<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Judiciary Plaza, 450 Fifth Street, N.W.
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1996 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.
195 International Parkway, Heathrow, FL 32746
- ----------------------------------------------------------------------------
(Address of principal executive offices) Zip Code
(407) 829-9000
Registrant's telephone number, including area code: ----------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class Outstanding as of June 30, 1996
- ---------------------------- -----------------------------------------
Common Stock $1 par value 3,291,778
<PAGE> 2
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
------------------------------------------
INDEX
-----
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Information
Consolidated Balance Sheets --
June 30, 1996 and September 30, 1995 3-4
Consolidated Statements of Operations --
For The Three Months and Nine Months
Ended June 30, 1996 and 1995 5-6
Consolidated Statements of Cash Flows --
For The Nine Months Ended June 30, 1996 and 1995 7-8
Notes to Consolidated Financial Statements 9-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-16
PART II. OTHER INFORMATION
Item 5. Other Information 17
Item 6. Exhibits 17
Signatures 18
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
- ------- CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,061,369 $ 1,513,622
Receivables, less allowance for
doubtful accounts of $806,320
at June 30, 1996 and $796,715
at September 30, 1995 30,448,268 18,202,541
Inventories 32,082,841 32,638,385
Assets held for sale -- 436,306
Other current assets 3,254,490 2,254,101
----------- -----------
Total current assets 66,846,968 55,044,955
----------- -----------
PROPERTY, PLANT and EQUIPMENT:
Land and buildings 16,007,028 12,908,945
Machinery and equipment 15,823,629 16,986,408
Furniture and fixtures 845,880 902,043
----------- -----------
32,676,537 30,797,396
Less accumulated depreciation (17,265,393) (17,229,617)
----------- -----------
15,411,144 13,567,779
OTHER ASSETS 1,624,596 1,545,110
----------- -----------
$83,882,708 $70,157,844
=========== ===========
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
June 30, September 30,
1996 1995
------------ -------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $28,778,461 $17,877,665
Current maturities of long-term debt 4,529,635 4,587,016
Accounts payable 5,863,219 5,280,884
Accrued liabilities 11,428,590 8,388,309
----------- -----------
Total current liabilities 50,599,905 36,133,874
----------- -----------
LONG-TERM DEBT 13,734,863 14,540,884
----------- -----------
DEFERRED INCOME TAXES AND OTHER 1,042,666 1,177,288
----------- -----------
MINORITY INTEREST 3,165,330 3,073,375
----------- -----------
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 3,535,211
shares as of June 30, 1996 and
3,448,466 as of September 30, 1995 3,535,211 3,448,466
Capital in excess of par value 2,461,486 2,166,329
Retained earnings 12,954,959 12,640,762
Cumulative translation adjustment (2,718,894) (2,087,354)
----------- -----------
16,232,762 16,168,203
Less - treasury stock, at cost
(243,433 shares at June 30, 1996, and
255,147 shares at September 30, 1995) (892,818) (935,780)
----------- -----------
15,339,944 15,232,423
----------- -----------
$83,882,708 $70,157,844
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE> 5
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
REVENUES $33,170,481 $28,445,498 $74,737,845 $69,209,716
----------- ----------- ----------- -----------
COST AND EXPENSES:
Cost of goods sold 21,691,475 18,296,442 50,155,519 45,298,401
Selling and
administrative
expenses 7,797,843 6,968,486 18,905,806 17,734,410
----------- ----------- ----------- -----------
29,489,318 25,264,928 69,061,325 63,032,811
----------- ----------- ----------- -----------
OPERATING INCOME 3,681,163 3,180,570 5,676,520 6,176,905
LITIGATION AND RELATED
COSTS -- -- (2,039,000) --
INTEREST EXPENSE (923,528) (995,385) (2,328,388) (2,589,685)
----------- ----------- ----------- -----------
(923,528) (995,385) (4,367,388) (2,589,685)
----------- ----------- ----------- -----------
INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES AND
MINORITY INTEREST 2,757,635 2,185,185 1,309,132 3,587,220
INCOME TAXES 991,721 744,268 406,063 1,266,634
----------- ----------- ----------- -----------
1,765,914 1,440,917 903,069 2,320,586
MINORITY INTEREST 348,083 154,049 588,874 543,408
----------- ----------- ----------- -----------
INCOME FROM CONTINUING
OPERATIONS 1,417,831 1,286,868 314,195 1,777,178
DISCONTINUED OPERATIONS -- (101,669) -- (149,848)
----------- ----------- ----------- -----------
NET INCOME $ 1,417,831 $ 1,185,199 $ 314,195 $ 1,627,330
=========== =========== =========== ===========
<PAGE> 6
EARNINGS (LOSS) PER
COMMON SHARE:
Continuing Operations $ .44 $ .40 $ .10 $ .56
Discontinued Operations -- (.03) -- (.05)
----------- ----------- ----------- -----------
Net Income $ .44 $ .37 $ .10 $ .51
=========== =========== =========== ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING 3,242,358 3,189,446 3,210,596 3,176,267
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE> 7
DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from continuing operations $ 314,195 $ 1,777,178
Loss from discontinued operations -- (149,848)
Adjustment to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 1,835,925 1,780,744
Deferred taxes 23,466 291,665
Income attributable to currency translation (33,572) (558,858)
Income attributable to minority interest 588,875 543,408
Changes in assets and liabilities:
Receivables, net (12,706,770) (8,292,977)
Inventories (62,933) (4,202,211)
Assets held for sale 237,326 --
Other current assets (1,095,423) (28,150)
Accounts payable and accrued liabilities 3,707,129 (1,195,765)
Other assets (94,347) (177,612)
----------- -----------
Net cash provided by (used in) operations (7,286,129) (10,212,426)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of plant and equipment, net (3,620,732) (1,774,462)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from notes payable 10,950,049 11,926,235
Principal reductions of long-term debt (843,220) (855,427)
Employee stock purchases and options 424,864 167,657
Other non-current liabilities (1,809) (101,283)
----------- -----------
Net cash provided by (used in)
financing activities 10,529,884 11,137,182
----------- -----------
Effect of exchange rate changes on cash (75,276) (620,812)
----------- -----------
<PAGE> 8
Net decrease in cash and
cash equivalents (452,253) (1,470,518)
Cash and cash equivalents,
beginning of period 1,513,622 1,822,764
----------- -----------
Cash and cash equivalents,
end of period 1,061,369 $ 352,246
=========== ===========
Supplemental Disclosures:
Cash paid during the period:
Interest (net of amount capitalized) 2,001,122 $ 2,201,755
Income taxes 303,698 1,392,130
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE> 9
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 Dixon
Ticonderoga Company and subsidiaries as of June 30, 1996, and the results of
their operations and cash flows for the nine months ended June 30, 1996, and
1995, have been included. The results of operations for such interim periods
are not necessarily indicative of the results for the entire year.
Certain 1995 balances have been reclassified to conform to current year
presentation.
2. Inventories:
Since amounts for inventories under the LIFO method are based on annual
determinations of quantities and costs as of the end of the fiscal year, the
inventories at June 30, 1996 (for which the LIFO method of accounting are
used) are based on certain estimates relating to quantities and costs as of
year end.
Inventories consist of (in thousands):
June 30, September 30,
1996 1995
------------ -------------
Raw materials $12,789 $12,450
Work in process 5,032 4,462
Finished goods 14,262 15,726
------- -------
$32,083 $32,638
======= =======
3. New financing arrangements:
In July 1996, the Company entered into new financing arrangements with a
consortium of lenders to provide additional working capital. The new loan
and security agreement provides for a total of $48 million in financing.
This includes a revolving line of credit facility in the amount of $40
million which bears interest at either the prime rate, plus 0.5%, or the
<PAGE> 10
prevailing LIBOR rate plus 2.5%. Borrowings under the revolving credit
facility are based upon eligible accounts receivable and inventories, as
defined, of the Company's U.S. and Canada operations. The financing
agreement also includes a term loan in the amount of $7.75 million. The term
loan bears interest at the same rate, and is payable in varying monthly
installments through 2001.
The new financing arrangements are collateralized by the tangible and
intangible assets of the U.S. and Canada operations (including accounts
receivable, inventories, property, plant and equipment, patents and
trademarks) and a pledge of the capital stock of the Company's subsidiaries.
The loan and security agreement contains provisions pertaining to the
maintenance of certain financial ratios and annual capital expenditure
levels, as well as restrictions as to payment of cash dividends. The Company
is presently in compliance with all such provisions. These new arrangements
provide up to $10 million in additional financing as compared with the
Company's agreement with its previous primary lender and permits the Company
to meet its current debt obligations, including its 1996 subordinated debt
payment.
4. Effect of certain new accounting pronouncements:
The Financial Accounting Standards Board (FASB) 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.
In 1995, the FASB also issued Statement No. 123, "Accounting for Stock-Based
Compensation." The statement (effective for the Company in fiscal 1997)
would provide certain specific disclosures regarding the value of stock
option grants made in fiscal 1996 and thereafter. The Company does not
expect to adopt the compensation recognition provision of the Statement, and,
accordingly, it is not expected to materially affect the future results of
operations or financial position of the Company. The specific disclosures
required by the statement have not been calculated at this time.
5. 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 foreign and state income taxes and other
permanent items.
6. Contingencies:
The Company, in the normal course of business, is party in certain
litigation. Ongoing litigation includes a claim under New Jersey's
Environmental Clean-Up Responsibility Act (ECRA) by a 1984 purchaser of
industrial property from the Company. In April 1996, a decision was rendered
<PAGE> 11
by the Superior Court of New Jersey in Hudson County finding the Company
responsible for $1.94 million in certain environmental clean-up costs
relating to this matter. Including pre-judgment interest on the damage
award, it is estimated that the Company's exposure will not exceed
approximately $3.3 million. The Company intends to pursue other responsible
parties for indemnification and/or contribution to the payment of this claim
(including its insurance carriers and a legal malpractice action against its
former attorneys) and has filed an appeal. As a result of the judgment, a
provision of approximately $2 million ($1.3 million, net of tax) was recorded
in fiscal 1996. This amount is in addition to approximately $1.3 million
($800,000, net of tax) provided in prior periods.
The Company has evaluated the merits of other litigation and believes their
outcome will not have a further material effect on the Company's future
results of operations or financial position.
The Company 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 July 1996, the Company was relieved of its guarantee of a loan
(approximating $300,000) relating to the previous sale of a discontinued
business.
7. Discontinued operations:
In September 1995, the Company disposed of its real estate operations, and
accordingly, the prior year operating results of the real estate segment have
been restated as discontinued operations. Revenues from discontinued
operations for the periods presented were not material.
<PAGE> 12
Item 2.
- -------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
REVENUES for the quarter ended June 30, 1996, increased $4,720,000 from the
same quarter last year. The changes by segment are as follows (in
thousands):
% Increase (Decrease)
Increase ---------------------
(Decrease) Total Volume Price/Mix
---------- ----- ------ ---------
Consumer U.S. $2,910 17 17 --
Consumer Foreign 1,907 37 35 2
Graphite & Lubricants 179 6 8 (2)
Refractory (276) 8 (10) 2
U.S. Consumer revenue increased due primarily to increased volume in the
office supply mega-store and mass retail markets. The increase in Foreign
Consumer revenue was primarily due to increased volume in Mexico. In the
prior year quarter, the Mexican market was depressed due to the severe
devaluation of the peso. Revenue in Mexico decreased $480,000 due to the
decline in value of the peso compared to the U.S. dollar.
Revenues for the nine months ended June 30, 1996, increased $5,530,000 over
the same period last year. The changes by segment are as follows (in
thousands):
% Increase (Decrease)
Increase ---------------------
(Decrease) Total Volume Price/Mix
---------- ----- ------ ---------
Consumer U.S. $3,046 8 7 1
Consumer Foreign 2,404 23 18 5
Graphite & Lubricants 360 4 5 (1)
Refractory (280) (3) (5) 2
The increase in U.S. Consumer revenue was again due to increased volume in
the mass retail and office supply mega-store markets. Foreign Consumer
revenue includes a decline of $1,220,000 attributable to the value of the
Mexican peso when compared to the U.S. dollar. This decline was more than
offset by increased peso selling prices and higher volume. As mentioned
above, Mexico revenues remained depressed last year as a result of the
devaluation of the Mexican peso.
<PAGE> 13
Revenues increased $12,550,000 from the prior quarter as follows (in
thousands):
% Increase (Decrease)
Increase ---------------------
(Decrease) Total Volume Price/Mix
---------- ----- ------ ---------
Consumer U.S. $8,839 82 81 1
Consumer Foreign 3,800 117 112 5
Graphite & Lubricants 33 1 2 (1)
Refractory (122) (4) (5) 1
U.S. and Foreign Consumer reflects the seasonality of these segments.
Historically, this quarter represents approximately 31% of annual revenues
being shipped, while the prior quarter only 18%.
OPERATING INCOME increased $500,000 over the same quarter last year. U.S.
Consumer increased $60,000 on higher revenue. The increased revenue was
primarily in writing products and yielded lower margins than the prior
period's mix of writing products and art supplies. In addition, operating
margins were lower due to increased up-front promotional costs as the Company
gained further distribution in the office supply mega-store and mass retail
markets. Foreign Consumer increased $600,000 on significantly higher
revenues and Refractory decreased $190,000, reflecting its change in revenues
and less favorable product mix.
Operating income decreased $500,000 for the nine months ended June 30, 1996,
when compared to the same period last year. U.S. Consumer decreased
$800,000. The increased revenue was primarily writing products and yielded
lower operating margins than the prior year's mix of writing products and art
supplies, as discussed above. The period was also adversely affected by
unfavorable purchased material costs and manufacturing inefficiencies
resulting from inventory reduction efforts. Foreign Consumer operating
income increased $30,000 with revenue increases in Mexico's domestic market
offsetting the prior year's favorable impact of increased shipments to the
U.S. and related currency gains. Corporate expenses decreased $200,000
primarily due to lower legal and professional costs.
Operating income increased $2,166,000 over the prior quarter. U.S. Consumer
increased $1,480,000 and Foreign Consumer increased $730,000 primarily due to
the seasonality of the revenues, as described above.
INTEREST EXPENSE decreased $72,000 and $262,000 in the quarter and nine
months ending June 30, 1996, respectively, primarily due to lower average
borrowings. Interest expense in the quarter increased $133,000 over the
prior quarter due to higher borrowings to support seasonal sales.
<PAGE> 14
LITIGATION AND RELATED COSTS in 1996 represents a pre-tax charge of
$2,039,000 relating to a claim under New Jersey's Environmental Clean-Up
Responsibility Act (ECRA) by a 1984 purchaser of industrial property from the
Company. In April 1996, a decision was rendered by the Superior Court of New
Jersey in Hudson County finding the Company responsible for $1.94 million in
certain environmental clean-up costs relating to this matter. The Company
and its legal counsel are disappointed that in its ruling, the Court
allocated 100% of the responsibility to the Company. In the Company's view,
the prior decision of the New Jersey Supreme Court in this case seems to
require a more equitable apportionment of damages between the plaintiffs and
the Company. Including pre-judgment interest on the damage award, it is
estimated that the Company's exposure will not exceed approximately $3.3
million. The Company intends to pursue other responsible parties for
indemnification and/or contribution to the payment of this claim (including
its insurance carriers and a legal malpractice action against its former
attorneys) and has filed an appeal. Also see Note 6 to Consolidated
Financial Statements.
INCOME TAXES reflect the respective changes in before tax income.
MINORITY INTEREST represents 49.9% of the net income of the consolidated
subsidiary, Dixon Ticonderoga de Mexico, S.A. de C.V. in each period
presented.
DISCONTINUED OPERATIONS in the prior-year periods represent the Company's
real estate segment that was disposed of in September 1995. Loss from
discontinued operations was $102,000 and $150,000 (net of tax benefits of
$11,000 and $16,000) for the three and nine month periods ended June 30,
1995, respectively.
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial condition has benefited from its recent operating
success and the completion of major financing initiatives. Cash flows from
operating activities for the first nine months of 1996 improved by
approximately $3 million over the prior-year period, due principally to more
strict inventory control practices. The Company's inventory levels remained
stable in the current period compared with an increase of over $4 million in
the prior year. In addition, the Company managed its accounts payable more
effectively in 1996. These improvements were partially offset by a large
increase in accounts receivable after accelerated collection practices in the
fourth quarter of fiscal 1995 and a 17% increase in sales during the most
recent quarter.
Investing activities for the first nine months of 1996 included approximately
$2.1 million for the final costs related to the construction of the Company's
new corporate headquarters. The total cost of the project was approximately
$3.5 million with construction costs ultimately financed through a separate
fixed-rate permanent mortgage arrangement. On an interim basis, these costs
have been financed through a construction loan (approximately $2.65 million),
included in notes payable in the accompanying financial statements. The
Company also intends to finance certain strategic manufacturing equipment (in
the amount of $2.8 million) under a long-term lease arrangement commencing in
late 1996. Generally, all other major capital projects are discretionary in
nature and thus no material purchase commitments exist. Other capital
expenditures will include customary projects, and will continue to be funded
from operations and existing financing arrangements.
In July 1996, the Company entered into new financing arrangements with a
consortium of lenders to provide additional working capital. The new loan
and security agreement provides for a total of $48 million in financing.
This includes a revolving line of credit facility in the amount of $40
million which bears interest at either the prime rate, plus 0.5%, or the
prevailing LIBOR rate plus 2.5%. Borrowings under the revolving credit
facility are based upon eligible accounts receivable and inventories of the
Company's U.S. and Canada operations, as defined. The financing agreement
also includes a term loan in the amount of $7.75 million. The term loan
bears interest at the same rate, and is payable in varying monthly
installments through 2001.
The new financing arrangements are collateralized by the tangible and
intangible assets of the U.S. and Canada operations (including accounts
receivable, inventories, property, plant and equipment, patents and
trademarks) and a pledge of the capital stock of the Company's subsidiaries.
The loan and security agreement contains provisions pertaining to the
maintenance of certain financial ratios and annual capital expenditure
levels, as well as restrictions as to payment of cash dividends. The Company
is presently in compliance with all such provisions. These new arrangements
provide up to $10 million in additional financing as compared with the
Company's agreement with its previous primary lender and permits the Company
to meet its current debt obligations, including its 1996 subordinated debt
<PAGE> 16
payment. The Company presently has approximately $10 million of unused lines
of credit available under this new financing arrangement.
The Company presently has $7 million of Senior Subordinated Notes remaining
outstanding with several insurance companies. The note agreement, as
amended, provides for the payment of approximately $3.3 million annually,
through August 1998, with the balance due August 1999. This agreement also
provides for the maintenance of certain financial covenants and ratios, with
which the Company is presently in compliance. The aforementioned revolving
credit agreement requires a credit line reserve for future payments. The
Company is in the process of raising $15 to $20 million of new subordinated
debt (through a private placement transaction) to satisfy the note
obligations described above and to provide further liquidity for growth.
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 business and to meet all of its
obligations.
<PAGE> 17
PART II. OTHER INFORMATION
Item 5. Other Information
- ------- -----------------
Information regarding the Company's new financing arrangements with a
consortium of lenders (See PART I - Item 1., Note 3 to Consolidated Financial
Statements and Item 2., Management's Discussion and Analysis of Financial
Condition and Results of Operations) is incorporated by reference herein and
in lieu of a separate report on Form 8-K.
