each month. This salary may be increased
from time to time in accordance with normal business practices of the Company
and, if so increased, shall not thereafter during the term of this Agreement
be decreased. Compensation of the Executive by salary payments shall not be
deemed exclusive and shall not prevent the Executive from participating in
any other compensation or benefit plan of the Company. The salary payments
(including any increased salary payments) hereunder shall not in any way
limit or reduce any other obligation of the Company hereunder, and no other
compensation, benefit or payment hereunder shall in any way limit or reduce
the obligation of the Company to pay the Executive's salary hereunder.
(b) Expenses. During the term of the Executive's employment
hereunder, the Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by the Executive in performing services
hereunder, including all expenses of travel and living expenses while away
from home on business or at the request of and in the service of the Company,
provided that such expenses are incurred and accounted for in accordance with
the policies and procedures presently established by the Company.
(c) Other Benefits. The Company shall maintain in full
force and effect, and the Executive shall be entitled to continue to
participate in, all of its employee benefit plans and arrangements in effect
on the date hereof in which the Executive participates or plans or
arrangements providing the Executive with at least equivalent benefits
thereunder (including without limitation each pension and retirement plan and
arrangement, supplemental pension and retirement plan and arrangement, stock
option plan, life insurance and health-and-accident plan and arrangement,
medical insurance plan, disability plan, survivor plan, relocation plan and
vacation plan). The Company shall not make any changes in such plans or
arrangements which would adversely affect the Executive's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable to all
executives of the Company and does not result in a proportionately greater
reduction in the rights of or benefits to the Executive as compared with any
other executive of the Company. The Executive shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement made available by the Company in the future to its executives and
key management employees, subject to and on a basis consistent with the
terms, conditions, and overall administration of such plans and arrangements.
Nothing paid to the Executive under any plan or arrangement presently in
effect or made available in the future shall be deemed to be in lieu of the
salary payable to the Executive pursuant to paragraph (a) of this Section.
Any payments or benefits payable to the Executive hereunder in respect of
any calendar year during which the Executive is employed by the Company for
less than the entire such year shall, unless otherwise provided in the
applicable plan or arrangement, be prorated in accordance with the number of
days in such calendar year during which he is so employed. In the event of
the termination of the Executive's employment for any reason, any equity
<PAGE>
membership for the Executive in clubs paid for in whole or in part by the
Company shall be sole property of the Executive.
(d) Vacations. The Executive shall be entitled to the
number of vacation days in each calendar year, and to compensation in respect
of earned but unused vacation days, determined in accordance with the
Company's vacation policy. The Executive shall also be entitled to all paid
holidays given by the Company to its executives.
(e) Services Furnished. The Company shall furnish
the Executive with office space, stenographic assistance, and such other
facilities and services as shall be suitable to the Executive's position and
adequate for the performance of his duties as set forth in Section 2 hereof.
(f) Company Automobile. The Company shall continue to
provide the Executive with a company automobile at the Company's expense
under the arrangements in place immediately prior to the date hereof. In the
event of a termination of Executive's employment for any reason, the Company
shall assign the lease of such automobile to the Executive, who shall
thereafter be obligated to perform all payment and other obligations of the
Company thereunder.
5. Termination. The Executive's employment hereunder may be
terminated without any breach of this Agreement only under the following
circumstances:
(a) Death. The Executive's employment hereunder shall
terminate upon his death.
(b) Disability. If, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from his duties hereunder on a full-time basis for the entire period
of six consecutive months, and within 30 days after written notice of
termination is given (which may occur before or after the end of such
six-month period) shall not have returned to the performance of his duties
hereunder on a full-time basis, the Company may terminate the Executive's
employment hereunder.
(c) Cause. The Company may terminate the Executive's
employment hereunder for Cause. For purposes of this Agreement, the Company
shall have "Cause" to terminate the Executive's employment hereunder upon (A)
the failure by the Executive to substantially perform his duties hereunder
(other than any such failure resulting from the Executive's incapacity due to
physical or mental illness), after demand for substantial performance is
delivered by the Company that specifically identifies the manner in which the
Company believes the Executive has not substantially performed his duties, or
(B) the willful engaging by the Executive in misconduct which is materially
injurious to the Company, monetarily or otherwise, or (C) the violation by
the Executive of any of the provisions of this Agreement. Notwithstanding
the foregoing, the Executive shall not be deemed to have been terminated for
Cause without (i) reasonable notice to the Executive setting forth the
reasons for the Company's intention to terminate for Cause, (ii) an
opportunity for the Executive, together with his counsel, to be heard before
<PAGE>
the Board of Directors of the Company, and (iii) delivery to the Executive of
a Notice of Termination as defined in subsection (e) hereof from the Chairman
of the Board of the Company finding that in the good faith opinion of the
Chairman that the Executive was guilty of conduct set forth above in clause
(A), (B), or (C) of the preceding sentence.
(d) Termination by the Executive. The Executive may
terminate his employment hereunder (i) for Good Reason (as defined below), or
(ii) if his health should become impaired to an extent that makes his
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that the Executive shall have furnished
the Company with a written statement from a qualified doctor to such effect
and provided, further, that, at the Company's request, the Executive shall
submit to an examination by a doctor selected by the Company and such doctor
shall have concurred in the conclusion of the Executive's doctor.
For purposes of this Agreement, "Good Reason" shall mean (A)
a Change in Control (as defined below), provided, however, that a termination
by the Executive due to a Change in Control must be within 12 months after
the effective date of such Change in Control, (B) failure by the Company to
comply with any material provision of this Agreement which has not been cured
within 15 days after notice of such noncompliance has been given by the
Executive to the Board of Directors of the Company, (C) following a Change in
Control (as defined below), a change by the Company by 100 miles or more of
the principal location in which Executive is required to perform services, or
(D) any purported termination by the Company of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of subsection 5(e) hereof (and for purposes of this Agreement no
such purported termination by the Company shall be effective).
For purposes of this Agreement, a "Change in Control" shall be deemed
to occur on the occurrence of any of the following events without the prior
written approval of a majority of the entire Board of Directors of Employer
as it exists immediately prior to such event; provided that, in the case of
an event described in (1) or (3) below, such approval occurs before the time
of such event and, in the case of an event described in (2) below, such
approval occurs prior to the time that any other party to the event described
in (2) (or any Affiliate or Associate thereof) acquires 20% or more of the
Voting Power:
(1) The acquisition by an entity, person or group
(including any Affiliates or Associates of such entity, person or group) of
beneficial ownership, as that term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, of capital stock of the Company entitled to
exercise more than 50% of the outstanding voting power of all capital stock
of the Company entitled to vote in elections of directors ("Voting Power");
(2) The effective time of (I) a merger or
consolidation of the Company with one or more other corporations as a result
of which the holders of the outstanding Voting Power of the Company
immediately prior to such merger or consolidation (other than the surviving
or resulting corporation or any Affiliate or Associate thereof) hold less
than 50% of the Voting Power of the surviving or resulting corporation,
<PAGE>
or (II) a transfer of a majority of the voting Power, or a Substantial
Portion of the Property, of the Company other than to an entity of which the
company owns at least 50% of the Voting Power. The term "Substantial
Portion" means 75% or more of the aggregate book value of the assets of the
Company and its Affiliates and Associates (for purposes of subparagraphs d(1)
and d(2), the terms "affiliates" and "associates" shall have the same
meanings as those terms are defined in Section 12b-2 under the Securities and
Exchange Act of 1934); or
(3) The election to the Board of Directors of the
Company of directors constituting a majority of the number of directors of
the Company then in office.
(e) Notice of Termination. Any termination of the
Executive's employment by the Company or by the Executive (other than
termination pursuant to subsection (a) above) shall be communicated by
written Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean
(i) if the Executive's employment is terminated by his death, the date of his
death, (ii) if the Executive's employment is terminated pursuant to
subsection (b) above, 30 days after Notice of Termination is given (provided
that the Executive shall not have returned to the performance of his duties
on a full-time basis during such 30 day period, (iii) if the Executive's
employment is terminated pursuant to subsection (e) above, the date specified
in the Notice of Termination, and (iv) if the Executive's employment is
terminated for any other reason, the date on which the Notice of Termination
is given; provided that if within 30 days after any Notice of Termination is
given the party receiving such Notice of Termination notifies the other party
that a dispute exists concerning the termination, the Date of Termination
shall the dispute is finally determined, either by mutual written agreement
of the parties, by a binding and final arbitration award, or by a
final judgment, order, or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been
perfected).