Item 6. Exhibits
- ------- --------
(28)a. Amended and Restated Revolving Credit Loan and Security Agreement
by and among Dixon Ticonderoga Company, Dixon Ticonderoga, Inc.
and First Union Commercial Corporation, dated July 10, 1996
(28)b. Amended and Restated Term Loan Agreement by and among Dixon
Ticonderoga Company, Dixon Ticonderoga, Inc., First Union
Commercial Corporation, First National Bank of Boston and
National Bank of Canada, dated July 10, 1996
(28)c. Amendment of Senior Subordinated Note Agreements
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DIXON TICONDEROGA COMPANY
Dated: August 13, 1996 By: /s/ Gino N. Pala
----------------------------
Gino N. Pala
Chairman of the Board,
President, Chief Executive
Officer and Director
Dated: August 13, 1996 By: /s/ Richard A. Asta
----------------------------
Richard A. Asta
Executive Vice President of
Finance and Chief Financial
Officer
Dated: August 13, 1996 By: /s/ John Adornetto
----------------------------
John Adornetto
Vice President/Corporate
Controller and Chief
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets, the Consolidated Statement of Operations and the
Consolidated Statement of Cash Flows, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,061,369
<SECURITIES> 0
<RECEIVABLES> 31,254,588
<ALLOWANCES> 806,320
<INVENTORY> 32,082,841
<CURRENT-ASSETS> 66,846,968
<PP&E> 32,676,537
<DEPRECIATION> 17,265,393
<TOTAL-ASSETS> 83,882,708
<CURRENT-LIABILITIES> 50,599,905
<BONDS> 0
<COMMON> 3,535,211
0
0
<OTHER-SE> 11,804,783
<TOTAL-LIABILITY-AND-EQUITY> 83,882,708
<SALES> 74,737,845
<TOTAL-REVENUES> 74,737,845
<CGS> 50,155,519
<TOTAL-COSTS> 50,155,519
<OTHER-EXPENSES> 20,944,806
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,328,388
<INCOME-PRETAX> 1,309,132
<INCOME-TAX> 406,063
<INCOME-CONTINUING> 314,195
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 314,195
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This restated schedule contains summary financial information extracted from teh
Consolidated Balance Sheets, the Consolidated Statement of Operations and the
Consolidated Statement of Cash FLows, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 352,246
<SECURITIES> 0
<RECEIVABLES> 27,474,608
<ALLOWANCES> 658,441
<INVENTORY> 31,961,943
<CURRENT-ASSETS> 61,210,693
<PP&E> 29,374,923
<DEPRECIATION> 16,592,039
<TOTAL-ASSETS> 76,064,437
<CURRENT-LIABILITIES> 38,299,206
<BONDS> 0
<COMMON> 3,447,966
0
0
<OTHER-SE> 12,336,632
<TOTAL-LIABILITY-AND-EQUITY> 76,064,437
<SALES> 69,209,716
<TOTAL-REVENUES> 69,209,716
<CGS> 45,298,401
<TOTAL-COSTS> 45,298,401
<OTHER-EXPENSES> 17,734,410
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,589,685
<INCOME-PRETAX> 3,587,220
<INCOME-TAX> 1,266,634
<INCOME-CONTINUING> 1,777,178
<DISCONTINUED> (149,848)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,627,330
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
<PAGE>
=============================================
$40,000,000
Amended and Restated
Revolving Credit and Letter of Credit Facility
=============================================
AMENDED AND RESTATED
REVOLVING CREDIT LOAN AND SECURITY AGREEMENT
by and among
DIXON TICONDEROGA COMPANY,
a Delaware corporation
and
DIXON TICONDEROGA INC.,
an Ontario corporation,
collectively as Borrower,
and the Lenders referred to herein,
and
FIRST UNION COMMERCIAL CORPORATION,
a North Carolina corporation,
as Agent
=============================================
July 10, 1996
=============================================
<PAGE> i
TABLE OF CONTENTS
Page
SECTION 1 - DEFINITIONS
Defined Terms 1
Accounting Terms 19
Other Terms 19
SECTION 2 - THE LOANS; INTEREST; FEES; AND PROCEEDS OF THE LOAN
Revolving Line of Credit 19
Maximum Revolving Credit Facility 20
Availability; Borrowing Base Certificate 20
Procedure for Revolving Credit Borrowings 21
Interest 21
Loan Closing/Commitment Fee 24
Unused Line Fee 25
One Loan 25
Loan Purposes 25
Optional Prepayment 25
Agency Fee 25
Yield-Protection 26
Changes in Capital Adequacy Regulations 26
Lender Statements: Survival of Indemnity 27
SECTION 3 - PAYMENTS
Payments 27
Receipt of Payments 27
Collections; Agent's Right to Notify Account Debtors and
to Endorse the Borrower's Name 29
Application of Payments and Collections 29
Statement of Account 29
SECTION 4 - SECURITY FOR THE OBLIGATIONS
Security Interest in the Collateral 29
Disclosure of Security Interest 30
Supplemental Documentation 30
Inspection 30
Cross-Collateralization 31
SECTION 5 - CLOSING; CONDITIONS OF CLOSING
Closing 31
Conditions of Loans and Letters of Credit 31
Waiver of Conditions Precedent 34
SECTION 6 - REPRESENTATIONS AND WARRANTIES
Corporate Organization and Power 34
Litigation; Government Regulation 35
Taxes 35
Enforceability of Loan Documents; Compliance With Other
Instruments 35
Governmental Authorization 35
Event of Default 35
Margin Securities 36
Full Disclosure 36
Principal Place of Business 36
ERISA 36
Financials 37
Title to Assets 37
<PAGE> ii
Solvency 37
Use of Proceeds 37
Assets for Conduct of Business 37
Trade Relations 37
Compliance With Laws 37
1996 Business Plan 38
SECTION 7 - AFFIRMATIVE COVENANTS
Repayment of Obligations 38
Performance Under Loan Documents 38
Financial and Business Information as to the Borrower 38
Notice of Certain Events 41
Corporate Existence and Maintenance of Properties 41
Payment of Indebtedness; Performance of Other Obligations 41
Maintenance of Insurance 42
Maintenance of Books and Records; Inspection 43
Comply with ERISA 43
Motor Vehicle Titles 43
Comply with Environmental Laws 43
Maintenance of Bank Accounts 43
Maintenance of Equipment 44
SECTION 8 - NEGATIVE COVENANTS
Merger and Dissolution 44
Acquisitions 44
Disposition of Assets 44
Transactions With Related Persons 44
Restricted Investments 45
Restrictions on Dividends and Other Payments 45
Subordinated Debt 45
Tangible Net Worth 45
Current Ratio 45
Fixed Charge Coverage Ratio 45
Senior Fixed Charge Coverage Ratio 45
Ratio of EBIT to Interest on Indebtedness 46
Ratio of EBIT to Senior Debt Interest 46
Quick Ratio 46
Debt-to-Equity Ratio 46
Pro Forma Debt Coverage Ratio 46
Capital Expenditure Limitation 46
Fiscal Year 46
Leases 46
Funded Debt Limitation 46
Sale and Leaseback 46
New Business 46
Subsidiaries 46
Guaranties 47
Transactions Affecting the Collateral 47
Consignment of Inventory 47
Change of Control 47
SECTION 9 - PROVISIONS WITH RESPECT TO THE COLLATERAL
Perfection and Priority; Location of Collateral 47
Verification of Accounts 48
Assignments, Records and Schedules of Accounts 48
Notice Regarding Disputed Accounts 48
Sale and Safekeeping of Inventory 48
<PAGE> iii
Records and Schedules of Inventory 48
Returns of Inventory 49
Maintenance of Equipment 49
Evidence of Ownership of Equipment 49
Records and Schedules of Equipment 49
Disposition of Equipment 49
The Agent's Payment of Claims Asserted Against the Collateral 49
SECTION 10 - PROVISIONS WITH RESPECT TO ACCOUNTS, INVENTORY AND EQUIPMENT
Account Warranties, Representations and Covenants 50
Inventory Warranties, Representations and Covenants 50
Equipment, Warranties, Representations and Covenants 51
Reaffirmation of Warranties and Representations 51
Survival of Warranties and Representations 51
SECTION 11 - PROVISIONS RELATING TO LETTERS OF CREDIT
Compliance with Terms and Conditions 51
Rights of Subrogation 51
Reimbursement Obligation 52
Indemnification 52
Termination 52
SECTION 12 - TERM OF AGREEMENT
Term 52
The Borrower's Right to Terminate 53
The Agent's and Required Lenders' Right to Terminate 53
Effect of Termination 53
SECTION 13 - EVENTS OF DEFAULT
Event of Default 53
Acceleration of the Obligations 56
Default Rate of Interest 56
Notice of Default 56
Declared Default 56
SECTION 14 - RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT
Rights and Remedies 57
Application of Proceeds 58
Appointment of the Agent as the Borrower's Lawful Attorney 59
Rights and Remedies Cumulative; Non-Waiver; Etc. 60
SECTION 15 - PAYMENT OF EXPENSES
Fees and Expenses 61
Stamp Taxes 61
Brokerage Fees 61
SECTION 16 - THE AGENT
Authorization and Action 62
Agent's Reliance, Etc. 62
FUCC and Affiliates 63
Lender Credit Decision 63
Indemnification 63
Successor Agent 64
<PAGE> iv
SECTION 17 - MISCELLANEOUS
Survival of Agreements 64
Governing Law; Waiver of Jury Trial 65
Notice 65
Indemnification of the Lenders, First Union and First Union-NC 66
Waivers by the Borrower 67
Lawful Charges 67
Assignment 68
Amendments, Waivers and Consents 68
Severability 69
Entire Agreement 69
Binding Effrct; Joint and Several Obligations 69
Captions 69
Disbursement of Loan Proceeds 69
Conflict of Terms 69
Injunctive Relief 69
Exhibit A
<PAGE> 1
AMENDED AND RESTATED
REVOLVING CREDIT LOAN AND SECURITY AGREEMENT
AMENDED AND RESTATED REVOLVING CREDIT LOAN AND SECURITY AGREEMENT,
dated as of July 10, 1996, by and among DIXON TICONDEROGA COMPANY, a Delaware
corporation ("DTC") and DIXON TICONDEROGA INC., an Ontario corporation
("DTI") (DTC and DTI are collectively referred to hereinafter as the "Borrow-
er"), the Lenders who are or may become a party to this Agreement and FIRST
UNION COMMERCIAL CORPORATION ("FUCC"), a North Carolina corporation, as Agent
for the Lenders (in its capacity as agent, the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower and FUCC are parties to a Revolving Credit
Loan, Foreign Exchange and Security Agreement, dated as of May 12, 1994 (the
"Existing Credit Agreement").
WHEREAS, the Borrower has requested an increase in the amount of
the financial accommodations which FUCC has extended to it, by amending and
restating the Existing Credit Agreement; and
WHEREAS, the Lenders are willing to extend increased financial
accommodations to the Borrower in the form of a $40,000,000 revolving line of
credit and letter of credit facility in accordance with, and subject to, the
terms and conditions hereinafter set forth; and
WHEREAS, the Lenders are extending a Term Loan to the Borrower in
the principal amount of $7,750,000.08, being made in accordance with, and
subject to, the terms and conditions of the Term Loan Agreement (as
hereinafter defined);
NOW, THEREFORE, in consideration of the premises and the
covenants, agreements, terms and conditions contained herein, the parties
hereto hereby agree as follows:
SECTION 1 - DEFINITIONS
DEFINED TERMS. For purposes of this Agreement, in addition to the
terms defined elsewhere in this Agreement, the following terms shall have the
meanings set forth below (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Accounts" shall mean all accounts, accounts receivable, contract
rights, notes, bills, acceptances, choses in action, chattel paper,
instruments, documents, and other forms of obligations at any time owing to
the Borrower, and all "Accounts," as that term is defined in the UCC, the
proceeds thereof and all of the Borrower's rights with respect to any goods
represented thereby, whether or not delivered, goods returned by customers and
all rights as an unpaid vendor or lienor, including rights of stoppage in
transit and of recovering possession by proceedings including replevin and
reclamation, together with all customer lists, books and records, ledger and
account cards, computer tapes, disks, printouts and records, whether now in
existence or hereafter created, relating to Accounts.
<PAGE> 2
"Account Debtor" shall mean any Person who is or who may become
obligated to the Borrower under, with respect to, or on account of an Account.
"Adjusted LIBOR Rate" shall mean the LIBOR Rate plus Two and One-Half
Percent (2.5%) per annum.
"Adjusted Prime Rate" shall mean the Prime Rate plus One-Half of One
Percent (0.5%) per annum.
"Affiliate" shall mean, with respect to any Person, each other Person
which, directly or indirectly, owns or controls, on an aggregate basis,
including all beneficial ownership and ownership or control as a trustee,
guardian or other fiduciary, at least five percent (5%) of the outstanding
Stock having ordinary voting power to elect a majority of the board of
directors (irrespective of whether, at the time, Stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) of such Person, or is controlled by or is
under common control with such Person, or any shareholders of such Person.
For the purpose of this definition, "control" means the possession, directly
or indirectly, of the power to direct or cause the direction of management and
policies, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" shall mean FUCC in its capacity as Agent hereunder, and any
successor thereto appointed pursuant to section 16.
"Agreement" or "this Agreement" shall include all amendments,
modifications, extensions, restatements, enlargements and supplements hereto
and shall refer to this Agreement as the same may be in effect at the time
such reference becomes operative.
"Availability" shall mean an amount determined pursuant to Exhibit A
attached hereto.
"Bank of Boston" shall mean The First National Bank of Boston, having an
office at 100 Federal Street, Boston, Massachusetts 02110.
"Banking Day" means, in respect of any city, any day on which commercial
banks are open for business (including dealings in foreign exchange and
foreign currency deposits) in that city.
"Bankruptcy Code" shall mean Title 11, United States Code, as amended
from time to time, and any successor statute thereto.
"Beneficiary" shall mean the customer, supplier or vendor of Inventory
who is the beneficiary of a Letter of Credit.
"Book Net Worth" shall mean the Borrower's Total Assets minus Total
Liabilities; provided, however, that all Inventory included on the asset side
of its balance sheet shall be accounted for in the same manner as presented in
the Financials or at the lower of LIFO cost or market.
"Borrower" shall collectively mean DTI and DTC, jointly and severally.
"Borrowing Base" shall mean an amount determined pursuant to the formula
set forth in Exhibit A attached hereto.
<PAGE> 3
"Borrowing Base Certificate" shall mean the form of certificate attached
hereto as Exhibit C.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the State of
Florida.
"Canadian Sweep Account" shall mean an account established at a Canadian
commercial bank pursuant to section 3.2(a) hereof.
"Capital Expenditures" shall mean, for any fiscal year of the Borrower,
the aggregate cost (less the amount of trade-in allowance included in such
cost) of all capital assets (as defined by GAAP) acquired by the Borrower
during such fiscal year, plus all Capital Lease Obligations with respect to
any Capital Lease entered into, renewed, assumed or guaranteed by the Borrower
during such year.
"Capital Lease" shall mean any lease of any property which would, in
accordance with GAAP, be required to be classified and accounted for as a
capital lease on a balance sheet of the lessee.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder which would, in
accordance with GAAP, appear on a balance sheet of such lessee in respect of
such Capital Lease.
"CERCLA" shall mean the Comprehensive, Environmental, Response,
Compensation and Liability Act of 1980, as amended from time to time, and all
rules and regulations from time to time promulgated thereunder.
"Change of Control" shall mean (a) the acquisition by any Person or
related group for purposes of Section 13(d) of the Securities Exchange Act of
1934, as amended (a "Group"), together with any Affiliates thereof, of a
majority of the voting stock of the Borrower, or (b) the success by any Person
or Group, together with any Affiliates thereof, in having its or their
nominees elected to the Board of Directors of the Borrower such that such
nominees, when added to any director remaining on the Board of Directors of
the Borrower who is an Affiliate of or related Person to such Person or Group,
shall constitute a majority of the Board of Directors of the Borrower.
"Closing Date" shall mean the date referred to in section 5.1 hereof.
"Collateral" shall mean and include all of the assets, property or
interests in property of the Borrower securing the Obligations pursuant to
section 4.l, all of the issued and outstanding Stock of all Subsidiaries, and
all other property and interests in real or personal property which shall,
from time to time, secure the Obligations.
"Commitment Termination Date" shall mean the earliest date that the
financing arrangements contemplated in respect of the Loans are terminated
pursuant to section 12.1, 12.2 or 12.3 hereof.
"Compensation" shall mean, with respect to any Person, all payments and
accruals commonly considered to be compensation, including, without
limitation, all wages, salary, deferred payment arrangements, bonus payments
and accruals, profit sharing arrangements, stock option or phantom stock
option or similar arrangements, stock appreciation rights or similar rights,
incentive payments, pension or employment benefit contributions or similar
payments, made to or accrued for the account of such Person or otherwise for
the direct or indirect benefit of such Person.
<PAGE> 4
"Current Assets" shall mean the aggregate of the current assets of the
Borrower appearing on the asset side of its balance sheet, all determined in
accordance with GAAP; provided, however, that all Inventory included in
current assets shall be accounted for in the same manner as presented in the
Financials or at the lower of LIFO cost or market.
"Current Liabilities" shall mean the aggregate of the current
liabilities of the Borrower appearing on the liability side of its balance
sheet, all determined in accordance with GAAP.
"Declared Default" shall have the meaning specified in section 13.5.
"Depository Account" shall have the meaning specified in section 3.2.
"Dilution" at any date shall mean the aggregate amount of credits
granted to Account Debtors during the 12-month period prior to such date,
including, without limitation, allowances, discounts, returns, credits,
chargebacks, contra-accounts and other offsets asserted or assertable by
Account Debtors, or any other events having the effect of reducing the
anticipated amount to be realized by the Borrower from Accounts.
"Dilution Percentage" at any date shall mean the quotient obtained by
dividing (a) the total dollar amount of the Dilution as of such date by (b)
the aggregate net sales of the Borrower for the 12-month period ending on such
date.
"Dixon-Mexico" shall mean Dixon Ticonderoga de Mexico S.A. de C.V., a
Mexican company.
"Dixon-U.K." shall mean Dixon Europe Limited, a United Kingdom company.
"DTC" shall mean Dixon Ticonderoga Company, a Delaware corporation.
"DTC Accounts" shall mean all Accounts created or acquired by DTC in the
ordinary course of its business as presently conducted.
"DTI" shall mean Dixon Ticonderoga Inc., an Ontario corporation.
"DTI Accounts" shall mean all Accounts created or acquired by DTI in the
ordinary course of its business as presently conducted.
"EBIT" shall mean, for any period, the Net Income for such period plus
the sum of the following amounts for such period to the extent included in the
determination of such Net Income: (i) Interest Charges on Indebtedness
(including the Obligations), (ii) income tax expense and, for any period
ending on or before September 30, 1996, (iii) the total of charges, up to
$455,422.00, to discontinued operations for the write-off of discontinued
assets, as reflected on the Borrower's audited consolidated income statement
for the fiscal year ended September 30, 1995, incurred during the immediately
preceding twelve month period, (iv) the total of net charges (after any
recovery), up to $1,530,377.00, for litigation costs and reserves as reflected
on the Borrower's audited consolidated income statement for the fiscal year
ended September 30, 1995, incurred during the immediately preceding twelve
month period, and, for any period ending on or before March 31, 1997, (v) the
total of net charges (after any recovery), up to $2,039,000 for reserves for
the judgment in the ECRA Case (defined in Exhibit A attached hereto).
"EBITDA" shall mean, for any period, the Net Income for such period plus
(a) the sum of the following amounts for such period to the extent included in
<PAGE> 5
the determination of such Net Income: (i) depreciation expense, (ii) amortiz-
ation expense, (iii) Interest Charges on Indebtedness (including the
Obligations), (iv) income tax expense and, for any period ending on or before
September 30, 1996, (v) the total of charges, up to $455,422.00, to
discontinued operations for the write-off of discontinued assets, as reflected
on the Borrower's audited consolidated income statement for the fiscal year
ended September 30, 1995, incurred during the immediately preceding twelve
month period, (vi) the total of net charges (after any recovery), up to
$1,530,377.00, for litigation costs and reserves as reflected on the
Borrower's audited consolidated income statement for the fiscal year ended
September 30, 1995, incurred during the immediately preceding twelve month
period, and for any period ending on or before March 31, 1997, (vii) the total
of net charges (after any recovery), up to $2,039,000 for reserves for the
judgment in the ECRA Case (defined in Exhibit A attached hereto).
"Educational Supplies Distributor Account" shall mean an Account eviden-
ced by an invoice which is due and payable as to (i) not less than 25% of the
invoice amount no later than June 15 next following the invoice date and not
more than 75% of the invoice amount no later than the following September 15
or (ii) not less than 25% of the invoice amount no later than June 30 next
following the invoice date and not more than 75% of the invoice amount no
later than the following September 30, in each case from an Account Debtor
which is a distributor of the Borrower's products to schools and school
boards.
"EPA" shall mean the Environmental Protection Act, as amended from time
to time, and all rules and regulations from time to time promulgated
thereunder.
"Eligible Accounts" shall mean all Accounts created or acquired by the
Borrower in the ordinary course of its business as presently conducted, which
the Agent, in its sole discretion, deems to be Eligible Accounts. The Agent
may determine, on a daily basis, whether any Account constitutes and continues
to constitute an Eligible Account, and if an Eligible Account subsequently
becomes ineligible for any reason, its ineligibility shall become effective
immediately. In making its determination of Eligible Accounts, the Agent will
consider whether an Account satisfies and continues to satisfy the following
requirements:
(a) The Account is a bona fide existing obligation of the
named Account Debtor arising from the sale and delivery of merchandise or the
rendering of services to such Account Debtor in the ordinary course of the
Borrower's business and is actually and absolutely owing to the Borrower and
is not contingent for any reason;
(b) The subject merchandise has been shipped or delivered
on open account to the named Account Debtor on an absolute sale basis and not
on consignment, on approval or on a sale or return basis or subject to any
other repurchase or return agreement and no material part of the subject goods
has been returned;
(c) The Account is not evidenced by chattel paper or an
instrument of any kind, unless such chattel paper or instrument is duly
endorsed to and is in the possession of the Agent;
(d) The Account is a valid, legally enforceable obligation
of the Account Debtor and no offset or other defense on the part of such
Account Debtor or any claim on the part of such Account Debtor denying
liability thereunder has been asserted;
<PAGE> 6
(e) The Account is not subject to any Lien whatsoever,
except for the Agent's security interest and Permitted Liens, and a currently
effective UCC financing statement filed by the Agent against the Borrower
covering such Account is on file in all appropriate filing locations for all
of the Borrower's places of business and records concerning such Account;
(f) For all Educational Supplies Distributor Accounts, the
Account is evidenced by an invoice in form acceptable to the Agent and has not
remained unpaid for a period exceeding thirty (30) days after the due date of
such invoice;
(g) For all Mass Market Accounts, the Account is evidenced
by an invoice in form acceptable to the Agent and has not remained unpaid for
a period exceeding one hundred fifty (150) days from invoice date or thirty
(30) days from due date, whichever is earlier;
(h) For all Non-Dated Accounts, the Account is evidenced
by an invoice in form acceptable to the Agent and has not remained unpaid for
a period exceeding ninety (90) days after the date of such invoice;
(i) The Account Debtor is Solvent and not the subject of
any bankruptcy or insolvency proceeding of any kind and the creditworthiness
of the Account Debtor is, in all other respects, acceptable to the Agent, in
its sole discretion, at the time in question;
(j) The Account does not arise out of transactions with
(i) any Subsidiary, shareholder or other Affiliate of the Borrower, or (ii)
any employee, officer, agent or director of the Borrower, a Subsidiary or an
Affiliate of the Borrower;
(k) The Account is not due from an Account Debtor whose
total indebtedness to the Borrower on Accounts exceeds ten percent (10%) of
the aggregate amount of all of the Borrower's Accounts; provided, however,
that only the amount of such Account Debtor's Account which exceeds such 10%
limit shall be deemed ineligible;
(l) The Account is not an Educational Supplies Distributor
Account or a Mass Market Account of an Account Debtor twenty-five percent
(25%) or more of whose Accounts are ineligible pursuant to subparagraphs (f)
or (g) of this definition;
(m) The Account is not a Non-Dated Account of an Account
Debtor fifty percent (50%) or more of whose Accounts are ineligible pursuant
to subparagraph (h) of this definition;
(n) Agent has a first lien security interest in the
Account and there are no material regulatory, administrative or judicial
obstacles to the Agent's direct enforcement of the Account against the Account
Debtor or to the Agent's intervention in any enforcement action which might be
brought by the Borrower with respect thereto and the Agent shall not be
subjected to any material adverse tax consequences (other than taxes measured
by the income of the Agent) as a result of taking such enforcement action or
lending against such Account;
(o) The Account Debtor has neither disputed liability in
any respect nor made any claim with respect to any other Account due from such
Account Debtor to the Borrower;
<PAGE> 7
(p) The sale represented by such Account is not on a
bill-and-hold, "undelivered sale," guaranteed sale, consignment, sale or
return or sale on approval basis;
(q) Each of the warranties and representations set forth
in section 10.1 hereof has been reaffirmed with respect thereto at the time
the most recent Schedule of Accounts was provided to the Agent;
(r) The Account Debtor is not located in the State of
Minnesota or State of New Jersey or, if the Account Debtor is located in
either such state, the Borrower has either qualified as a foreign corporation
to do business in such state or has filed a Notice of Business Activities
report with the appropriate officials in such state for the then current year;
(s) The Account Debtor is not located outside of the
United States, unless the Account is (i) a DTI Account owed by a Canadian
Account Debtor and the Agent has a first priority perfected Lien in such
Account, or (ii) supported by a letter of credit from a financial institution,
and in form and substance, acceptable to Agent in its sole discretion; and
(t) If the Account Debtor is a supplier or creditor of the
Borrower, the amount of all Accounts of such Account Debtor which are deemed
to be Eligible Accounts hereunder shall be only that amount, if any, which
exceeds the Borrower's total indebtedness to such Account Debtor.
"Eligible Foreign Accounts" shall mean Accounts of Account Debtors which
are located outside of the United States and which are not Eligible Accounts,
provided that, with respect to any particular Account Debtor, (i) at no time
during the 12 months preceding the Revolving Credit Loan request were 50% or
more of all Accounts due from such Account Debtor 60 days or more past due,
and (ii) the Borrower has provided to the Agent either (A) current financial
information regarding the Account Debtor in form and substance satisfactory to
the Agent, in its sole discretion, or (B) a credit reference from a reputable
financial institution or credit rating organization or third party credit
enhancement, in each such case acceptable to the Agent, in its sole discre-
tion.
"Eligible Inventory" shall mean all Inventory created or acquired by the
Borrower in the ordinary course of its business as presently conducted, which
the Agent, in its sole discretion, deems to be Eligible Inventory. The Agent
may determine, on a daily basis, whether any Inventory constitutes and
continues to constitute Eligible Inventory, and if any Eligible Inventory
subsequently becomes ineligible for any reason, its ineligibility shall become
effective immediately. Eligible Inventory shall not include Inventory which
consists of damaged, obsolete, slow-moving or discontinued items. In making
its determination of Eligible Inventory, the Agent will consider whether
Inventory satisfies and continues to satisfy the following requirements:
(a) The Inventory consists of Inventory which is located
at any of the owned, leased or warehouse sites listed in Schedules I through
XV, but in any event shall not include Inventory located anywhere outside of
the States of Florida, Illinois, New Jersey, Missouri, Ohio, Pennsylvania,
Tennessee, Texas and West Virginia, and Acton Vale, Quebec, and Newmarket,
Ontario, Canada, and such other states in which Inventory is warehoused or
consigned and where the Borrower has executed appropriate UCC financing state-
ments and taken all other required action to perfect the Agent's Lien as a
first priority Lien in such warehoused and consigned Inventory;
<PAGE> 8
(b) The Inventory is deemed by the Agent, in its sole
discretion, to be in good currently saleable condition, not deteriorating in
quality or otherwise unsalable and subject to satisfactory internal control
and management procedures;
(c) The Inventory meets all standards imposed by any
governmental agency, or department or division thereof, having regulatory
authority over such Inventory;
(d) The Inventory is not consigned Inventory or work-in-
process (excluding unpackaged finished goods); provided, however, that
Inventory consigned to customers of the Borrower shall be Eligible Inventory
if, and so long as it remains, situated at one of the locations listed on
Schedules XIII through XV attached hereto and the Agent is satisfied that its
Lien in such Inventory is perfected and entitled to a first priority under
applicable law;
(e) The Inventory is not subject to any Lien whatsoever,
except for the Agent's first priority security interest and Permitted Liens,
and currently effective UCC financing statements filed by the Agent against
the Borrower covering such Inventory are on file in all appropriate filing
locations for all of the Borrower's places of business, and the Agent shall
not be subjected to any material adverse tax consequences (other than taxes
measured by the income of the Agent) as a result of enforcing its security
interest in or lending against such Inventory;
(f) If the Inventory is stored at a public warehouse or at
a location which the Borrower leases from third Persons, the warehouseman or
landlord shall have executed and delivered to the Agent the letter or
landlord's waiver, as appropriate, substantially in the form of Exhibit J or
Exhibit K attached hereto; and
(g) Each of the warranties and representations set forth
in section 10.2 hereof has been reaffirmed with respect thereto at the time
the most recent Schedule of Inventory was provided to the Agent.
"Environmental Indemnity and Compliance Agreement" shall mean the
Ratification of Environmental Compliance and Indemnity Agreement of even date
herewith by the Borrower in favor of the Agent for the Lenders.
"Environmental Laws" shall mean (i) the following United States laws:
CERCLA, EPA, RCRA, OSHA, SARA, (ii) the following Ontario, Canada laws:
Environmental Bill of Rights (1993), Environmental Protection Act, Ontario
Water Resources Act, Gasoline Handling Act and Occupational Health and Safety
Act, (iii) the following Quebec, Canada laws: Environmental Quality Act, The
Pesticides Act, An Act Respecting the Ministere de l'Environment, An Act
Respecting the Conseil de la Conservation et l'Environment, An Act Respecting
the Communaute Urbaine de Montreal, An Act Respecting Land Use, Planning and
Development and An Act Respecting the Use of Petroleum Products, (iv) the
following Canadian Federal laws: Canadian Environmental Protection Act and
Hazardous Materials Information Review Act, and (v) and all other federal,
state, local and foreign laws relating to pollution or protection of the
environment, including laws relating to omission, discharges, releases or
threatened releases of Hazardous Materials into the environment (including,
without limitation, ambient air, surface water, ground water or land) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of Hazardous Materials,
and any and all regulations, codes, plans, orders, decrees, judgments,
injunctions, notices or demand letters issued, entered, promulgated or
approved thereunder.
<PAGE> 9
"Equipment" shall mean all goods of the Borrower, other than Inventory,
including, without limitation, all machinery, equipment, motor vehicles,
parts, supplies, apparatus, appliances, tools, patterns, molds, dies,
blueprints, fittings, furniture, furnishings, fixtures and articles of
tangible personal property of every description now or hereafter owned by the
Borrower or in which the Borrower may have or may hereafter acquire any
interest, located at, upon or about, or attached to, any place of business of
the Borrower or at any other location, and all improvements, accessions or
appurtenances thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and all rules and regulations from time to time
promulgated thereunder.
"Eurodollar Business Day" means a day on which commercial banks and
foreign exchange markets settle payments in New York City and on which
dealings in United States dollars are carried on in the London interbank
market.
"Event of Default" shall have the meaning specified in section 13
hereof.
"Financials" shall mean the consolidated balance sheet, consolidated
statements of income and shareholders' equity and consolidated statements of
cash flows of the Borrower as at and for the fiscal years ended September 30,
1994 and 1995 and all other financial statements or information of the
Borrower which have been previously delivered by the Borrower to the Agent.
"First Union" shall mean First Union National Bank of Florida, with
principal offices at 225 Water Street, Jacksonville, Florida.
"First Union-NC" shall mean First Union National Bank of North Carolina,
with principal offices at 301 South College Street, Charlotte, North Carolina
28288-0737
"Fixed Charges" shall mean, for any period, the aggregate of Borrower's
interest expense, non-financed Capital Expenditures, including those made with
proceeds from the Revolving Credit Loans and not subsequently refinanced
within the applicable period (including, to the extent not otherwise included
in Fixed Charges, payments under Capital Leases), scheduled payments of
principal on all Indebtedness for borrowed money during such period, and
payments of all taxes on or measured by income, all determined in accordance
with GAAP less, for any period ending on or before September 30, 1997, the
amount of Capital Expenditures relating to the construction of the Heathrow
Facility, made during the twelve month period immediately preceding the last
day of such period.
"Foreign Exchange Agreement" shall mean the Foreign Exchange Agreement
of even date herewith among FUCC and the Borrower, as such agreement may be
amended, restated or otherwise modified from time to time hereafter.
"Foreign Exchange Contract" shall mean an agreement to purchase spot or
forward foreign exchange entered into by First Union-NC for the account of the
Borrower pursuant to the terms of the Foreign Exchange Agreement.
"Foreign Exchange Facility" shall mean the foreign exchange facility
pursuant to the Foreign Exchange Agreement.
"FUCC" shall mean First Union Commercial Corporation, a North Carolina
Corporation.
<PAGE> 10
"Funded Debt" shall mean (i) all Indebtedness for borrowed money or
which has been incurred in connection with the acquisition of assets, in each
case having a final maturity of one or more than one year from the date of
origin thereof (or which is renewable or extendible at the option of the
Borrower for a period or periods more than one year from the date of origin
thereof), including all payments in respect thereof which are required to be
made within one year from the date of any determination of Funded Debt,
whether or not included in the Financials or in the financial statements to be
delivered to the Agent pursuant to any of the provisions hereof, (ii) all
Capitalized Lease Obligations, and (iii) all guarantees by the Borrower of
debt of other Persons of the type described in clause (i) of this definition.
"General Intangibles" shall mean all general intangibles as that term is
defined in the UCC, now existing or hereafter owned or acquired or arising or
in which the Borrower now has or hereafter acquires any rights, including,
without limitation, causes of action, corporate or business records,
inventions, designs, patents, patent applications, trademarks, trademark
registrations and applications therefor, goodwill, trade names, trade secrets,
trade processes, copyrights, copyright registrations and applications
therefor, licenses, permits, franchises, customer lists, computer programs,
all claims under guaranties, tax refund claims, rights and claims against
carriers and shippers, leases, claims under insurance policies, all rights to
indemnification and all other intangible personal property of every kind and
nature other than Accounts.
"GAAP" shall mean generally accepted accounting principles consistently
applied and maintained on a basis for the Borrower throughout the period
indicated and consistent with the prior financial practice of the Borrower as
reflected in the Financials.
"Hazardous Material" shall mean any pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substance or material defined as such in (or
for purposes of) the Environmental Laws, including, without limitation, any
waste constituents coming within the definition or list of hazardous
substances in 40 C.F.R. 261.1 through 261.33.
"Heathrow Facility" shall mean 195 International Parkway, Heathrow,
Florida 32746.
"Indebtedness" shall mean all liabilities, obligations and indebtedness
of the Borrower of any and every kind and nature, including, without
limitation, the Obligations and all obligations to trade creditors, whether
heretofore, now or hereafter owing, arising, due or payable from the Borrower
to any Person and howsoever evidenced, created, incurred, acquired or owing,
whether primary, secondary, direct, contingent, fixed or otherwise. Without
in any way limiting the generality of the foregoing, Indebtedness specifically
includes the following:
(a) All obligations or liabilities of any Person that are
secured by any Lien upon property owned by the Borrower, even though the
Borrower has not assumed or become liable for the payment thereof;
(b) All obligations or liabilities created or arising
under any lease (including but not limited to any Capital Lease) of real or
personal property, or conditional sale or other title retention agreement with
respect to property used or acquired by the Borrower, even though the rights
and remedies of the lessor, seller or lender thereunder are limited to
repossession of such property;
<PAGE> 11
(c) All unfunded pension fund obligations and liabilities;
(d) All the Borrower's obligations or liabilities under
guarantees of Indebtedness;
(e) Deferred taxes;
(f) All Subordinated Debt; and
(g) All Obligations.
"Intercreditor Agreement" shall mean the Intercreditor Agreement of even
date with this Agreement by and between FUCC, Bank of Boston and NBC.
"Interest Charges" shall mean for any period all interest and all
amortization of debt discount and expense on any particular Indebtedness for
which such calculations are being made. Computations of Interest Charges on a
pro forma basis for Indebtedness having a variable interest rate shall be
calculated at the rate in effect on the date of any determination.
"Interest Rate Election Notice" shall mean a notice described in section
2.5(c) hereof.
"Interest Rate Swap Agreement" shall mean the ISDA Master Agreement,
including all schedules, confirmations and exhibits thereto, entered into as
of May 12, 1994 between First Union-NC and the Borrower, as such agreement may
be amended, restated or otherwise modified from time to time hereafter.
"Inventory" shall mean all "Inventory", as that term is defined in the
UCC, of the Borrower wherever located, including, without limitation, all
parts, products, goods manufactured or acquired for sale or lease, and any
piece goods, raw materials, work in process and finished merchandise, findings
or component materials, and all supplies, goods, incidentals, office supplies,
packaging materials and any and all items used or consumed in the operation of
the business of the Borrower or which may contribute to the finished product
or to the sale, promotion and shipment thereof, in which the Borrower now or
at any time hereafter may have an interest, whether or not the same is in
transit or in the constructive, actual or exclusive occupancy or possession of
the Borrower or is held by the Borrower or by others for the Borrower's
account, and any returns upon any Accounts and other proceeds, resulting from
the sale or disposition of any of the foregoing;
"Leases" shall collectively mean those certain leases described in
Exhibit B attached hereto and made a part hereof, and all amendments,
extensions, renewals and modifications thereto.
"Lenders" shall mean FUCC, Bank of Boston and NBC.
"Lessor(s)" shall mean each of the lessors under the Leases described on
Exhibit B.
"Letters of Credit" shall mean Stand-by Letters of Credit and Trade
Letters of Credit.
"Letter of Credit Agreement" shall mean the Application And Agreement
For Irrevocable [Stand-by] [Commercial] Letter of Credit (and the Commercial
Credit Agreement which is attached to and a part thereof, with appropriate
modifications thereto to indicate that any Letter of Credit issued thereunder
is to be issued
<PAGE> 12
pursuant to, and subject to the terms and condition of, this Agreement) of
even date herewith between First Union and the Borrower, the form of which is
attached hereto as Exhibit D.
"Letter of Credit Obligations" shall mean all outstanding obligations
incurred by First Union at the request of the Borrower, whether direct or
indirect, contingent or otherwise, due or not due, in connection with the
issuance by First Union of Letters of Credit. The amount of such Letter of
Credit Obligations shall equal the maximum amount which may be payable by
First Union thereupon or pursuant thereto.
"LIBOR Loan" shall mean, at any time, any outstanding 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 numerically corresponding day in the first, second,
third or sixth calendar month thereafter; 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.
"LIBOR Rate" means, for any LIBOR Period, the amount obtained by
dividing (a) the interest rate per annum for deposits in U.S. Dollars which
appears on the Telerate Page 3750 as of 11:00 A.M. London time, on the day
that is two London Banking Days preceding the first day of such LIBOR Period
for a period equal to such LIBOR Period by (b) the percentage equal to One
Hundred Percent (100%) (expressed as a decimal fraction) minus the Reserve
Requirement for such LIBOR Period; provided, however, that if such rate does
not so appear on the Telerate Page 3750, then "LIBOR Rate" means, for any
LIBOR Period, the amount obtained by dividing (x) the interest rate per annum
at which deposits in U.S. Dollars are offered by the Reference Banks (in the
manner determined below) to prime banks in the London interbank market at
approximately 11:00 A.M., London time on the day that is two London Banking
Days preceding the first day of such LIBOR Period for a period equal to such
LIBOR Period and in an amount substantially equal to the amount of such LIBOR
Loan to be outstanding during such LIBOR Period by (y) the percentage equal to
One Hundred Percent (100%) (expressed as a decimal fraction) minus the Reserve
Requirement for such LIBOR Period. In determining the interest rate per annum
in clause (x) above: (i) the Agent will request the principal London office of
each of the Reference Banks to provide a quotation of its rate and if at least
two such quotations are provided, such rate will be the arithmetic mean of
such quotations; and (ii) if fewer than two such quotations are provided as
requested, such rate in clause (x) above will instead be equal to the
arithmetic mean of the interest rates per annum quoted by major banks in New
York City, selected by the Agent at approximately 11:00 A.M., New York City
time, on the day that is two London Banking Days preceding the first day of
such LIBOR Period for loans in U.S. Dollars to leading European banks for a
period equal to such LIBOR Period and in an amount substantially equal to the
amount of such LIBOR Loan to be outstanding during such LIBOR Period. Each
calculation by the Agent of the applicable LIBOR Rate shall be conclusive and
binding for all purposes, absent manifest error.
"Lien" shall mean any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
<PAGE> 13
without limitation, any lease or title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing, and the
filing of, or agreement to give, any financing statement under the UCC or
comparable law of any jurisdiction).
"Loans" shall mean and refer to the Revolving Credit Loans and the Term
Loan.
"Loan Documents" shall mean and collectively refer to this Agreement,
the Term Loan Agreement, the Mortgages, the Notes, the Letter of Credit Agree-
ment, the Foreign Exchange Agreement, all Foreign Exchange Contracts, the
Interest Rate Swap Agreement, the Environmental Indemnity and Compliance
Agreement, the Intercreditor Agreement and all Supplemental Documentation and
any and all agreements, instruments and documents, including, without limita-
tion, notes, guaranties, mortgages, deeds to secure debt, deeds of trust,
chattel mortgages, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, trust account agreements and all
other written matters whether heretofore, now or hereafter executed by or in
behalf of the Borrower and/or delivered to Lenders, First Union, or First
Union-NC with respect to this Agreement, or with respect to the transactions
contemplated by this Agreement, together with any amendments, modifications,
restatements and supplements thereto, and any renewals or extensions thereof,
in whole or in part.
"Mass Market Accounts" shall mean those Accounts listed on Schedule 1
attached hereto, as the same may be supplemented from time to time by the
Borrower with the prior approval of Agent which it may give or withhold in its
sole discretion.
"Mortgages" shall collectively mean the Mortgages encumbering each of
the Sites described in Schedules I through XII attached hereto, together with
any amendments, modifications, restatements and supplements thereto, and any
renewals or extensions thereof, in whole or in part.
"Mortgaged Property" shall mean all of the real property of DTC
described on Schedules I through XI attached hereto, together with all
personal property of such parties located on or used in connection with such
real property, and all of the real property of DTI described on Schedule XII,
all of which are encumbered by the Mortgages.
"NationsBanc Lease" shall mean the Master Equipment Lease Agreement
between DTC and NationsBanc Leasing Corporation dated January 12, 1996
numbered Lease Number 02262-00300.
"NBC" shall mean National Bank of Canada, a Canadian chartered bank, and
having an office at 125 West 55th Street, New York, New York 10019.
"Net Income" shall mean for any period the gross revenues of the
Borrower and the Subsidiaries for such period less all expenses and other
proper charges (including taxes on or measured by income), determined in
accordance with GAAP consistently applied but excluding in any event:
(a) any gains or losses on the sale or other disposition of
investments or fixed or capital assets, and any taxes on such excluded gains
and any tax deductions or credits on account of any such excluded losses;
(b) the proceeds of any life insurance policy;
<PAGE> 14
(c) net earnings and losses of any Subsidiary accrued prior to
the date it became a Subsidiary;
(d) net earnings and losses of any Person (other than a
Subsidiary), substantially all the assets of which have been acquired in any
manner, realized by such other Person prior to the date of such acquisition;
(e) net earnings and losses of any Person (other than a
Subsidiary) with which the Borrower or a Subsidiary shall have consolidated or
which shall have merged into or with the Borrower or a Subsidiary prior to the
date of such consolidation or merger;
(f) net earnings of any Person (other than a Subsidiary) in
which the Borrower or any Subsidiary has an ownership interest unless such net
earnings shall have actually been received by the Borrower or such Subsidiary
in the form of cash distributions;
(g) any portion of the net earnings of any Subsidiary which for
any reason is unavailable under applicable law or otherwise for payment of
dividends to the Borrower or any other Subsidiary, except for temporary
restrictions imposed by Mexican law on dividends of Dixon-Mexico due to short-
term borrowings of Dixon-Mexico;
(h) earnings resulting from any reappraisal, revaluation or
write-up of assets;
(i) any deferred or other credit representing any excess of the
equity in any Subsidiary at the date of acquisition thereof over the amount
invested in such Subsidiary; and
(j) any gain arising from the acquisition of any Stock of the
Borrower or any Subsidiary.