6. Compensation Upon Termination or During Disability.
(a) Salary During Disability. During any period that the
Executive fails to perform his duties hereunder as a result of incapacity due
to physical or mental illness ("disability period"), the Executive shall
continue to receive his full salary at the rate then in effect for such
period until his employment is terminated pursuant to Section 5(b) hereof,
provided that payments so made to the Executive during the first 180 days of
the disability period shall be reduced by the sum of the amounts, if any,
payable to the Executive at or prior to the time of any such payment under
disability benefit plans of the Company and which were not previously applied
to reduce any such payment.
<PAGE>
(b) Compensation Upon Death. If the Executive's employment
is terminated by his death, the Company shall pay to the Executive's spouse,
or if he leaves no spouse, to his estate, commencing on the next succeeding
day which is the fifteenth day or last day of the month, as the case may be,
and semimonthly thereafter on the fifteenth and last days of each month, an
amount on each payment date equal to 25% of the semimonthly salary payment
payable to the Executive pursuant to Section 4(a) hereof at the time of his
death throughout the remainder of the then current term hereof.
(c) Compensation Upon Termination for Cause. If the
Executive's employment shall be terminated for Cause, the Company shall pay
the Executive his full salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and the Company shall have
no further obligations to the Executive under this Agreement.
(d) Compensation Upon Termination for Company's Breach of
Agreement or For Good Reason. If (A) in breach of this Agreement, the
Company shall terminate the executive's employment other than pursuant to
Section 5(b) or 5(c) hereof or (B) the Executive shall terminate his
employment for Good Reason, then
(i) the Company shall pay the Executive his full
salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given;
(ii) in lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination, the Company
shall pay as severance pay to the Executive an amount equal to the product of
(A) the Executive's annual salary rate in effect as of the Date of
Termination, multiplied by (B) the greater of the number of years (including
partial years) remaining in the term of employment hereunder or the number
two, such payment to be made (X) if resulting from a termination based on a
change of control of the Company, in a lump sum on or before the fifth day
following the Date of Termination, or (Y) if resulting from any other cause,
in substantially equal semimonthly installments on the fifteenth and last
days of each month commencing with the month in which the Date of Termination
occurs and continuing for six months; and
(iii) the Company shall pay the Executive's Bonus for
the year in which such termination takes place. For purposes of this
paragraph 6(d)(iii), the term "Bonus" shall mean the amount determined by
multiplying the Executive's base salary at the rate in effect at the time
Notice of Termination is given by a percentage that is the average percentage
of base salary that was paid (or payable) to the Executive as a bonus under
any Company bonus plan or arrangement, for the three full fiscal years of the
Company immediately preceding the delivery of the Notice of Termination.
(e) Compensation in Case of Health Impairment. If the
Executive shall terminate his employment under clause (ii) of Section 5(d)
hereof, the Company shall pay the Executive his full salary through the Date
of Termination at the rate in effect at the time Notice of Termination is
given.
<PAGE>
(f) Employee Benefit Plans. Unless the Executive is
terminated for Cause, the Company shall maintain in full force and effect,
for the continued benefit of the Executive for the greater of the number of
years (including partial years) remaining in the term of employment hereunder
or the number three, all employee benefit plans and programs in which the
Executive was entitled to participate immediately prior to the Date of
Termination provided that the Executive's continued participation is possible
under thegeneral terms and provisions of such plans and programs.
(g) Acceleration of Options. If upon the date of
termination of Executive's employment, other than a termination by the
Company for Cause, the Executive holds any options with respect to stock of
Company, all such options will, regardless of whether or not they are vested,
immediately become exercisable upon such date and will be exercisable for
90 days thereafter. To the extent such acceleration of exercise of such
options is not permissible under the terms of any plan pursuant to which the
options were granted, the Employer will pay to the Executive, in a lump sum,
within 90 days after termination of employment, an amount equal to the
excess, if any, of the aggregate fair market value of all stock of the
Employer subject to such options, determined on the date of termination
of employment, over the aggregate option price of such stock, and the
Executive will surrender all such options unexercised.