"Non-Dated Accounts" shall mean Accounts which are not Educational
Supplies Distributor Accounts or Mass Market Accounts.
"Notes" shall mean the Revolving Credit Notes and the Term Notes.
"Obligations" shall mean and include the Loans, the obligations of the
Borrower under this Agreement, the Term Loan Agreement, the Notes, the
Mortgages, the Foreign Exchange Agreement, the Foreign Exchange Contracts, the
Interest Rate Swap Agreement or the other Loan Documents, and all other loans,
advances, debts, liabilities, obligations, covenants and duties owing,
arising, due or payable from the Borrower to the Agent, Lenders, or any of
them, First Union and/or First Union-NC, of any kind or nature, whether or not
evidenced by any note, guaranty or other instrument, whether direct or
indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
and however acquired. The term includes, but without limitation, all
interest, charges, expenses, fees, attorneys' and paralegals' fees and any
other sums chargeable to the Borrower by the Agent, Lenders, or any of them,
First Union or First Union-NC under this Agreement or any of the other Loan
Documents. The term also includes, but without limitation, the obligations of
the Borrower under the Interest Rate Swap Agreement for any and all "Loss",
"Settlement Amount" and "Unpaid Amounts" as such terms are defined in the
Interest Rate Swap Agreement.
<PAGE> 15
"OSHA" shall mean the Occupational Safety and Health Act, as amended
from time to time, and all rules and regulations from time to time promulgated
thereunder.
"Overadvance" shall have the meaning specified in Exhibit A attached
hereto.
"Permitted Liens" shall mean any of the following Liens securing any
Indebtedness on the Borrower's property, real or personal, whether now owned
or hereafter acquired:
(a) Liens of carriers, warehousers, mechanics and
materialmen incurred in the ordinary course of business for sums not overdue
or being contested in good faith and with due diligence by appropriate
proceedings;
(b) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other forms
of governmental insurance or benefits entered into in the ordinary course of
business;
(c) Liens for current taxes, assessments or other
governmental charges which are not delinquent or remain payable without any
penalty or which are being contested in good faith and with due diligence by
appropriate proceedings but do not, in the Agent's sole judgment, materially
adversely affect the Agent's rights or the priority of such Liens, and, if
reasonably requested by the Agent, the Borrower shall establish reserves
satisfactory to the Agent with respect thereto;
(d) Liens placed upon fixed assets hereafter acquired at
the time of, or within ten (10) days after, the acquisition thereof to secure
a portion of the purchase price thereof, provided (i) any such Lien shall not
encumber any other property of the Borrower, (ii) any such Lien shall not
exceed 100% of the purchase price of such fixed assets, and (iii) the
aggregate amount of indebtedness secured by such Liens incurred as a result of
such purchases during any fiscal year, when added to the amount of Capital
Expenditures made during such fiscal year, shall not exceed the amount
specified in section 8.18 hereof. Notwithstanding the foregoing, the Borrower
shall not be permitted to encumber any after-acquired real property unless the
mortgagee thereof enters into an agreement in form and substance acceptable to
the Agent and its counsel providing the Agent with, inter alia, notices of
default under such mortgage and the opportunity to cure such defaults; and
(e) Liens existing on the date hereof and set forth on
Exhibit G attached hereto.
"Permitted Title Exceptions" shall have the same meaning assigned to it
as in each of the Mortgages with respect to the Mortgaged Property described
therein.
"Person" shall mean a corporation, an association, a partnership, a
joint venture, a joint stock company, a trust, an organization, a business, an
individual or a government or political subdivision thereof or any government
agency, or any other form of entity.
"Prime Rate" shall mean the interest rate publicly announced from time
to time by First Union-NC to be its prime rate. First Union-NC lends at rates
both above and below its Prime Rate. In the event that First Union-NC shall
abolish or abandon the practice of announcing its Prime Rate or should the
<PAGE> 16
same be unascertainable, the Prime Rate under this Agreement and the other Loan
Documents shall be 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.
"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.
"Pro Forma Debt Coverage Ratio" shall mean, at any date, EBITDA for the
twelve-month period immediately preceding such date, divided by the sum of (a)
the amount of principal and interest payments due under the Subordinated Debt
for the twelve months next succeeding such date, and (b) the aggregate amount
of cash paid for taxes, Capital Expenditures and principal and interest
payments due on Indebtedness other than the Subordinated Debt, all for such
preceding twelve-month period.
"RCRA" shall mean the Resource Conservation and Recovery Act, as amended
from time to time, and all rules and regulations from time to time promulgated
thereunder.
"Reference Banks" means four prime banks in the London interbank market.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor
thereto or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of the
Federal Reserve System.
"Reportable Event" shall have the meaning specified in section 6.10
hereof.
"Required Lenders" shall mean, at any date, any combination of holders
of at least sixty-six and two-thirds percent (66-2/3%) of the aggregate unpaid
principal amount of the Notes, or if no amounts are outstanding under the
Notes, any combination of Lenders whose Revolving Credit Commitment
percentages aggregate at least sixty-six and two thirds percent (66-2/3%).
"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 Lenders, or any of them, 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 Lenders, or any of them, 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
Lenders, or any of them, 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.
"Revolving Credit Commitment" shall mean the commitments of each of the
Lenders pursuant to section 2.1 hereof to make the Revolving Credit Loans to
the Borrower, to wit: FUCC, $20,133,000 or 50.3325% of the Revolving Credit
Loans; Bank of Boston, $13,250,000 or 33.125% of the Revolving Credit Loans;
and NBC, $6,617,000 or 16.5425% of the Revolving Credit Loans.
<PAGE> 17
"Revolving Credit Loans" shall mean the revolving credit loans made by
Lenders to Borrower pursuant to the Revolving Line of Credit.
"Revolving Credit Notes" shall mean the promissory notes of Borrower,
substantially in the forms of Exhibits F-1, F-2 and F-3 attached hereto,
evidencing the Revolving Credit Loans, together with any amendments,
modifications, restatements and supplements thereto, and any renewals or
extensions thereof, in whole or in part.
"Revolving Line of Credit" shall mean the revolving line of credit made
available by the Lenders to the Borrower pursuant to section 2.1 hereof.
"SARA" shall mean the Superfund Reauthorization and Amendments Act of
1986, as amended from time to time, and all rules and regulations promulgated
thereunder.
"Schedule of Accounts" shall mean a Schedule of Accounts in the form
specified in section 9.3 hereof.
"Schedule of Equipment" shall mean a Schedule of Equipment in the form
specified in section 9.10 hereof.
"Schedule of Inventory" shall mean a Schedule of Inventory in the form
specified in section 9.6 hereof.
"Solvent" shall mean, as to any Person, that such Person has capital
sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage and is able to pay its debts as
they mature and owns property having a value, both at fair valuation and at
present fair saleable value, greater than the amount required to pay its
debts.
"Stand-by Letter of Credit" shall mean a letter of credit issued by
First Union for the account of Borrower payable in the event that Borrower
fails to perform its obligations under an agreement with one or more third
parties.
"Stock" shall mean all shares, options, interests, partnerships or other
equivalents (howsoever designated) of or in a corporation, whether voting or
non-voting, including, without limitation, common stock, warrants, preferred
stock, convertible debentures and all agreements, instruments and documents
convertible, in whole or in part, into any one or more or all of the
foregoing.
"Stock Pledge Agreement" shall mean the Amended and Restated Stock
Pledge and Security Agreement the form of which is attached hereto as
Exhibit M.
"Subordinated Debt" shall mean the 10.59% Senior Subordinated Notes of
DTC due August 1, 1999 in the original principal amount of $20,000,000 payable
to The Principal Mutual Life Insurance Company.
"Subordinated Debt Amendment" shall mean that certain Agreement of even
date herewith by and among the holders of the Subordinated Debt which amends
the Subordinated Debt Loan Documents, in the form of Exhibit E attached
hereto.
"Subordinated Debt Loan Documents" shall mean the Note Agreement dated
as of July 1, 1989 between DTC and the Subordinated Lenders, the Subordinated
Debt Amendment, the Subordinated Notes issued pursuant thereto and all other
documents evidencing, securing or otherwise related to the Subordinated Debt,
together with any amendments, modifications and supplements thereto, and any
renewals or extensions thereof, in whole or in part.
<PAGE> 18
"Subordinated Lenders" shall mean the holders from time to time of the
Subordinated Debt.
"Subsidiary" shall mean any corporation, more than fifty percent (50%)
of the outstanding Stock having ordinary voting power to elect a majority of
the board of directors of which is at the time, directly or indirectly, owned
by DTC or DTI and/or one or more Subsidiaries (irrespective of whether, at the
time, Stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency).
"Supplemental Documentation" shall mean all agreements, instruments,
documents, financing statements, warehouse receipts, bills of lading, notices
of assignment of accounts, schedules of accounts assigned, mortgages, deeds of
trust, certificates of title and other written matter necessary or requested
by the Agent to perfect and maintain perfected the Agent's security interest
in the Collateral and to consummate the transactions contemplated by this
Agreement and the other Loan Documents.
"Tangible Net Worth" shall mean Book Net Worth, minus (a) the amount, if
any, of the Borrower's intangible assets, including, without limitation,
General Intangibles and any other asset which would be treated as an
intangible under GAAP; (b) any indebtedness owed to the Borrower by any
Affiliate or officer or director of the Borrower; (c) any write-up in the book
value of any fixed asset resulting from a revaluation thereof at any time
subsequent to the Closing Date; (d) the amount, if any, at which any shares of
Stock of the Borrower appear on the asset side of its balance sheet, and (e)
prepaid expenses.
"Term" shall mean the term of this Agreement as specified in section
12.1 hereof.
"Term Loan" shall mean the term loan made by the Lenders pursuant to the
Term Loan Agreement.
"Term Loan Agreement" shall mean the Amended and Restated Term Loan
Agreement dated of even date herewith among Borrower, Agent and the Lenders
pursuant to which Lenders are making the Term Loan.
"Term Notes" shall mean the promissory notes of Borrower payable to the
Lenders and evidencing the Term Loan.
"Total Assets" shall mean all assets which would be shown on the asset
side of a balance sheet prepared in accordance with GAAP.
"Total Liabilities" shall mean all liabilities which would be shown on
the liability side of a balance sheet prepared in accordance with GAAP.
"Trade Letter of Credit" shall mean a documentary letter of credit
issued by First Union with documents consigned to First Union for the account
of Borrower for the purchase of Inventory, payable at sight to a supplier of
Borrower.
"Trademarks, Copyrights and Patents" shall mean all of the Borrower's
right, title and interest in, to and under all trade names, trademarks,
servicemarks, copyrights, patents, and other intellectual property, and all
licenses and registrations of and applications for each of the foregoing,
including, without limitation the names "Dixon Ticonderoga", "Prang",
"ColorArt", "Ticonderoga" and "Dixon".
<PAGE> 19
"UCC" shall mean the Uniform Commercial Code as in effect from time to
time and enacted in the State of Florida and in any other jurisdiction, as
applicable.
"United States" or "U.S." shall mean the United States of America,
including its territories and possessions, and the District of Columbia.
ACCOUNTING TERMS. Any accounting terms used in this Agreement
which are not specifically defined shall have the meanings customarily given
them in accordance with GAAP; provided, however, that, (i) unless the context
indicates otherwise, all accounting terms shall refer to the Borrower and the
Subsidiaries on a consolidated basis, and (ii) in the event that changes in
GAAP shall be mandated by the Financial Accounting Standards Board, or any
similar accounting body of comparable standing, or shall be recommended by the
Borrower's certified public accountants, to the extent that such changes would
modify such accounting terms or the interpretation or computation thereof,
such changes shall be followed in defining such accounting terms only from and
after such date as the Borrower and Lenders shall have amended this Agreement
to the extent necessary to reflect any such changes in the financial covenants
and other terms and conditions of this Agreement.
OTHER TERMS. All other terms contained in this Agreement shall,
when the context so indicates, have the meanings provided for by the UCC as
enacted in the State of Florida to the extent the same are used or defined
therein.
SECTION 2 - THE LOANS; INTEREST; FEES; AND PROCEEDS OF THE LOANS
REVOLVING LINE OF CREDIT. (a) Subject to all of the terms and
conditions set forth in this Agreement and the other Loan Documents, the
Lenders shall make a revolving line of credit available for the Borrower's use
from time to time on and after the Closing Date and until the Commitment
Termination Date. Pursuant to the Revolving Line of Credit, each Lender,
provided there does not then exist a Declared Default and subject to section
2.3, upon the Borrower's request therefor, severally agrees that it will make
Revolving Credit Loans to the Borrower, in accordance with and not in excess
of such Lender's Revolving Credit Commitment, on a revolving credit basis, in
an aggregate amount at any one time outstanding not to exceed, as to all
Lenders, the lesser of (i) Forty Million U.S. Dollars ($40,000,000), or (ii)
the Borrowing Base, less the amount of Letter of Credit Obligations, at such
time.
(a) Under the Revolving Line of Credit, the Borrower may
borrow funds from the Lenders, may make payments thereof to the Lenders, and
may reborrow funds from the Lenders, all in accordance with the provisions of
this Agreement and the other Loan Documents.
(b) To evidence the Revolving Credit Loans, the Borrower
is executing and delivering the Revolving Credit Notes to the Lenders on the
Closing Date which Revolving Credit Notes shall bear interest and be paid in
accordance with and subject to the terms and conditions of this Agreement.
Letters of Credit. (a) Subject to all of the terms
and conditions of this Agreement and the other Loan Documents, and provided
there does not then exist an Event of Default or any event or condition which,
with notice, lapse of time or the issuance of any Letter of Credit, would
constitute an Event of Default, the Agent will cause First Union, upon the
Borrower's written request therefor, to open, from time to time on and after
the Closing Date until the Commitment Termination Date, Letters of Credit
issued for the
<PAGE> 20
account of the Borrower. In no event shall Letters of Credit outstanding at
any time hereunder exceed the lesser of either (i) the Borrowing Base less the
amount of the outstanding Revolving Credit Loans or (ii) Two Million U.S.
Dollars ($2,000,000) in the aggregate. Immediately upon issuance by First
Union of any Letter of Credit in accordance with the procedures set forth in
this section 2.1.1, each Lender shall be deemed to have irrevocably and uncon-
ditionally purchased and received from First Union, without recourse or
warranty, an undivided interest and participation, to the extent of such
Lender's pro rata share of the Revolving Credit Commitment, in such Letter of
Credit (including, without limitation, all obligations of the Borrower with
respect thereto other than amounts owing to First Union under section 2.5.1)
and any security therefor.
(b) Notwithstanding anything to the contrary set
forth in this section 2.1.1, First Union shall not open any Letter of Credit
having an expiry date which is later than the Commitment Termination Date or
which is payable in a currency other than United States Dollars.
(c) In the event that First Union shall make any
payment on, or pursuant to, any Letter of Credit, the Borrower shall be
obligated to immediately reimburse First Union for any such payment. If the
Borrower does not reimburse First Union on the same day that First Union makes
any such payment, the unreimbursed portion of such payment shall be deemed to
constitute Revolving Credit Loans made by the Lenders pursuant to section 2.1
hereof.
(d) In the event that any Letter of Credit
Obligations, whether or not then due and payable, shall for any reason be
outstanding on the Commitment Termination Date, the Borrower will either (i)
provide the Agent with a letter of credit or other guaranty of payment for all
then outstanding Letters of Credit issued by First Union, satisfactory to the
Lenders in their sole discretion, or (ii) pay to the Agent for the account of
First Union cash in an amount equal to the maximum amount then available to be
drawn under such Letters of Credit. All funds delivered to the Agent pursuant
to this subsection (d) shall be held by First Union for the account of the
Borrower.
MAXIMUM REVOLVING CREDIT FACILITY.
Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents but subject to the sublimits on
borrowing contained in Exhibit A attached hereto, the aggregate amount of
Revolving Credit Loans, Letter of Credit Obligations and Foreign Exchange
Contracts shall not exceed Forty Million U.S. Dollars ($40,000,000) at any
time outstanding less the aggregate amount, determined by the Agent in its
sole discretion, of the obligations of the Borrower under the Interest Rate
Swap Agreement for any and all "Loss", "Settlement Amount" and "Unpaid
Amounts" as such terms are defined in the Interest Rate Swap Agreement.
AVAILABILITY; BORROWING BASE CERTIFICATE. In no event shall the
Lenders be required to make any Revolving Credit Loans nor shall First Union
open any Letters of Credit if, after giving effect to such Revolving Credit
Loans, the Availability is not a positive amount. If, at any time, the
Availability is not a positive amount, the Borrower shall immediately either
reduce the Obligations or increase the amount of Collateral in the Borrowing
Base so that the Availability shall be a positive amount. All of the
foregoing shall be calculated in accordance with a Borrowing Base Certificate.
In determining Availability, the Agent shall, subject to the terms of section
17.8, have the right from time to time to establish and reestablish such
reserves (in addition to those set forth in Exhibit A) against the Borrowing
Base as it deems appropriate in its sole discretion.
<PAGE> 21
PROCEDURE FOR REVOLVING CREDIT BORROWINGS. The Borrower may borrow
under the Revolving Line of Credit on any Business Day; provided, however,
that Borrower shall give the Agent irrevocable verbal or facsimile notice,
which notice must be received prior to 12:00 P.M., Miami, Florida time on the
same Business Day that the Borrower requests funding of the Revolving Credit
Loan and, if verbal, confirmed by a written request sent to Agent via
facsimile prior to 4:00 P.M. on the same day, specifying, inter alia (a) the
amount to be borrowed, and (b) the date on which the Borrower requests that
such funding be made. Not later than 3:00 p.m. (Miami, Florida time) on
Thursday of each week unless such Thursday is not a Business Day, in which
case on the next succeeding Business Day, or on any other day as Agent may
deem necessary in connection with any LIBOR Loan(s), the Agent shall give each
Lender verbal or facsimile notice of the amount of such Lender's pro rata
share of the Loans as of such date, less amounts previously made available to
the Agent by such Lender and less applicable repayments made by the Borrower.
Each Lender will make available to the Agent, for the account of the
Borrower, at the office of the Agent in funds immediately available to the
Agent, the amount of such Lender's pro rata share of the Loans not later than
3:00 p.m. on the following Business Day. Such borrowing will be made
available to the Borrower by the Agent crediting the account of the Borrower
on the books of such office with the aggregate amount of the requested
borrowing.
INTEREST. Subject to the provisions of section 13.3 below, the
Borrower shall pay interest to the Lenders 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.
For Revolving Credit Loans which are Overadvances, interest shall be payable
at the Adjusted Prime Rate plus one-half of one percent (0.5%) per annum. 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 and Overadvances 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.
(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. Interest 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 applicable LIBOR Period ends.
<PAGE> 22
(c) Conversion of Rate Options. On the terms and subject
to the conditions of this Agreement, the Borrower 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 delivery to the Agent of an Interest Rate Election
Notice prior to 10:00 a.m. (Charlotte, North Carolina, time) at least three
(3) Eurodollar Business Days prior to the effective date of any conversion to
or renewal of a LIBOR Loan and at least one (1) Eurodollar Business Day prior
to the effective date of any conversion to a Prime Rate Loan, specifying (1)
the date of conversion or renewal (which date shall be a Eurodollar Business
Day, and in the case of a conversion from a LIBOR Loan to a Prime Rate Loan,
the last day of the LIBOR Period therefor); (2) the amount and type of
conversion or renewal; and (3) the length of the applicable LIBOR Period. If,
within the time period required under this section 2.5(c), the Agent 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. Upon receipt of an Interest Rate Election
notice from the Borrower, the Agent shall immediately notify the Lenders of
any conversion or renewal, and the date(s) thereof.
(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 aggregate amount of the succeeding LIBOR Loan
made by the Lenders 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 (A) not more
than two (2) tranches 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 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 or event which, with the giving of notice or
passage of time, or both, would constitute 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 pursuant to section
2.1 may be designated as LIBOR Loans;
(v) anything herein to the contrary notwithstanding, if,
on or prior to the determination of an interest rate for any LIBOR
Loan for any period:
<PAGE> 23
A. the Agent determines (which determination 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 the purpose of determining the rate of
interest for such LIBOR Loan under this Agreement; or
B. the Agent determines (which determination 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 Loan
for such period is determined does not accurately reflect
the cost to the Lenders incurred in the London interbank
market of making or maintaining such LIBOR Loan for such
period,
then the Agent shall give the Borrower prompt notice thereof, and,
so long as such condition remains in effect, the Lenders shall be
under no obligation 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 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, 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 Agent
determines that it is unlawful for any of the Lenders (A) to
honor their obligations to fund LIBOR Loans hereunder, or
(B) to maintain such LIBOR Loans hereunder, then the Agent
shall promptly notify the Borrower thereof and the Lenders'
obligation to fund LIBOR Loans and to convert any Prime Rate
Loans into LIBOR Loans hereunder shall be suspended until
such time as the Lenders 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 converted 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 Agent gives notice to the Borrower
that the circumstances specified in clause (vii) hereof
which gave rise to such conversion no longer exist, all
Loans which would otherwise be advanced by the Lenders 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 Agent, the Borrower shall pay to the Agent such
amount as the Agent determines shall be sufficient to compensate the Lenders
for any loss, cost or expense incurred as a result of:
<PAGE> 24
(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, acceleration of the Loans by the Agent pursuant to
section 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 any Lender(s) as a result of reinvesting or
redeploying any amount prepaid at a rate lower than such 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 Agent's
determination of any such amounts, as specified in the Agent's notice to the
Borrower, shall be conclusive absent bad faith or manifest error.
(f) Payment of Additional Compensation. Any payment or
prepayment of any LIBOR Loan, 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 the Lenders as provided in subsection (e) hereof, as
the Agent may upon request advise the Borrower; provided, however, that any
estimate communicated by the Agent to the Borrower of the losses, costs and
expenses resulting from such payment or prepayment shall not be binding upon
the Lenders, who will subsequently adjust the estimated amount as determined
pursuant to subsection (e) hereof. Each such payment or prepayment shall be
applied first to reimburse the Lenders for any losses sustained by the Lenders
as provided in subsection (e) hereof.
Letter of Credit Fees. As additional consideration for
First Union's issuing Letters of Credit for the Borrower's account, and in
addition to the letter of credit and administrative fees and charges normally
charged from time to time by First Union, the Borrower agrees to pay to the
Agent, on behalf of Lenders and in proportion to their respective pro rata
shares of the Revolving Credit Commitment, Letter of Credit issuance fees
equal to one percent (1.0%) per annum of the face amount of such Letters of
Credit issued from time to time during the Term plus, on behalf of First
Union, all other customary fees and charges from time to time imposed by First
Union in letter of credit transactions. Such fees shall be earned and due and
payable upon the issuance of each Letter of Credit and shall not be subject to
rebate or proration upon the termination of this Agreement for any reason.
LOAN CLOSING/COMMITMENT FEE. As additional consideration for the
Loans extended to Borrower hereunder, Borrower agrees to pay to the Agent, on
behalf of Lenders, on the Closing Date a loan closing and commitment fee in
the aggregate amount of Seventy-Five Thousand U.S. Dollars ($75,000). The
loan closing fee provided for herein shall compensate the Lenders for the
costs associated with the structuring, processing, approval and closing of the
transactions contemplated by this Agreement and the Lenders' commitments to
make the Revolving Credit Loans hereunder, including, but not limited to,
administrative, out-of-pocket, general overhead and lost opportunity costs,
but not including any expenses for which the Borrower has agreed to reimburse
the Lenders pursuant to section 15 hereof. The loan closing and commitment
fee shall be fully earned upon the execution of this Agreement by the
Borrower, and shall not be subject to proration or rebate upon the termination
of this Agreement for any reason. The $90,000 annual installment of the loan
closing and commitment fee which is owing to FUCC and due on May 12, 1996, all
pursuant to the Existing Credit Agreement, is reduced to $25,000.
<PAGE> 25
UNUSED LINE FEE. As additional consideration for the Revolving
Credit Commitment extended to the Borrower hereunder, and in addition to all
other amounts due hereunder, the Borrower agrees to pay to the Agent, on
behalf of Lenders an unused line fee equal to one-quarter of one percent
(1/4%) of the amount of the Revolving Line of Credit which is unused
(calculated on the average unused amount for the preceding ninety (90) day
period), which unused line fee shall be due and payable on each April 1, July
1, October 1 and January 1 throughout the Term.
ONE LOAN. All Loans and Letters of Credit Obligations by the
Lenders under this Agreement and the other Loan Documents shall constitute one
general obligation of the Borrower and, except as may be otherwise provided in
any of the Loan Documents, shall be secured by the Agent's Liens upon all of
the Collateral granted hereunder, under the Mortgages or under the other Loan
Documents, and by all other Liens heretofore, now, or at any time or times
hereafter granted by the Borrower to the Agent.
LOAN PURPOSES. The Borrower shall use the proceeds of the
Revolving Credit Loans for the Borrower's working capital needs, which uses
shall only be for legal and proper corporate purposes (duly authorized by the
Borrower's Board of Directors) which are consistent with all applicable laws
and statutes.
OPTIONAL PREPAYMENT. The Borrower shall have the right at any
time, on 90 days' prior written notice to Agent, to voluntarily prepay the
entire principal balance of the Loans then outstanding, and, upon such
prepayment, (a) Borrower's right to receive advances under the Revolving
Credit Loans and obtain the issuance of Letters of Credit hereunder shall
simultaneously terminate and (b) if prepaid during the first two years of the
Term using funds which are not internally generated or proceeds of a public
offering of the Borrower's Stock, the Borrower shall pay to the Lenders a
prepayment fee equal to either one percent (1%), if such prepayment occurs
during the first year of the Term, or one-half of one percent (.5%) if such
prepayment occurs during the second year of the Term, of the average aggregate
outstanding principal balance of the Loans during the twelve (12) month period
preceding such prepayment.
AGENCY FEE. In order to compensate the Agent for structuring and
syndicating the Loans and for its obligations hereunder, the Borrower agrees
to pay to the Agent, for its own account, on each anniversary of the Closing
Date, an agency fee in an amount equal to one eighth of one percent (.125%) of
the aggregate Revolving Credit Commitment amount.
Reserves and Settlement for Foreign Exchange. Upon instruc-
tions from FUCC or Borrower, and provided that no monetary Event of Default
shall then exist, the Agent shall make advances under the Revolving Line of
Credit in amounts necessary to cover settlements of Foreign Exchange
Contracts, subject, in each such case, to there existing, at the time such
advance would be required hereunder, a sufficient amount of Availability to
cover such advances. As provided in Exhibit A attached hereto, an amount
equal to one hundred percent (100%) of the total value of Spot (as defined in
the Foreign Exchange Agreement) transactions outstanding at any given time
under the Foreign Exchange Facility shall be reserved against the Borrowing
Base. An amount equal to twenty percent (20%) of the total value of Forward
(as defined in the Foreign Exchange Agreement) transactions outstanding at any
given time under the Foreign Exchange Facility shall be reserved against the
Borrowing Base until two (2) days prior to the value date, at which time the
reserve shall be one hundred percent (100%).
<PAGE> 26
YIELD-PROTECTION. If any law or any governmental or quasi-
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law), or any interpretation thereof, or the compliance of
any Lender therewith,
(a) subjects any Lender to any tax, duty, charge or
withholding on or from payments due from the Borrower (excluding federal taxa-
tion of the overall net income of any Lender) or changes the basis of taxation
of payments to any Lender in respect of its Loans or other amounts due it
hereunder, or
(b) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any
Lender (other than reserves and assessments taken into account in determining
the interest rate applicable to LIBOR Loans), or
(c) imposes any other condition the result of which is to
increase the cost to any Lender of making, funding or maintaining loans or
reduces any amount receivable by any Lender in connection with loans, or
requires any Lender to make any payment calculated by reference to the amount
of loans held or interest received by it, by an amount deemed material by such
Lender,then, within 15 days of demand by such Lender, the Borrower shall pay
such Lender that portion of such increased expense incurred or reduction in an
amount received which such Lender determines is attributable to making,
funding and maintaining its Loans and its Revolving Credit Commitment.
CHANGES IN CAPITAL ADEQUACY REGULATIONS. If a Lender determines
the amount of capital required or expected to be maintained by such Lender, or
any corporation controlling such Lender is increased as a result of a Change,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender the amount necessary to compensate for any shortfall in the rate of
return on the portion of such increased capital which such Lender determines
is attributable to this Agreement, its Loans or its commitment to make Loans
hereunder (after taking into account such Lender's policies as to capital
adequacy). "Change" means (i) any change after the date of this Agreement in
the Risk-Based Capital Guidelines or (ii) any adoption of or change in any
other law, governmental or quasi-governmental rule, regulation, policy,
guideline, interpretation, or directive (whether or not having the force of
law) after the date of this Agreement which affects the amount of capital re-
quired or expected to be maintained by any Lender or any corporation
controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-
based capital guidelines in effect in the United States on the date of this
Agreement, including transition rules, and (ii) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
<PAGE> 27
LENDER STATEMENTS: SURVIVAL OF INDEMNITY. Each Lender shall
deliver a written statement of such Lender as to the amount due, if any, under
sections 2.13 or 2.14. Such written statement shall set forth in reasonable
detail the calculations upon which such Lender determined such amount and
shall be final, conclusive and binding on the Borrower in the absence of
manifest error. Determination of amounts payable under such sections in
connection with a LIBOR Loan shall be calculated as though each Lender funded
its LIBOR Loan through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining the LIBOR Rate
applicable to such Loan, whether in fact that is the case or not. Unless
otherwise provided herein, the amount specified in the written statement shall
be payable on demand after receipt by the Borrower of the written statement.
The obligations of the Borrower under sections 2.13 and 2.14 shall survive
payment of the Obligations and termination of this Agreement.
SECTION 3 - PAYMENTS
PAYMENTS. All Obligations of the Borrower to the Lenders shall be
repayable to the Agent at the address set forth in section 16.3 hereof or at
such other place or places as each Lender may designate from time to time.
That portion of the Obligations consisting of:
(a) Principal, payable on account of Revolving Credit
Loans, shall be payable by the Borrower to the Agent immediately (i) upon the
earlier of (A) the Commitment Termination Date, or (B) to the extent of any
collections with respect to any proceeds of any Collateral, the receipt of
said collections, or (ii) to the extent that the amount of the Revolving
Credit Loans (including any Overadvances) and Letters of Credit outstanding
exceed the amounts which the Borrower may request under the Revolving Line of
Credit;
(b) Interest, payable pursuant to this Agreement or any of
the other Loan Documents, shall be payable on the earlier of (i) in arrears,
as provided in section 2.5, or (ii) the Commitment Termination Date;
(c) Costs, fees and expenses payable pursuant to this
Agreement or the other Loan Documents shall be payable by the Borrower to the
Agent or to such other Person designated by the Agent in writing on demand;
and
(d) The balance of the Obligations, if any, shall be
payable by the Borrower to the Lenders as and when provided in this Agreement
or the other Loan Documents.
With respect to any sums due and payable by the Borrower to the Lenders
pursuant to subsections (b) through (d) above, the Borrower authorizes and
directs the Agent, at its option, to cause such sums to be paid on their
respective due dates by charging such payment as a Revolving Credit Loan on
the Borrower's behalf as of such day.
RECEIPT OF PAYMENTS. In the event the Borrower (or any of its
Affiliates, directors, officers, employees or agents) shall receive any
monies, checks, notes, drafts or any other items of payment relating to and/or
constituting proceeds of the Collateral, the Borrower agrees with the Lenders
as follows:
<PAGE> 28
(a) The Borrower shall hold all items of payment in trust
for the Lenders and as the property of the Lenders, separate from the funds of
the Borrower, and no later than the first Business Day following the receipt
thereof, the Borrower shall deposit the same or cause the same to be deposited
in kind, in special accounts of the Borrower established by the Borrower at
First Union, over which the Agent shall have sole and exclusive access and
control for withdrawal purposes ("Blocked Accounts") for application on
account of the Obligations as provided in section 3.4 hereof; provided,
however, that from and after the establishment by the Agent of depository
accounts or "lock-boxes" in the Agent's name in a bank or banks for the
deposit of such items of payment ("Depository Accounts"), the Borrower shall
deposit such items of payment or cause the same to be deposited, in kind, in
such Depository Accounts in lieu of depositing the same to the Blocked
Accounts, for application on account of the Obligations as provided in section
3.4 hereof; provided further, however, that promptly following the Closing,
the Borrower will establish a new account with CIBC (or with any other
Canadian bank acceptable to the Agent in its sole discretion which is willing
to enter into a Sweep Account Security Agreement substantially in the form
attached hereto as Exhibit N) entitled "First Union Commercial Corporation, as
Agent, Accounts Receivable Collection Account for Dixon Ticonderoga, Inc."
(hereinafter called the "Canadian Sweep Account") into which the Borrower will
deposit all collections with respect to Canadian Accounts of the Borrower,
which Canadian Sweep Account will be opened with the Borrower's irrevocable
instructions to transfer, when instructed to do so by the Agent, to the
Agent's account at First Union all funds on deposit in the Canadian Sweep
Account in excess of a maximum balance to be maintained therein of $200,000
(Canadian) with respect to the Canadian Sweep Account; provided, however, that
unless otherwise requested in writing by the Agent, no such transfer shall be
required unless the amount on deposit in the Canadian Sweep Account is at
least $300,000 (Canadian);
(b) When, and as frequently as, requested by the Agent,
the Borrower shall forward to the Agent deposit slips related to all such
items of payment received by the Borrower and, if requested by the Agent,
copies of such checks and other items, together with a statement showing the
application of that portion of such items of payment relating to payment on
Accounts to outstanding Accounts and a collection report with regard thereto
in form and substance satisfactory to the Agent;
(c) All such items of payment shall be the sole and
exclusive property of the Agent, on behalf of Lenders, immediately upon the
earlier of receipt of such items by the Agent or the receipt of such items by
the Borrower;
(d) For the purpose of computing interest hereunder, all
such items of payment shall be deemed applied by the Agent on account of the
Obligations upon the earlier of (i) upon receipt by the Agent in Miami,
Florida, or Charlotte, North Carolina, if received in immediately available
funds by federal funds bank wire transfer, or (ii) one (1) Business Day, after
receipt by the Agent in Miami, Florida, or Charlotte, North Carolina, if
received by any other method of payment; and
(e) No such item received by the Agent shall constitute
payment to the Lenders unless such item is actually collected by the Agent's
depository bank and such collection is credited to the Agent's account.
Notwithstanding anything to the contrary herein, each such item of payment
shall, solely for purposes of determining the occurrence of an Event of
Default, be deemed received upon actual receipt by the Agent, unless the same
is subsequently dishonored for any reason whatsoever.
<PAGE> 29
COLLECTIONS; AGENT'S RIGHTS TO NOTIFY ACCOUNT DEBTORS AND TO
ENDORSE THE BORROWER'S NAME. The Borrower hereby authorizes the Agent to
(a) open the Borrower's mail and collect any and all amounts due to the
Borrower from Account Debtors; (b) notify any or all Account Debtors that the
Accounts have been assigned to the Agent and that the Agent has a security
interest therein; and (c) direct such Account Debtors to make all payments due
from them to the Borrower upon the Accounts directly to the Agent or to a
lock-box designated by the Agent. The Agent shall promptly furnish the
Borrower with a copy of any such notice sent and the Borrower hereby agrees
that any such notice, in the Agent's sole discretion, may be sent on the
Borrower's stationery, in which event the Borrower shall co-sign such notice
with the Agent. The Borrower irrevocably makes, constitutes and appoints the
Agent (and all Persons designated by the Agent for that purpose) as the
Borrower's true and lawful attorney (and agent-in-fact) to endorse the
Borrower's name on any checks, notes, drafts or any other payment relating to
and/or proceeds of the Collateral which come into any Lender's possession or
control.
APPLICATION OF PAYMENTS AND COLLECTIONS. The Borrower irrevocably
waives the right to direct the application of any and all payments and
collections at any time or times hereafter received by the Agent from or on
behalf of the Borrower, and the Borrower does hereby irrevocably agree that
the Agent shall have the continuing exclusive right to apply and to reapply
any and all such payments and collections received at any time or times
hereafter by the Agent or its agent against the Obligations which are due and
payable at the time of such application, in such manner as the Agent, in its
sole discretion, may determine, notwithstanding any entry by the Agent upon
any of its books and records.
STATEMENT OF ACCOUNT. The Agent shall provide the Borrower with a
statement of account on a monthly basis and each statement of account which is
delivered by the Agent to the Borrower and which relates to the Obligations
shall be presumed correct and accurate, shall constitute an account stated
between the Borrower and the Agent, and shall be deemed correct and
conclusively binding upon the Borrower and the Agent, unless thereafter waived
in writing by the Agent or unless, within ten (10) days after the Borrower's
receipt of such statement, the Borrower delivers to the Agent, in the manner
set forth in section 16.3 hereof, written objection thereto specifying the
error or errors, if any, contained in any such statements.
SECTION 4 - SECURITY FOR THE OBLIGATIONS
SECURITY INTEREST IN THE COLLATERAL. To secure the prompt payment
and performance of all of the Obligations, the Borrower hereby pledges and
assigns to the Agent, as agent and for the account of the Lenders and First
Union-NC, and grants to the Agent, as agent and for the account of the Lenders
and First Union-NC, a Lien and continuing general security interest in and to
each of the assets, property and interests in property of the Borrower,
whether now owned or existing or at any time hereafter acquired, arising or
created, wherever located, including, without limitation, the following:
(a) all Blocked Accounts and Depository Accounts;
(b) the Equipment;
(c) the Accounts;
(d) the Inventory;
<PAGE> 30
(e) the General Intangibles;
(f) the Leases;
(g) the Trademarks, Copyrights and Patents;
(h) the Mortgaged Property; and
(i) proceeds and products of any and all of the
foregoing, including insurance proceeds thereof.
Such Liens and security interests shall give the Agent, as agent and for
the account of the Lenders and First Union-NC, continuing Liens in, on and to
all of the Collateral, and the proceeds and products thereof and thereto, and
any replacements, additions, accessions or substitutions thereof, including,
without limitation, the proceeds of insurance covering the Collateral.
DISCLOSURE OF SECURITY INTEREST. The Borrower shall make
appropriate entries upon its financial statements and its books and records
disclosing the Agents's Liens and security interests in the Collateral.
SUPPLEMENTAL DOCUMENTATION. At the Agent's request, the Borrower
shall execute and/or deliver to the Agent, at any time or times hereafter, all
Supplemental Documentation that the Agent may request, in form and substance
acceptable to the Agent, and pay all charges, expenses and fees the Agent may
incur in filing any of the Supplemental Documentation, and all taxes relating
thereto. Supplemental Documents to be delivered on the Closing Date shall
specifically include certificates of title to each vehicle comprising a part
of the Collateral and listed on Schedule 4.3 hereto, together with duly
executed applications for submission to the appropriate state authorities
regulating the reissuance of such titles with the Agent's Lien noted thereon.
The Borrower hereby irrevocably makes, constitutes and appoints the Agent
(and all Persons designated by the Agent for that purpose) as the Borrower's
true and lawful attorney (and agent-in-fact) to sign the name of the Borrower
on any of the Supplemental Documentation and to deliver any of the
Supplemental Documentation to such Persons as the Agent, in its sole discre-
tion, may elect. The Borrower ratifies and approves all acts of such attorney
and agrees that such power is irrevocable so long as any Obligations of the
Borrower are outstanding. The Borrower agrees that a carbon, photographic,
photostatic, or other reproduction of this Agreement or a financing statement
is sufficient as a financing statement and may be filed by the Agent in any
filing office.
INSPECTION. The Agent and the Lenders (by any of their respective
officers, employees and agents) shall have the right, at any reasonable time
or times during the Borrower's usual business hours, to inspect the
Collateral, all records related thereto (and to make extracts from such
records), and the premises upon which any of the Collateral is located, to
request information relating to the Borrower from any Person and to verify the
amount, quality, quantity, value and condition of, or any other matter
relating to, the Collateral; provided, however, that such right shall not be
independently exercised by any of the Lenders unless, despite reasonable
attempts to exercise such right through, or coordinate the exercise of such
right with, the Agent, such Lender(s) have been unable to exercise such right.
The Agent may, at any time upon and after the occurrence of an Event of
Default and during the continuance thereof, employ and maintain in the
Borrower's premises custodians selected by the Agent who shall have full
authority to do all acts necessary to protect the Agent's interest. All
expenses incurred by the Agent by reason of the employment of such custodians
shall be paid by the Borrower, added to the Obligations and secured by the
Collateral.
<PAGE> 31
CROSS-COLLATERALIZATION. The Collateral and all other collateral
which the Agent may at any time acquire from any other source in connection
with the Obligations shall constitute cross-collateral for all Obligations
without apportionment or designation as to particular Obligations, and all
Obligations, howsoever and whensoever incurred, shall be secured by all of the
Collateral, howsoever and whensoever acquired, and, subject to the terms of
the Intercreditor Agreement, the Agent shall have the right, in its sole
discretion and in accordance with section 14.2, to determine the order in
which the Agent's rights in or remedies against the Collateral are to be
exercised and which types of the Collateral or which portions of the
Collateral are to be proceeded against and the order of application of
proceeds of the Collateral as against particular Obligations.
SECTION 5 - CLOSING; CONDITIONS OF CLOSING.
CLOSING. The closing hereunder shall take place on the date and
at the time of the execution of this Agreement, or at such other time as the
parties hereto shall mutually agree.