7. Disclosure of Information. The Executive recognizes and
acknowledges that the list of the Company's customers, as it may exist from
time to time, is a valuable, special, and unique asset of the Company's
business. The Executive will not, during or after the term of his
employment, disclose the list of the Company's customers or any part thereof
to any person, firm, corporation, association, or other entity for any reason
or purpose whatsoever. In the event of a breach or threatened breach by the
Executive of the provisions of this paragraph, the Company shall be entitled
to an injunction restraining the Executive from disclosing, in whole or in
part, the list of the Company's customers, or from rendering any services to
any person, firm, corporation, association, or other entity to whom such
list, in whole or in part, has been disclosed or is threatened to be
disclosed. Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies available to the Company for such breach or
threatened breach, including the recovery of damages from the Executive.
8. Inventions. All ideas, inventions, and other developments
conceived by Executive, alone or with others, during the term of his
employment, whether or not during working hours, that are within the scope of
Company's business operations or that relate to any of Company's work or
projects, are the exclusive property of Company. Executive agrees to assist
Company, at its expense, to obtain patents on any such patentable ideas,
inventions, and other developments, and agrees to execute all documents
necessary to obtain such patents in the name of Company.
9. Restrictive Covenant. Notwithstanding anything in this
Agreement to the contrary, if, during the initial term or thereafter, this
Employment Agreement terminates or if Executive's employment is terminated
under this Agreement, with or without cause, voluntarily or involuntarily, by
either party, Executive agrees that for a period of two years after the
<PAGE>
termination of employment he shall not own, manage, operate, control, be
employed by, act as an agent for, participate in, or be connected in any
manner with the ownership, management, operation, or control of any business
which is engaged in businesses which are or may be competitive to the
business of the Company. It is the intention of the parties that the Company
be given the broadest protection allowed by law with regard to the
restrictions herein contained. In the event of a breach or a threatened
breach by the Executive of provisions in this paragraph, the Company shall be
entitled to an injunction restraining the Executive from such breach or
threatened breach. Nothing herein shall be construed as prohibiting the
Company from pursuing any other remedies available to it for such breach or
threatened breach, including the recovery of damages from the Executive.
This covenant on the part of the Company and Executive shall be construed
as an agreement independent of any other provision of this Agreement and the
existence of any claim or cause of action by the Executive against the
Company whether predicated upon this Agreement or otherwise shall not
constitute a defense to the enforcement by the Company of this covenant.
10. Successors; Binding Agreement. The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Executive, to
expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no
such succession had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as he would be entitled to
hereunder if he terminated his employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which executes and
delivers the agreement provided for in this Section 10 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation
of law. This Agreement and all rights of the Executive hereunder shall inure
to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees, and legatees. If the Executive should die while any amounts would
still be payable to him hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee, or other
designee or, if there be no such designee, to the Executive's estate.
11. Notice. For the purposes of this Agreement, notices, demands, and
all other communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or (unless
otherwise specified) mailed by United States registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive: Richard F. Joyce
______________________________
______________________________
<PAGE>
If to the Company: Dixon Ticonderoga Company
c/o Gino N. Pala
2600 Maitland Center Parkway, Suite 200
Maitland, Florida 32751
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
12. Miscellaneous. No provisions of this Agreement may be
modified, waived, or discharged unless such waiver, modification, or
discharge is agreed to in writing signed by the Executive and the Company's
President or such other officer as may be specifically designated by the
Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made
by either party which are not set forth expressly in this Agreement. The
validity, interpretation, construction, and performance of this Agreement
shall be governed by the laws of the State of Florida.
13. Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
DIXON TICONDEROGA COMPANY,
a Delaware corporation
Attest: By: /s/ Gino N. Pala
----------------------
As its: Chairman and CEO
------------------
By: /s/ Laura VanCamp
--------------------------
Executive
/s/ Richard F. Joyce
------------------------
Richard F. Joyce