CONDITIONS OF LOANS AND LETTERS OF CREDIT. Without limiting in
any manner the other rights of the Agent and the Lenders pertaining to the
Revolving Credit Loans made by the Lenders or the issuance of any Letters of
Credit, as provided for in this Agreement, the obligation of the Lenders to
make any Revolving Credit Loans or of the Agent to cause First Union to issue
any Letters of Credit under this Agreement is subject to: (i) the accuracy and
correctness of the representations and warranties of the Borrower contained
herein and in the other Loan Documents and in any certificate delivered
pursuant to this Agreement or the other Loan Documents; (ii) the performance
by the Borrower of its agreements contained herein and in the other Loan
Documents; and (iii) the satisfaction of all of the following conditions:
(a) Revolving Credit Notes. The Revolving Credit Notes,
in form and substance satisfactory to the Lenders and their special counsel,
shall have been duly authorized, executed and delivered by the Borrower, shall
be in full force and effect and no default shall exist thereunder.
(b) Uniform Commercial Code Financing Statements and
Comparable Canadian Filings. All filings of UCC financing statements (and
comparable Canadian filings with the Registrar pursuant to the Personal
Property Security Act (Ontario) and the Registre des Droits Personnels et
Reels Mobiliers pursuant to the Civil Code of Quebec) and all other filings or
recordations necessary to perfect the Liens of the Agent in the Collateral
shall have been filed or recorded or delivered to the title company(ies)
selected by the Agent for such filings and recordations and, with respect to
filed financing statements, confirmation thereof received by the Agent in a
form acceptable to the Agent that such security interests constitute valid and
perfected first priority Liens therein subject only to Permitted Liens.
(c) General Intangibles. The Borrower shall have executed
and delivered to the Agent, as additional security for the Obligations, a duly
executed and acknowledged collateral assignment of all of the Trademarks,
Copyrights and Patents, in the form of Exhibit H attached hereto and in proper
form for filing with the United States Office of Patents and Trademarks and
the Register of Copyrights, and such other collateral assignments of the
General Intangibles, in form suitable for recordation in the office
appropriate for the recordation of collateral assignments of the General
Intangibles, and otherwise in form and substance satisfactory to the Agent and
its special counsel.
<PAGE> 32
(d) Environmental Compliance and Indemnity Agreement. The
Borrower shall have executed and delivered to the Agent the Environmental
Compliance and Indemnity Agreement in the form attached as Exhibit L hereto.
(e) Mortgage. The Borrower shall have executed and
delivered assignments of the Mortgages, and each survey, title insurance
policy, mortgagee estoppel and other documents and instruments requested by
the Agent with respect thereto.
(f) Certificate of Secretary of the Borrower. The Agent
shall have received a certificate of the Secretary or an Assistant Secretary
for each of the entities which collectively constitute the Borrower,
certifying with respect to each corporation: (a) that attached thereto is a
true and complete copy of the Bylaws for such corporation as in effect on the
date of such certification; (b) that attached thereto is a true and complete
copy of resolutions adopted by the Board of Directors for such corporation,
authorizing the execution, delivery and performance by each such entity of
this Agreement and the other Loan Documents; and (c) as to the incumbency and
genuineness of the signature of each officer of such corporation executing
this Agreement or any of the other Loan Documents.
(g) Charter Documents. The Agent shall have received
copies of the Articles or Certificates of Incorporation for each of the
entities which collectively constitute the Borrower, and all amendments
thereto, each certified by the Secretary of State or other appropriate
governmental official of the jurisdiction of such entity's incorporation.
(h) Certificates of Good Standing. The Agent shall have
received certificates for each of the entities which collectively constitute
the Borrower of such entity's good standing under the laws of each
jurisdiction where the Borrower is authorized to transact business.
(i) Certificate of the Borrower. The Agent shall have
received a certificate from each of the entities which collectively constitute
the Borrower, signed by the Chief Executive Officer and Executive Vice
President of each such entity, in form and substance satisfactory to the Agent
and its special counsel, to the effect that all representations and warranties
of the Borrower contained in this Agreement and the other Loan Documents are
true, correct and complete as of the Closing Date; that the Borrower is not in
violation of any of the covenants contained in this Agreement and the other
Loan Documents; that, giving effect to the transactions contemplated by this
Agreement, no Event of Default or any event or condition which with notice,
lapse of time, or both would constitute such an Event of Default, has occurred
and is continuing; and that the Borrower has satisfied each of the closing
conditions set forth in this section 5.
(j) Opinion of Counsel to the Borrower. The Agent shall
have received the opinion of counsel for the Borrower dated the Closing Date,
as to the transactions contemplated by this Agreement, in form and substance
satisfactory to the Agent and its special counsel.
(k) Property Insurance. The Agent shall have received
certificates of insurance upon the Collateral with loss payable endorsement
required to be maintained by the Borrower pursuant to section 7.7 hereof.
<PAGE> 33
(l) Payment at Closing. There shall have been paid to the
respective parties entitled thereto the amounts specified in the closing
statement to be issued in connection with the closing (including, without
limitation, the amounts specified in sections 2.6 and 15) to the extent any
such amounts are due and owing at, or have been billed to the Agent at or
prior to, the Closing Date.
(m) Taxes. All taxes, fees and other charges in
connection with the execution, delivery, recording, filing and registration of
any of the Loan Documents shall have been paid by the Borrower.
(n) Status of Title. The Borrower shall be the owner of
the Collateral free and clear of any Liens except Permitted Liens.
(o) Governmental Approvals. All necessary approvals,
authorizations and consents, if any are required, of all governmental bodies
(including courts) having jurisdiction with respect to the Collateral and the
transactions contemplated by this Agreement shall have been obtained.
(p) No Injunction, Etc. No action, proceeding, investiga-
tion, regulation or legislation shall have been instituted, threatened or
proposed before any court, governmental agency or legislative body to enjoin,
restrain, or prohibit, or to obtain substantial damages in respect of, or
which is related to or arises out of this Agreement or the consummation of the
transactions contemplated hereby, or which, in the Agent's sole discretion,
would make it inadvisable to consummate the transactions contemplated by this
Agreement.
(q) No Material Adverse Change. There shall not have
occurred (a) any material adverse change in the business, financial condition
or results of operations or cash flows of the Borrower or in the value of the
Collateral since March 31, 1996, (b) any event, condition or state of facts
which would be expected materially and adversely to affect the business,
financial condition or results of operations of the Borrower, except the
judgment in the ECRA Case, an event subsequent to March 31, 1996 but reported
as of March 31, 1996, or (c) any change in Borrower's executive officers.
(r) Proceedings and Documents. All opinions, certificates
and other instruments and all proceedings in connection with the transactions
contemplated by this Agreement shall be satisfactory in form and substance to
the Agent and its special counsel. The Agent shall have received copies of
all other instruments and other evidence as the Agent may reasonably request,
in form and substance satisfactory to the Agent and its special counsel, with
respect to the transactions contemplated by this Agreement and the taking of
all actions in connection therewith.
(s) Landlord's Agreement. Each of the Lessors shall have
executed and delivered to the Agent a landlord's agreement, substantially in
the form of Exhibit J attached hereto and otherwise in form and substance
satisfactory to the Agent and its special counsel.
(t) Letter to the Borrower's Accountants. Execution and
delivery by the Borrower of a letter addressed to certified public accountants
for the Borrower, authorizing such accountants to discuss the finances and
financial affairs of the Borrower with the Agent and the Lenders (provided,
however, that none of the Lenders shall individually enter into such
discussions unless, despite reasonable efforts, such Lender(s) are unable to
obtain such information from the Agent), the form of which letter is attached
hereto as Exhibit I.
<PAGE> 34
(u) Event of Default. No Event of Default, nor any event
or condition which, with notice, lapse of time or the making of any Loan or
the issuance of any Letter of Credit would constitute an Event of Default,
shall have occurred and be continuing.
(v) Amendment of the Subordinated Debt Loan Documents.
Execution by the Subordinated Lenders and the Borrower and delivery to Agent
of the Subordinated Debt Amendment.
(w) Stock Pledge Agreement. The Borrower shall have
executed and delivered to the Agent the Stock Pledge Agreement and all
certificates representing the Stock of Subsidiaries pledged thereunder.
(x) Canadian Security Agreements. The Borrower shall have
executed and delivered to the Agent the Security Agreement (Ontario) and the
Security Agreement (Quebec) in the forms of Exhibits P and Q, respectively.
(y) Assignment of Credit Insurance. American Credit
Indemnity Company credit insurance policy number D-332,514-9 shall have been
assigned to the Agent and the Agent shall have been provided with satisfactory
evidence thereof.
(z) Intercreditor Agreement. Execution by the Lenders,
the Agent and the Borrower, and delivery to Agent, of the Intercreditor
Agreement.
WAIVER OF CONDITIONS PRECEDENT. If the Agent makes any Revolving
Credit Loans or First Union issues any Letter of Credit hereunder prior to the
fulfillment of any of the conditions precedent set forth in section 5.2
hereof, the making of such Revolving Credit Loans or the issuance of such
Letter of Credit shall constitute only an extension of time for the fulfill-
ment of such condition and not a waiver thereof, and the Borrower shall
thereafter use its best efforts to fulfill each such condition promptly.
SECTION 6 - REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement and each of
the other Loan Documents and to make the Loans, and to induce First Union to
issue Letters of Credit, the Borrower makes the following warranties and
representations to the Lenders:
CORPORATE ORGANIZATION AND POWER. Each of the entities which constitute
the Borrower (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of incorporation; (b) is qualified
to do business and is in good standing in every other jurisdiction where the
nature of its business or the ownership of its properties requires it to be so
qualified; (c) has the power to own and give Liens in the Collateral, and to
engage in the transactions contemplated hereby; and (d) has the full power,
authority and legal right to execute and deliver this Agreement and the other
Loan Documents and to perform and observe the terms and provisions thereof.
None of the entities which collectively constitute the Borrower has, during
the preceding five (5) years, been known as or used any other corporate,
fictitious or trade names. None of the entities which collectively constitute
the Borrower has any Subsidiaries, except for DTC, which has DTI and Dixon-
U.K. as its only directly-owned Subsidiaries, and Dixon-Mexico which is a
Subsidiary of DTI.
<PAGE> 35
LITIGATION; GOVERNMENT REGULATION. Except as described in
Schedule 6.2 attached hereto, there are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower at law or in equity before any court or administrative officer or
agency which might result in a material adverse change in the business or
financial condition of the Borrower or impair the Borrower's ability to
perform its obligations under the Loan Documents. The Borrower is not in
violation of or in default under any applicable statute, rule, order, decree,
writ, injunction or regulation of any governmental body (including any court).
TAXES. The Borrower is not delinquent in the payment of any taxes
which have been levied or assessed by any governmental authority against it or
its assets. The Borrower has timely filed all tax returns which are required
by law to be filed, and has paid all taxes and all other assessments or fees
levied upon the Borrower or upon its properties to the extent that such taxes,
assessments or fees have become due. No controversy in respect of income
taxes is pending or, to the knowledge of the Borrower, threatened.
ENFORCEABILITY OF LOAN DOCUMENTS; COMPLIANCE WITH OTHER
INSTRUMENTS. The Loan Documents are the legal, valid and binding obligations
of the Borrower, enforceable against the Borrower in accordance with their
respective terms. The Borrower is not subject to any corporate or other
restriction or to any order, rule, regulation, writ, injunction or decree of
any court or governmental authority or to any statute which materially and
adversely affects its business, property, assets or financial condition.
Except as described in Schedule 6.4 attached hereto, the Borrower is not a
party to any labor contract or labor dispute. The Borrower is not in default
with respect to any indenture, loan agreement, mortgage, lease, deed or
similar agreement related to the borrowing of monies to which the Borrower is
a party or by which it is bound. Neither the execution, delivery or perfor-
mance of the Loan Documents, nor compliance therewith: (a) conflicts or will
conflict with or results or will result in any breach of, or constitutes or
will constitute with the passage of time or the giving of notice or both, a
default under, (i) the Articles or Certificate of Incorporation or Bylaws of
the Borrower, (ii) any law, order, writ, injunction or decree of any court or
governmental authority, or (iii) any agreement or instrument to which the
Borrower is a party or by which the Borrower or the Collateral is bound or (b)
results or will result in the creation or imposition of any Lien upon its
properties pursuant to any such agreement or instrument, except the Liens
created by the Loan Documents and Permitted Liens.
GOVERNMENTAL AUTHORIZATION. No authorization, consent or approval
of any governmental authority is required for the execution, delivery and
performance of the Loan Documents or the consummation of the transactions
contemplated thereby. The Borrower has, and is in good standing with respect
to, all governmental approvals, permits, certificates, inspections, consents
and franchises necessary to continue to conduct its business as heretofore and
presently conducted and proposed to be conducted and to own or lease and
operate its properties as now owned or leased by it. None of such approvals,
permits, certificates, consents, or franchises contains any term, provision,
condition or limitation which is more burdensome than such as are generally
applicable to Persons engaged in the same or similar business as the Borrower.
EVENT OF DEFAULT. No event has occurred and is continuing which
constitutes an Event of Default or would constitute such an Event of Default
after notice or lapse of time or both.
<PAGE> 36
MARGIN SECURITIES. None of the transactions contemplated by this
Agreement (including, without limitation thereof, the use of the proceeds of
the Loans) will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended, or any regulations issued
pursuant thereto. The Borrower does not own or intend to carry or purchase
directly or indirectly any "margin securities" as that term is defined in
Regulations G and U of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"), and the proceeds of the Loans made pursuant to
this Agreement and the other Loan Documents will be used only for the purposes
contemplated hereunder. None of the proceeds of the Loans will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
security, for the purpose of reducing or retiring any indebtedness which was
originally incurred to purchase or carry any margin security or for any other
purpose which might cause any of the Loans under this Agreement to be
considered a "purpose credit" within the meaning of Regulations G, T, U or X
of the Federal Reserve Board. The Borrower will neither take nor permit any
agent acting on its behalf to take any action which might cause this Agreement
or any document or instrument delivered pursuant hereto to violate any
regulation of the Federal Reserve Board.
FULL DISCLOSURE. None of the Loan Documents, nor any statements
furnished by or on behalf of the Borrower to the Agent or a Lender in
connection with the Loan Documents, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. To the Borrower's knowledge,
there is no fact which the Borrower has not disclosed to Lenders in writing
which materially affects adversely or, to the Borrower's knowledge, will
materially and adversely affect the Collateral, the Agent's Liens in the
Collateral or the priority thereof, the other assets, business, profits or
conditions (financial or otherwise) of the Borrower or the ability of the
Borrower to perform the Obligations.
PRINCIPAL PLACE OF BUSINESS. DTC's chief executive office and
principal place of business, and the place where DTC maintains all records
relating to its non-Canadian Accounts, is at 195 International Parkway,
Heathrow, Florida 32746-5036. DTI's chief executive office and principal
place of business is at 220 Pony Drive, Unit 4, Newmarket, Ontario, Canada L3Y
7D6, and the place where DTI maintains all records relating to its Canadian
Accounts, is at 220 Pony Drive, Unit 4, Newmarket, Ontario, Canada L3Y 7D6 and
195 International Parkway, Heathrow, Florida 32746-5036.
ERISA. No fact, including, but not limited to, any Reportable
Event (as defined in Section 4043 of ERISA; a "Reportable Event"), exists in
connection with any employee benefit plan or other plan for the Borrower's
employees which is covered by ERISA, which might constitute grounds for the
termination of any such plan by the Pension Benefit Guaranty Corporation or
for the appointment by the appropriate United States district court of a
trustee to administer any such plan.
<PAGE> 37
FINANCIALS. The Financials delivered to Lenders have been
prepared in accordance with GAAP, contain no misstatement or omission, and
fairly present the financial position, assets and liabilities of the Borrower
as of the respective dates thereof and the results of operations and cash
flows of the Borrower for the respective periods then ended, in each case on a
consolidated basis. Except for the transactions contemplated by this
Agreement or as disclosed in written financial information heretofore provided
to the Lenders, since March 31, 1996, there has been no material adverse
change in the assets or liabilities of the Borrower or in the results of the
Borrower's operations or cash flows, and the Borrower has not incurred any
obligation or liability which would materially and adversely affect its
financial condition, business operations, cash flows or the Collateral, except
for the judgment in the ECRA Case, an event subsequent to March 31, 1996, but
reported as of March 31, 1996.
TITLE TO ASSETS. The Borrower has good, indefeasible and
merchantable title to and ownership of the Collateral and all of its other
assets, including, without limitation, the assets reflected in the Financials,
free and clear of all Liens except those created under the Loan Documents and
Permitted Liens.
SOLVENCY. The Borrower is Solvent.
USE OF PROCEEDS. The Borrower's use of the proceeds of any Loans
made by the Lenders to the Borrower pursuant to this Agreement are, and
continue to be, legal and proper corporate uses (duly authorized by the
Borrower's Board of Directors) and such uses are and will be consistent with
all applicable laws and statutes, as in effect from time to time.
ASSETS FOR CONDUCT OF BUSINESS. The Borrower possesses adequate
assets, licenses, patents, patent applications, copyrights, trademarks and
trade names to conduct its business as heretofore conducted and all such
licenses, patents, patent applications, copyrights, trademarks and trade names
are listed on Schedule 6.15 attached hereto.
TRADE RELATIONS. There exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship of the Borrower or any customer or any group of
customers whose purchases individually or in the aggregate are material to the
business of the Borrower, or with any material supplier, and there exists no
present condition or state of facts or circumstances which would materially
adversely affect the Borrower or prevent the Borrower from conducting such
business after the consummation of the transaction contemplated by this
Agreement in substantially the same manner in which it has heretofore been
conducted.
COMPLIANCE WITH LAWS. The Borrower has duly complied with, and
the Collateral and its business operations and leaseholds are in compliance in
all material respects with, the provisions of all federal, state and local
laws, rules and regulations and all foreign laws, rules and regulations
applicable to the Borrower, the Collateral or the conduct of the Borrower's
business, including, without limitation, all Environmental Laws, and there
have been no citations, notices or orders of noncompliance issued to the
Borrower under any such law, rule or regulation.
<PAGE> 38
1996 BUSINESS PLAN. The one-year annual business plan covering
the Borrower's fiscal year commencing on October 1, 1995, previously delivered
to the Lender and amended in the Private Placement Memorandum prepared by
Alex. Brown & Sons, Incorporated for the Borrower's Senior Subordinated Notes
in the aggregate principal amount of $20,000,000.00, contains management's
best estimate of the operating performance of the Borrower for such period.
SECTION 7 - AFFIRMATIVE COVENANTS
Until the latest of the Commitment Termination Date and payment in full
of all Obligations and the cancellation of all outstanding Letters of Credit,
the Borrower covenants and agrees that, unless the Required Lenders otherwise
consent in writing as provided in section 17.8 hereof:
REPAYMENT OF OBLIGATIONS. The Borrower will repay the Obligations
according to the terms of this Agreement and the other Loan Documents.
PERFORMANCE UNDER LOAN DOCUMENTS. The Borrower will perform all
Obligations required to be performed by it under the terms of this Agreement
and the other Loan Documents and any other agreements now or hereafter
existing or entered into between the Borrower and the Agent or any of the
Lenders.
FINANCIAL AND BUSINESS INFORMATION AS TO THE BORROWER. The
Borrower shall deliver to the Agent and, as to all subsections below except
(f) and (g) (unless otherwise requested by the Lenders), the Lenders:
(a) Within thirty (30) days after the close of each month,
beginning with the current month ending, (i) a consolidated balance sheet of
the Borrower, as of the close of each month, and consolidated statements of
income for that portion of the fiscal year to date then ended, and (ii)
supplemental profit and loss (before allocating corporate overhead and
interest) and balance sheet information by division and department in such
detail as shall be requested by the Agent in each such case, prepared in
accordance with GAAP, applied on a basis consistent with that of the preceding
period or containing disclosure of the effect on the financial position or
results of operations of any change in the application of accounting
principles and practices during the period, and certified by the chief finan-
cial officer or Treasurer of the Borrower; provided, however, that in no event
shall the Borrower change the method of valuing Inventory in its financial
statements from that reflected in the Financials;
<PAGE> 39
(b) Within forty-five (45) days after the close of the
first three fiscal quarters of the Borrower, beginning with the current fiscal
quarter ending, a consolidated balance sheet of the Borrower, as of the close
of each such quarter, and consolidated statements of income and shareholders'
equity for that portion of the fiscal year to date then ended, prepared in
accordance with GAAP, applied on a basis consistent with that of the preceding
period or containing disclosure of the effect on the financial position or
results of operations of any change in the application of accounting princi-
ples and practices during the period, and certified by the chief financial
officer or Treasurer of the Borrower and shall also provide supplemental
profit and loss and balance sheet information by division and department in
such detail as shall be requested by the Agent; provided, however, that in no
event shall the Borrower change the method of valuing Inventory in its
financial statements from that reflected in the Financials; provided further,
however, that notwithstanding the methodology heretofore employed by the
Borrower in allocating income and expense items (other than corporate overhead
and interest) to each entity comprising the Borrower, all supplemental
statements to be delivered to the Lenders hereunder shall contain allocations
of such items so as to accurately reflect the separate income and expenses of
such entity;
(c) Within ninety (90) days after the close of the fiscal
year of the Borrower, beginning with the fiscal year ending September 30,
1996, audited consolidated balance sheets of the Borrower as of the close of
such fiscal year and audited consolidated statements of income and
shareholders' equity and cash flows for the fiscal year then ended, prepared
in accordance with GAAP, applied on a basis consistent with the preceding year
or containing disclosure of the effect on financial position or results of
operation of any change in the application of accounting principles and
practices during the year, and accompanied by (i) a report thereon, containing
an unqualified opinion, without scope limitations imposed by the Borrower,
from a firm of independent certified public accountants selected by the
Borrower and acceptable to the Lenders, (ii) a copy of each "management
letter", if any, from such accountants to the Borrower in connection with such
accountants' audit (or within five (5) days of the date of issuance if not
issued by such accountants simultaneously with such financial statements), and
(iii) supplemental unaudited profit and loss and balance sheet information by
division and department in such detail as shall be requested by the Lenders;
provided, however, that in no event shall the Borrower change the method of
valuing Inventory in its financial statements from that reflected in the
Financials;
(d) Concurrently with the delivery of the financial state-
ments described in subsection (c) above, a certificate from Borrower's
independent certified public accountants stating that, in making their
examination of the financial statements of the Borrower, they obtained no
knowledge of the occurrence or existence of any condition or event which
constitutes or would constitute, upon the giving of notice or lapse of time or
both, any Event of Default, or a statement specifying the nature and period of
existence of any such condition or event disclosed by their examination;
<PAGE> 40
(e) Concurrently with the delivery of the financial state-
ments described in subsections (a), (b) and (c) above, a certificate from the
chief financial or accounting officer of the Borrower certifying to Lenders
that, to his knowledge, the Borrower has kept, observed, performed and
fulfilled each and every covenant, obligation and agreement binding upon the
Borrower contained in this Agreement or the other Loan Documents, and that no
Event of Default, or any event which, with the giving of notice or lapse of
time or both, would constitute an Event of Default, has occurred or specifying
any such Event of Default, together with a financial covenant compliance
worksheet, in form and substance satisfactory to the Agent, reflecting the
computation of the financial covenants set forth in section 8 hereof as of the
end of the period covered by such financial statements;
(f) Once each week, or at such shorter intervals as
requested by the Agent, and, from September 1 through November 30 of each
year, on a daily basis (as to the Agent only), or at such other intervals as
requested by the Agent, a Borrowing Base Certificate reflecting information as
of the close of business on the immediately preceding Business Day;
(g) On or before the fifteenth (15th) day of each month,
an aging of accounts payable and accounts receivable (the "Schedule of
Accounts") and an inventory report (which shall be provided on a weekly basis
from June 1 through September 30 of each year), in the form of the report
attached hereto as Exhibit O (the "Schedule of Inventory"), in each case as of
the end of the immediately preceding month or week, as applicable;
(h) Immediately upon issuance, each report and proxy
statement which the Borrower shall, from time to time, send to its
shareholders and each registration statement and report filed by the Borrower
with the Securities and Exchange Commission;
(i) Within thirty (30) days after the close of each fiscal
year of the Borrower, projections of the Borrower's operations for the next
three (3) fiscal years, prepared in accordance with GAAP, applied on a basis
consistent with that of the preceding period; and
(j) Upon the Agent's or, if any Lender is unable to obtain
such information by requesting same through the Agent, any Lender's written
request, such other information about the Collateral or the financial
condition and operations of the Borrower as the Agent or any Lender may from
time to time reasonably request. The Agent may, upon its determination that
there has been an adverse change in the overall performance and condition of
the Borrower and/or the Collateral, require more frequent rendering of the
reports and certificates described in (a) through (g) above.
<PAGE> 41
NOTICE OF CERTAIN EVENTS. The Borrower shall promptly, but in no
event later than three (3) Business Days after obtaining knowledge thereof,
give written notice to the Agent of: (a) any material litigation or proceeding
brought against the Borrower, whether or not the claim is considered by the
Borrower to be covered by insurance, and the Borrower shall, if requested by
the Agent, set up such reserves as the Agent reasonably determines as are
necessary to protect the Borrower against loss; (b) any written notice of a
violation received by the Borrower from any governmental regulatory body or
law enforcement authority which, if such violation were established, might
have a material adverse effect on the business of the Borrower, the value of
the Collateral, the Agent's Liens in the Collateral or the priority of such
Liens; (c) any labor controversy which has resulted in a strike or other work
action materially affecting the Borrower; (d) any attachment, judgment, Lien,
levy or order which may be placed on or assessed against or threatened against
the Borrower or the Collateral; (e) any Event of Default or any event which,
after notice or lapse of time or both, would become an Event of Default; (f)
any material delay in the Borrower's performance of any of its obligations to
any Account Debtor; (g) any material adverse information relating to any
Account Debtor; and (h) any other matter which has resulted in a material
adverse change in the financial condition, cash flows or operations of the
Borrower.
CORPORATE EXISTENCE AND MAINTENANCE OF PROPERTIES. The Borrower
shall maintain and preserve its corporate existence and all rights, privileges
and franchises now enjoyed; and the Borrower shall conduct its business in an
orderly, efficient and customary manner, keep its properties in good working
order and condition, and from time to time make all needed repairs to,
renewals of or replacements of its properties (except to the extent that any
of such properties is obsolete or is being replaced) so that the efficiency of
such property shall be fully maintained and preserved. The Borrower shall
file or cause to be filed in a timely manner all reports, applications,
estimates and licenses which shall be required by any governmental authority
and which, if not timely filed, would have a material adverse effect on the
Borrower, the Collateral, the Agent's Liens in the Collateral or the priority
of such Liens.
PAYMENT OF INDEBTEDNESS; PERFORMANCE OF OTHER OBLIGATIONS. The
Borrower shall pay all Indebtedness for borrowed money at maturity, all taxes,
assessments and other governmental charges which may be levied or assessed
upon the Borrower or the Collateral when due and all other obligations in
accordance with customary trade practices, and comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official applicable to the Collateral or any part thereof or to the operation
of the Borrower's business; provided, however, that the Borrower may in good
faith by appropriate proceedings and with due diligence contest any such
taxes, assessments, governmental charges, acts, rules, regulations, orders and
directions that do not in the Agent's judgment materially adversely affect the
value of the Collateral or the Agent's Liens in the Collateral or the priority
of such Liens, and if requested by the Agent, shall establish reserves
reasonably satisfactory to the Agent. The Borrower shall also observe and
remain in compliance with all laws, ordinances, governmental rules and
regulations to which it is subject and obtain all licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its properties or the conduct of its business, and all covenants and
conditions of all agreements and instruments to which the Borrower is a party,
which failure to comply or failure to obtain would materially and adversely
affect the business, prospects, profits, properties or condition (financial or
otherwise) of the Borrower, the Collateral, the Agent's Liens in the
Collateral or the priority of such Liens.
<PAGE> 42
MAINTENANCE OF INSURANCE. The Borrower shall maintain and pay for
insurance upon all Collateral, wherever located, covering casualty, hazard,
public liability and such other risks and in such amounts and with such
insurance companies as shall be satisfactory to the Agent, and deliver such
certificates of insurance to the Agent with loss payable endorsements naming
the Agent as loss payee thereunder in form satisfactory to the Agent. The
Borrower also agrees to maintain and pay for insurance in such amount, with
such companies and in such form as shall be satisfactory to the Agent insuring
the Borrower against any claims, suits, loss or damages suffered by any Person
on any property owned or leased by the Borrower, and against such other
casualties and contingencies as is customary in the business in which the
Borrower is engaged, and deliver such certificates of insurance to the Agent
with satisfactory endorsements naming the Agent as additional insured thereun-
der. Each policy of insurance shall contain a clause requiring the insurer to
give not less than thirty (30) days' prior written notice to the Agent before
any cancellation of the policies for any reason whatsoever and a clause that
the interest of the Agent shall not be impaired or invalidated by any act or
neglect of the Borrower or the owner of the property nor by the occupation of
the premises wherein such property is located for purposes more hazardous than
are permitted by said policy. The Borrower hereby directs all insurers under
such policies of insurance on the Collateral to pay all proceeds payable
thereunder directly to the Agent. The Borrower hereby irrevocably makes,
constitutes and appoints the Agent (and all officers, employees or agents
designated by the Agent) as the Borrower's true and lawful attorney (and
agent-in-fact) for the purpose of making, settling and adjusting claims under
such policies of insurance, endorsing the name of the Borrower on any check,
draft, instrument or other item or payment for the proceeds of such policies
of insurance and for making all determinations and decisions with respect to
such policies of insurance; provided, however, that the Agent shall be
empowered to act as such agent-in-fact only after, and during the continuance
of, an Event of Default. If the Borrower fails to obtain and maintain any of
the policies of insurance or to pay any premium in whole or in part, then the
Agent may, at the Borrower's expense, without waiving or releasing any
obligation or default by the Borrower hereunder, procure the same, but shall
not be required to do so. All sums so disbursed by the Agent, including at-
torneys' fees, court costs, expenses and other charges related thereto, shall
be payable on demand by the Borrower to the Agent and shall be additional
Obligations hereunder secured by the Collateral. The Borrower shall deliver
to the Agent, promptly as rendered, true copies of all monthly reports made in
any reporting forms to insurance companies. Not less than thirty (30) days
prior to the expiration date of the insurance policies required to be
maintained by the Borrower hereunder, the Borrower shall deliver to the Agent
one or more certificates of insurance evidencing renewal of the insurance
coverage required hereunder plus such other evidence of payment of premiums
therefor as the Agent may request.
<PAGE> 43
MAINTENANCE OF BOOKS AND RECORDS; INSPECTION. The Borrower shall
maintain adequate books, accounts and records, and prepare all financial
statements required under this Agreement in accordance with GAAP and in
compliance with the regulations of any governmental regulatory body having
jurisdiction over it; and permit employees or agents of the Agent or, provided
that such Lender(s) shall have made reasonable attempts to schedule its
inspection(s) through or simultaneously with those of the Agent, Lenders at
any reasonable time to inspect the Borrower's properties, and to examine or
audit the Borrower's books, accounts and records and make copies and memoranda
of them. The Borrower shall permit any representative of the Agent or,
provided that such Lender(s) shall have made reasonable attempts to schedule
its inspection(s) through or simultaneously with those of the Agent, Lenders
to visit and inspect any property of the Borrower, to examine all books of
accounts, records, reports and other papers, to make copies and extracts
therefrom, and to discuss the affairs, finances and accounts of the Borrower
with its officers, employees and independent public accountants (and by this
provision the Borrower authorizes said accountants to discuss the finances and
affairs of the Borrower), all at such reasonable times during normal business
hours and as often as may be reasonably requested. Without limiting the
generality of the foregoing, the Borrower shall permit representatives of the
Agent to conduct quarterly field examinations of the Borrower's premises and
books and records (wherever located) during the Term; provided, however, that
the Agent reserves the right at any time to increase the frequency of such
examinations in its sole discretion.
COMPLY WITH ERISA. The Borrower shall at all times make prompt
payment of contributions required to meet the minimum funding standards set
forth in ERISA with respect to any employee benefit plan; promptly after the
filing thereof, furnish to the Agent copies of any annual report required to
be filed under ERISA in connection with each employee benefit plan; not
withdraw from participation in, permit the termination or partial termination
of, or permit the occurrence of any other event with respect to any employee
benefit plan that could result in liability to the Pension Benefit Guaranty
Corporation; notify the Agent as soon as practicable of any Reportable Event
and of any additional act or condition arising in connection with any employee
benefit plan which the Borrower believes might constitute grounds for the
termination thereof by the Pension Benefit Guaranty Corporation or for the
appointment by the appropriate United States district court of a trustee to
administer such plan; and furnish to the Agent upon the Agent's request, such
additional information about any employee benefit plan as may be reasonably
requested.
MOTOR VEHICLE TITLES. Within ten (10) days after the acquisition
of any vehicle comprising a part of the Collateral, the Borrower shall furnish
to the Agent certificates of title for each vehicle, together with duly
executed applications for submission to the appropriate state and provincial
authorities requesting the reissuance of such titles with the Agent's Lien
noted thereon.
COMPLY WITH ENVIRONMENTAL LAWS. The Borrower shall comply at all
times with all Environmental Laws and all other federal, state, local or
foreign statutes, laws, ordinances, rules, regulations, orders or decrees
relating to Environmental Laws.
MAINTENANCE OF BANK ACCOUNTS. The Borrower shall maintain all its
operating accounts, including payroll and draft accounts, with First Union;
provided, however, that the Borrower shall be permitted to maintain petty cash
and imprest fund accounts at financial institutions which are listed on
Schedule 7.12 hereto, with the aggregate of operating division account
balances not to exceed $150,000.
<PAGE> 44
MAINTENANCE OF EQUIPMENT. The Borrower shall cause the Equipment
to be maintained and preserved in the same condition, repair and working order
as when new, ordinary wear and tear excepted, and in accordance with any
manufacturer's manual, and shall timely make or cause to be made all repairs,
replacements and other improvements in connection therewith which are
necessary or desirable to such end.
SECTION 8 - NEGATIVE COVENANTS
Until the later of the Commitment Termination Date and payment in full
of all Obligations and the cancellation of all outstanding Letters of Credit,
the Borrower covenants and agrees that, unless the Required Lenders otherwise
consent in writing as provided in section 17.8 hereof, the Borrower will not:
MERGER AND DISSOLUTION. Liquidate or dissolve, or enter into any
consolidation, merger, syndicate or other business combination or sell, lease
or dispose of its business or assets as a whole or such part as in the opinion
of the Required Lenders constitutes a substantial portion of its business or
assets.
ACQUISITIONS. Acquire the business or all or a substantial
portion of the assets of any Person, whether by purchase of stock, assets or
otherwise' provided, however, that the Borrower shall be permitted to make
acquisitions of the business or substantially all of the assets or stock of
any Person or of a division or line of business of any Person if, for each
such acquisition, the aggregate purchase price does not exceed $100,000.
Liens and Encumbrances. Create, assume or suffer to exist
any deed of trust, mortgage, encumbrance or other Lien (including a Lien of
attachment, judgment or execution) or security interest (including the
interest of a conditional seller of goods), securing a charge or obligation,
on or of any of its property, real or personal, whether now owned or hereafter
acquired, except for the Liens in favor of the Agent created by this Agreement
and the other Loan Documents and Permitted Liens.
DISPOSITION OF ASSETS. Sell, lease, transfer, convey or otherwise
dispose of any of its assets or property except for (a) sales of Inventory in
the ordinary course of business and (b) sales of Equipment during any twelve
(12) month period with an aggregate value of less than One Hundred Thousand
U.S. Dollars ($100,000).
TRANSACTIONS WITH RELATED PERSONS. Directly or indirectly, make
any loan or advance, purchase, assume or guarantee any note to or from any of
its officers, directors, shareholders or Affiliates, or to or from any member
of the immediate family of any of its officers, directors, shareholders or
Affiliates, or subcontract any operations to any Affiliate, except for travel
or other reasonable expense advances to employees in the ordinary course of
business; or enter into, or be a party to, any transaction with any Affiliate
or shareholder of the Borrower, except for transactions in the ordinary course
of and pursuant to the reasonable requirements of the Borrower's business and
upon fair and reasonable terms which are fully disclosed to the Agent and are
no less favorable to the Borrower than would obtain in a comparable arm's
length transaction with a Person not an Affiliate or shareholder of the
Borrower.
<PAGE> 45
RESTRICTED INVESTMENTS. Make any loans, advances or extensions of
credit to, or any investment in cash or by delivery of property in, any
Person, whether by acquisition of stock, indebtedness or other obligation or
security, or by loan, advance or capital contribution, or otherwise, except as
permitted pursuant to section 8.2 and except for (i) normal trade terms
extended to customers in connection with the purchase of merchandise in the
ordinary course of business, (ii) travel or other reasonable expense advances
to employees in the ordinary course of business, and (iii) any such
transaction effected between any two entities comprising the Borrower.
RESTRICTIONS ON DIVIDENTS AND OTHER PAYMENTS. (a) Declare any
dividend on or incur any liability to make any payment or distribution of cash
or other property or assets in respect of any of the Borrower's Stock, (b)
make any payment on account of the purchase, redemption or other retirement of
any of the Borrower's Stock or any other payment or distribution made in
respect thereof, either directly or indirectly, (c) pay any Compensation to or
for the benefit of executive officers in amounts or at rates that exceed those
in effect on January 1, 1996, increased in the aggregate each year by up to
eight percent (8%) for the amount of normal performance and/or cost of living
increases; provided, however, that the Borrower shall be permitted to make any
of the declarations and payments referred to in clauses (a), (b) and (c) of
this section if, and to the extent that, after giving effect thereto the ratio
of EBITDA to Fixed Charges, determined as of the end of the most recently
completed fiscal quarter but after reducing EBITDA by the aggregate amount of
such payment, is not less than 1.1 to 1.0; provided further, however, that the
Borrower shall not be restricted under this section from making any payments
or issuing any of its Stock required under its Management Incentive Plan,
Executive Stock Option Plan, Profit-Sharing Plan (401K Plan) or 401K Mirror
Plan, as such plans are constituted on the date of this Agreement.
SUBORDINATED DEBT. Permit the Subordinated Debt at any time to
exceed Ten Million Three Hundred Fifty U.S. Dollars ($10,350,000), agree to an
amendment of the Subordinated Debt Loan Documents or make any payments of the
Subordinated Debt prior to the scheduled repayment dates or maturity date for
such payments.
TANGIBLE NET WORTH. Permit Tangible Net Worth to be less than
$12,500,000 at any time.
CURRENT RATIO. Permit the ratio of Current Assets to Current
Liabilities (including the Revolving Credit Loans) to be less than 1.25 to
1.00 from February through August, inclusive, of each year, or 1.35 to 1.0
from September through January, inclusive of each year.
FIXED CHARGE COVERAGE RATIO. As of the last day of each fiscal
quarter, permit the ratio of EBITDA to Fixed Charges for the twelve (12)
months immediately preceding such date to be less than 0.80 to 1.0.
SENIOR FIXED CHARGE COVERAGE RATIO. As of the last day of each
fiscal quarter, permit the ratio of EBITDA to Fixed Charges, other than
principal and interest on Subordinated Debt, for the twelve (12) months
immediately preceding such date to be less than the ratio shown below during
the period corresponding thereto:
Quarter Ended in Period Ratio
Closing Date through September 29, 1996 1.4 to 1.0
From and after September 30, 1996 1.25 to 1.0
<PAGE> 46
RATIO OF EBIT TO INTEREST ON INDEBTEDNESS. As of the last day of
each fiscal quarter, permit the ratio of EBIT to interest payable on Indebted-
ness for the twelve (12) months immediately preceding such date to be less
than 1.8 to 1.0.
RATIO OF EBIT TO SENIOR DEBT INTEREST. As of the last day of each
fiscal quarter, permit the ratio of EBIT to interest payable on the Loans for
the twelve (12) months immediately preceding such date to be less than 2.2 to
1.0.
QUICK RATIO. Permit the ratio of the sum of Borrower's cash and
Accounts, each calculated according to GAAP, to Current Liabilities (including
the Revolving Credit Loans) to be less than 0.4 to 1.0.
DEBT-TO-EQUITY RATIO. Permit the ratio of Total Liabilities to
Tangible Net Worth to be more than the amounts shown below at the dates set
forth below:
Date Ratio
Closing Date and June 30, 1996 5.50 to 1.0
September 30, 1996 and December 31, 1996 3.50 to 1.0
March 31, 1997 and at the end of each
calendar quarter thereafter 4.50 to 1.0
PRO FORMS DEBT COVERAGE RATIO. Permit the Pro Forma Debt Coverage
Ratio to be less than 1.1 to 1.0 at September 30, 1996.
CAPITAL EXPENDITURE LIMITATION. Make any Capital Expenditures in
any fiscal year in excess of 90% of the depreciation and amortization expense
taken by the Borrower for the immediately preceding fiscal year.
FISCAL YEAR. Change its fiscal year.
LEASES. Enter into any agreement or agreements to lease (pursuant
to leases which would be non-capitalized leases in accordance with GAAP) any
personal or real property; provided, however, that the Borrower shall be
permitted to enter into personal property leases if, and to the extent that,
the aggregate rental obligations thereunder do not increase the Borrower's
annual consolidated personal property rental obligations above those in effect
on the Closing Date plus the amount of rental obligations attributable to the
NationsBank Lease.
FUNDED DEBT LIMITATION. As of the last day of each fiscal
quarter, permit Funded Debt to exceed five hundred percent (500%) of Cash Flow
Available for Interest Charges for the twelve (12) months immediately
preceding such date.
SALE AND LEASEBACK. Enter into any arrangement with any Person
providing for the leasing by the Borrower of any asset which has been sold or
transferred by the Borrower to such Person.
NEW BUSINESS. Engage in any business other than the business in
which the Borrower is currently engaged or a business reasonably related
thereto or make any material change in any of its business objectives,
purposes and operations which might in any way adversely affect the repayment
of the Obligations.
SUBSIDIARIES. Create any Subsidiary or transfer any assets to a
Subsidiary which is not a Borrower.
<PAGE> 47
GUARANTIES. Guarantee or otherwise, in any way, become liable
with respect to the obligations or liabilities of any Person other than a
Subsidiary which is a Borrower, except by endorsement of instruments or items
of payment for deposit to the general account of the Borrower or for delivery
to the Agent on account of the Obligations.
TRANSACTIONS AFFECTING THE COLLATERAL. Enter into any transaction
which adversely affects the Collateral, the Agent's Liens in the Collateral or
the priority of such Liens or the Borrower's ability to repay any Indebted-
ness, or permit or agree to any extension, compromise or settlement or make
any change or modification of any kind or nature with respect to any Account,
including any of the terms relating thereto.
CONSIGNMENT OF INVENTORY. Sell, transfer or deliver possession of
Inventory to any Person, other than a Subsidiary (if permitted by section 8.23
hereof) and other than a shipper or other carrier of Inventory in transit in
the ordinary course of business, on a consignment basis with a FIFO cost at
any time of more than $500,000 in the aggregate, unless, prior to such sale,
transfer or delivery, the Borrower has taken all steps to assure the Agent
that (i) title to the Inventory remains with the Borrower and (ii) the Agent's
Lien in such consigned Inventory is and remains perfected in each state,
province or other jurisdiction in which the Inventory is to be consigned and
such Lien is superior to all other Liens on the assets of the consignee.
CHANGE OF CONTROL. Cause or permit any Change of Control.
SECTION 9 - PROVISIONS WITH RESPECT TO THE COLLATERAL
PERFECTION AND PRIORITY; LOCATION OF COLLATERAL. The
Borrower warrants and represents to and covenants with the Agent that: (a)
none of the Collateral is subject to any Lien, other than those in favor of
the Agent and Permitted Liens; and (b) the offices and/or locations where the
Borrower now or hereafter may keep the Collateral and books and records,
including, without limitation, computer programs, printouts and other computer
materials and records concerning the Collateral, are at the locations
described in Schedules I through XI hereto and the Borrower shall not remove
such books and records and/or the Collateral therefrom, except for sales of
Inventory or transfers of Inventory from one such location to another in the
ordinary course of business, and shall not keep any of such books and records
and/or the Collateral at any other offices or locations unless (i) the
Borrower gives the Agent written notice of such removal and the new location
of said books and records and/or the Collateral at least thirty (30) days
prior thereto, (ii) the Borrower duly executes and delivers to the Agent, and
the Agent files, appropriate financing statements with respect to the
Collateral showing the Borrower, as debtor, and the Agent, as secured party,
and, after filing, the Lender conducts a search of all filings made against
the Borrower in all jurisdictions in which the books and records and/or
Collateral to be removed or transferred is to be located, (iii) such searches
confirm that the Agent's Liens in the Collateral, including the Collateral to
be removed or transferred to the new location, shall be first and prior on the
Collateral, except for Permitted Liens, and (iv) the Borrower causes the
lessor, bailee, warehouseman or similar Person of the Collateral to be removed
or transferred to execute and deliver to the Agent a letter, substantially in
the form attached as Exhibit J and/or K, as appropriate, waiving, in favor of
the Agent, such person's Liens in the Collateral and containing such other
assurances as may be requested by the Agent.
<PAGE> 48
VERIFICATION OF ACCOUNTS. Any of the Agent's officers, employees,
or agents shall have the right, at any time or times hereafter, in the Agent's
name or in the name of the Borrower, to verify the validity, amount or any
other matter relating to any Account by mail, telephone, telegraph or
otherwise.
ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS. From time to time
at intervals designated by the Agent, but no less frequently than monthly, the
Borrower shall provide the Agent with Schedules of Accounts describing all
Accounts created or acquired by the Borrower, and reflecting as separate
categories all Educational Supplies Distributor Accounts and all Mass Market
Accounts, and shall execute and deliver written assignments of such Accounts
to the Agent; provided, however, that the Borrower's failure to execute and
deliver such Schedules of Accounts or assignments shall not affect or limit
the Agent's Lien or other rights in and to any Accounts. If requested by the
Agent, the Borrower shall furnish the Agent with copies of proof of delivery
and the original copy of all documents, including, without limitation,
repayment histories and present status reports, relating to the Accounts so
scheduled and such other matters and information relating to the status of
then existing Accounts as the Agent shall request.
NOTICE REGARDING DISPUTED ACCOUNTS. In the event any amounts due
and owing in excess of One Hundred Thousand U.S. Dollars ($100,000) are in
dispute between any Account Debtor and the Borrower (which shall include,
without limitation, any dispute in which an offset, claim or counterclaim may
result), the Borrower shall notify the Agent of the same immediately,
explaining in detail the reason for the dispute, all claims relating thereto
and the amount in controversy.
SALE AND SAFEKEEPING OF INVENTORY. Until an Event of Default
occurs, the Borrower may sell Inventory in the ordinary course of its business
(which does not include a transfer in partial or total satisfaction of
Indebtedness); the Borrower shall be responsible for the safekeeping of
Inventory, and in no event shall the Agent have any responsibility for: (a)
any loss or damage to Inventory or destruction thereof occurring or arising in
any manner or fashion from any cause except as a direct result of the Agent's
gross negligence or willful misconduct; (b) any diminution in the value of
Inventory; or (c) any act or default of any carrier, warehouseman, bailee or
forwarding agency thereof or other Person in any way dealing with or handling
Inventory.
RECORDS AND SCHEDULES OF INVENTORY. The Borrower shall keep
correct and accurate daily records on a perpetual basis, itemizing and
describing the kind, type, location, quality, quantity and value of Inventory,
the Borrower's cost therefor, and the daily withdrawals therefrom and
additions thereto, and shall furnish to the Agent from time to time at
intervals designated by the Agent, but no less frequently than monthly or,
with respect to the Borrower's consumer division during the period from June 1
through September 30 of each year, weekly, a current Schedule of Inventory
based upon its most recent physical inventory and its perpetual inventory
records. The Borrower shall conduct a physical inventory no less than
annually, and more often if requested by the Agent, and shall furnish to the
Agent such other documents and reports as the Agent shall request with respect
to the Inventory, including, without limitation, copies of invoices relating
to the Borrower's purchase of Inventory.
<PAGE> 49
RETURNS OF INVENTORY. If any Account Debtor returns any Inventory
to the Borrower after shipment thereof, and such return generates a credit in
excess of One Hundred Thousand U.S. Dollars ($100,000) in the aggregate, on
any Account or Accounts of such Account Debtor, the Borrower shall notify the
Agent of the same not later than the date the next Borrowing Base Certificate
is required to be delivered, specifying the reason for such return, the amount
of such credit and the location of the returned Inventory.
MAINTENANCE OF EQUIPMENT. The Borrower shall keep and maintain
its Equipment in good operating condition and repair and shall make all
necessary replacements thereof so that the value and operating efficiency
thereof shall, at all times, be maintained and preserved. The Borrower shall
not permit any such items to become a fixture to real estate or accessions to
other personal property except to the extent such items constitute fixtures to
real estate or accessions on the Closing Date.
EVIDENCE OF OWNERSHIP OF EQUIPMENT. The Borrower, immediately
upon demand therefor by the Agent, shall deliver to the Agent any and all
evidence of ownership of any of the Equipment (including, without limitation,
certificates of title and applications for title).
RECORDS AND SCHEDULES OF EQUIPMENT. From time to time at
intervals designated by the Agent, but no less frequently than annually, the
Borrower shall provide the Agent with Schedules of Equipment itemizing and
describing the kind, type, quality, quantity and value of its Equipment. The
Borrower shall also furnish to the Lender such other documents and reports as
the Agent shall request with respect to the Equipment.
DISPOSITION OF EQUIPMENT. Except as provided in section 8.4, the
Borrower will not sell, lease, or otherwise dispose of any Equipment or any
part thereof without the prior written consent of the Agent; provided,
however, that the foregoing restriction shall not apply to replacement of
Equipment that is substantially worn, damaged or obsolete with Equipment of
like kind and function, provided that the replacement Equipment shall be
acquired prior to the date on which any disposition is to be made of the
Equipment that is to be replaced and the replacement Equipment shall be free
and clear of all Liens except for Permitted Liens. When the Agent's consent
to the sale, lease or other disposition of Equipment is required by this
Agreement, the Agent may, in its sole discretion, condition its consent to any
such disposition upon the delivery to the Agent of all or part of the proceeds
thereof or may condition its consent upon the Borrower's use of cash proceeds
thereof to finance the purchase by the Borrower of replacement Equipment.
THE AGENT'S PAYMENT OF CLAIMS ASSERTED AGAINST THE COLLATERAL.
The Agent may, at any time or times hereafter, in its sole discretion, without
waiving or releasing any obligation, liability or duty of the Borrower under
this Agreement or the other Loan Documents, or any Event of Default, pay,
acquire and/or accept an assignment of, any Lien asserted by any Person
against the Collateral, including, without limitation, any Permitted Liens.
All sums paid by the Agent in respect thereof and all costs, fees and
expenses, including, without limitation, attorneys' fees, court costs,
expenses and other charges relating thereto, which are incurred by the Agent
on account thereof, shall be payable, upon demand, by the Borrower to the
Agent and shall be additional Obligations hereunder secured by the Collateral.
<PAGE> 50
SECTION 10 - PROVISIONS WITH RESPECT TO ACCOUNTS, INVENTORY AND EQUIPMENT
ACCOUNT WARRANTIES, REPRESENTATIONS AND COVENANTS. With respect
to its Accounts, the Borrower represents and warrants to and covenants with
the Agent that the Agent may rely, in determining which Accounts listed on any
Schedule of Accounts are Eligible Accounts and Eligible Foreign Accounts, on
all statements or representations made by the Borrower on or with respect to
any such Schedule of Accounts, and, unless otherwise indicated in writing by
the Borrower, that each Account listed on the Schedule of Account: (a) will
cover a bona fide sale and delivery of Inventory usually dealt in by the
Borrower, or the rendition by the Borrower of services, to an Account Debtor
in the ordinary course of business; (b) will be genuine and in all respects
what it purports to be, will not be evidenced by an instrument or document, or
if so, will be only evidenced by one original instrument or document which has
been duly delivered to the Agent; (c) will be for a liquidated amount maturing
as stated in the Schedule of Accounts and in the duplicate invoice covering
said sale; (d) the Agent's Lien therein will not be subject to any offset,
deduction, counterclaim, Lien or other adverse condition; (e) there are no
discounts, allowances, claims, setoffs, counterclaims or disputes of any kind
or description existing or asserted with respect thereto except as may be
stated in the Schedule of Accounts and in the duplicate invoice covering said
sale, or under programs for which accruals and reserves are maintained by the
Borrower; (f) there are, to the Borrower's knowledge, no facts, events or
occurrences which would in any way impair the validity or enforcement thereof;
(g) the goods giving rise thereto are not, and were not at the time of the
sale thereof, subject to any Lien except those held by the Agent and Permitted
Liens; and (h) to the Borrower's knowledge, each Person obligated on an
Account is Solvent and will continue to be fully able to pay all Accounts on
which it is obligated in full when due. If any warranty is breached as to any
Account, or if any Account is not paid in full according to its terms, then
the Agent may deem such Account to be an ineligible Account, but the Agent
shall retain its Lien in all Accounts, eligible and ineligible, until the
later of the Commitment Termination Date and payment and satisfaction in full
of all Obligations and the Borrower causing all Letters of Credit and
outstanding Foreign Exchange Contracts to be canceled or terminated and First
Union-NC to be released from all liability thereunder.
INVENTORY WARRANTIES, REPRESENTATIONS AND COVENANTS. With respect
to its Inventory, the Borrower represents and warrants to and covenants with
the Agent that the Agent may rely on all statements or representations made by
the Borrower on or with respect to any such Schedule of Inventory, and, unless
otherwise indicated in writing by the Borrower, that all Inventory listed on
the Schedule of Inventory: (a) will be kept at one of the owned locations
described in Schedules I through XII hereto or at one of the leased locations
or public warehouses described in Schedules XIII through XV hereto, or in
transit to one of such locations from a vendor of the Borrower; (b) shall not,
at any time, be stored with a bailee, warehouseman or similar party without
the Agent's prior written consent, and if the Agent gives such consent, the
Borrower will concurrently therewith cause any such bailee, warehouseman or
similar party to issue and deliver to the Agent, in form and substance
acceptable to the Agent, warehouse receipts therefor in the Agent's name and
cause the bailee, warehouseman or similar party to execute and deliver to the
Agent a letter substantially in the form attached hereto as Exhibit K; and (c)
will be Inventory of good and merchantable quality, free from defects. If the
requirements set forth in clauses (a), (b) and (c) of this section 10.2 are
not met, then the Agent may deem such Inventory ineligible, but the Agent
shall retain its Lien in all Inventory, eligible or ineligible, until the
later of the Commitment Termination Date and payment and satisfaction in full
<PAGE> 51
of all Obligations and the Borrower causing all Letters of Credit and Foreign
Exchange Contracts to be canceled or terminated and First Union-NC to be
released from all liability thereunder.
EQUIPMENT, WARRANTIES, REPRESENTATIONS AND COVENANTS. With
respect to its Equipment, the Borrower represents and warrants to and
covenants with the Agent that the Agent may rely on all statements or
representations made by the Borrower on or with respect to any Schedule of
Equipment, and, unless otherwise indicated in writing by the Borrower, that
all Equipment listed on the Schedule of Equipment: (a) is located at one of
the locations described in Schedules I through XII hereto; and (b) shall not,
at any time, be stored with a bailee, warehouseman or similar party without
the Agent's prior written consent.
REAFFIRMATION OF WARRANTIES AND REPRESENTATIONS. Each request for
a Loan or the issuance of a Letter of Credit pursuant to this Agreement shall
constitute (a) an automatic warranty and representation by the Borrower to the
Agent, the Lenders and First Union that there does not then exist an Event of
Default or any event or condition which, with notice, lapse of time and/or the
making of such requested Loan or the issuance of such requested Letter of
Credit, would constitute an Event of Default, and (b) a reaffirmation, as of
the date of said request, of all of the representations and warranties of the
Borrower contained in this Agreement and the other Loan Documents.
SURVIVAL OF WARRANTIES AND REPRESENTATIONS. The Borrower
covenants, warrants and represents to the Lenders and First Union that all
representations and warranties of the Borrower contained in this Agreement and
the other Loan Documents shall be true at the time of the Borrower's execution
of this Agreement and the other Loan Documents, shall survive the execution,
delivery and acceptance thereof by the parties thereto and the closing of the
transactions described therein or related thereto and shall be deemed remade
by the Borrower at the time each Revolving Credit Loan is made or Letter of
Credit is issued hereunder.
SECTION 11 - PROVISIONS RELATING TO LETTERS OF CREDIT
In consideration of the Agent's causing First Union to issue Letters of
Credit for the account of the Borrower from time to time pursuant to section
2.1.1 hereof, the Borrower agrees as follows:
COMPLIANCE WITH TERMS AND CONDITIONS. The Borrower shall comply
with all of the terms and conditions imposed upon the Borrower under the
Letter of Credit Agreement.
RIGHTS OF SUBROGATION. In the event of the Borrower's failure to
pay to the Agent for the account of First Union, upon demand, the total amount
of liabilities incurred or sums paid by the Agent in connection with any such
Letter of Credit, the Agent shall, in addition to its rights under the UCC of
the State of Florida, the Personal Property Security Act (Ontario) and the
Civil Code of Quebec or any other applicable state or jurisdiction and under
this Agreement, be fully subrogated to the rights of any Beneficiary of the
Letters of Credit with respect to any obligation of the Borrower to such
Beneficiary discharged with the proceeds of any Letter of Credit.
<PAGE> 52
REIMBURSEMENT OBLIGATION. The Borrower hereby unconditionally
agrees to reimburse the Agent for the account of First Union for the total
amount of the sums paid by First Union in connection with the issuance of any
Letters of Credit or any additional or further liability which may accrue
against First Union in connection with the same and such amount shall be
treated for all purposes and shall have the same force and effect as if such
amount had been advanced by the Lenders to the Borrower as a Revolving Credit
Loan pursuant to section 2.1 hereof, subject to all of the terms and
conditions of this Agreement pertaining to such Loans. In the event of any
conflict between the provisions of this section or any other section of this
Agreement on the one hand, and the provisions of the Letter of Credit
Agreement on the other hand, those provisions which afford Agent, the Lenders
and First Union the greatest rights and remedies shall control.
INDEMNIFICATION. The Borrower hereby unconditionally agrees to
indemnify the Lenders, the Agent and First Union and hold the Lenders, the
Agent and First Union harmless from any and all losses, claims or liabilities
arising from any transactions or occurrences relating to Letters of Credit
issued, established or opened for the Borrower's account, and all obligations
incurred in connection therewith, including any loss or claim due to any
action taken or omitted in opening such Letters of Credit or paying or dealing
with any Beneficiary thereof. The Borrower's unconditional obligation to the
Lenders, the Agent and First Union shall not be modified or diminished for any
reason or in any amount whatsoever. The Borrower agrees that any action taken
by the Lenders, the Agent and First Union in connection with a Letter of
Credit, if taken in good faith, shall be binding upon the Borrower and shall
not impose any resulting liability on the Lenders, the Agent or First Union.
TERMINATION. In the event that this Agreement is terminated for
any reason by the Borrower or the Agent as herein provided, the Agent shall be
entitled to charge immediately the Borrower's loan account hereunder with the
full amount of any outstanding Letter of Credit Obligations, whether the
Borrower's Obligations with respect thereto are absolute or contingent at any
time. The Agent shall also be entitled to hold any balance the Agent may deem
necessary against possible claims under any outstanding Letters of Credit
unless and until each of the Lenders and First Union is supplied with an
indemnity satisfactory to it with respect to any possible liability under such
Letters of Credit and Foreign Exchange Contracts or a release of their
respective liabilities thereunder.
SECTION 12 - TERM OF AGREEMENT
TERM. Subject to the Agent's right to cease making Revolving
Credit Loans and First Union's right to cease issuing Letters of Credit, as
the case may be, to or for the benefit of the Borrower under this Agreement
upon the occurrence of an Event of Default or any event or condition which,
with notice, lapse of time or the making of such Loans or the issuance of such
Letters of Credit or Foreign Exchange Contracts would constitute an Event of
Default, the provisions of this Agreement shall continue in full force and
effect until three (3) years from the Closing Date (the "Term"), unless sooner
terminated as provided in section 12.2 or 12.3 below. Notwithstanding any
term herein to the contrary or any other term in any of the other Loan
Documents, the Borrower and the Agent agree that all Obligations hereunder
shall be payable in accordance with section 3.1 hereof, the Term Loan
Agreement and the Term Notes.
<PAGE> 53
THE BORROWER'S RIGHT TO TERMINATE. The Borrower may terminate the
financing arrangements under this Agreement and the other Loan Documents at
the end of the Term, by giving the Agent written notice of such termination,
in the manner set forth in section 17.3 below, at least ninety (90) days prior
thereto; provided, however, that in order for any such notice of termination
by the Borrower pursuant to this section 12.2 to become effective, the
Borrower, on or before such termination date, shall pay the Obligations in
full in immediately available funds and cause all of the Letters of Credit,
Foreign Exchange Contracts and the Interest Rate Swap Agreement to be canceled
or terminated and First Union released from all liability thereunder.
THE AGENT'S AND REQUIRED LENDERS' RIGHT TO TERMINATE. The Agent
or the Required Lenders may terminate the financing arrangements under this
Agreement and the other Loan Documents at any time, without demand, notice or
legal process of any kind, upon the occurrence of an Event of Default;
provided, however, that the Lenders shall retain the right to payment of the
Obligations in accordance with section 3.1 above; and provided, further, that
all of the Lenders', Agent's, First Union's and First Union-NC's rights and
remedies under this Agreement and the other Loan Documents shall survive such
termination until all of the Obligations have been paid in full and all of the
Letters of Credit, Foreign Exchange Contracts and the Interest Rate Swap
Agreement have been canceled or terminated and First Union and First Union-NC
released from all liability thereunder. On or before the Commitment Termina-
tion Date, the Borrower shall pay the Obligations in full in immediately
available funds and shall cause all of the Letters of Credit, Foreign Exchange
Contracts and the Interest Rate Swap Agreement to be canceled or terminated
and First Union and First Union-NC released from all liability thereunder.
EFFECT AND TERMINATION. Upon the effective date of termination,
all Obligations to the Lenders, whether or not incurred under this Agreement,
and notwithstanding any term or credit allowed by the Notes or by any other
instrument evidencing the Obligations, shall become immediately due and
payable without notice, demand, presentment, protest or notice of any kind,
all of which are hereby waived by the Borrower. Notwithstanding any termina-
tion, until all Obligations of every nature whatsoever shall have been fully
paid and satisfied, including, without limitation, the expiration,
cancellation or termination of all Letters of Credit, all Foreign Exchange
Contracts and the Interest Rate Swap Agreement, and the release of First Union
and First Union-NC from all liability thereunder, the Agent shall be entitled
to retain its Liens in the Collateral, and the Borrower shall continue to
comply fully with the terms of this Agreement and shall turn over all proceeds
of the Collateral to the Agent, and the Agent shall retain all of its other
rights and remedies hereunder.
SECTION 13 - EVENTS OF DEFAULT
EVENT OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(a) The Borrower fails to pay any portion of the
Obligations when due and payable or declared due and payable, or fails to
remit or deposit items or funds as required by the terms of this Agreement;
(b) The Borrower fails or neglects to observe, perform or
comply with any of the provisions of sections 7.2, 7.4, 7.6, 8.1, 8.2, 8.3,
8.4, 8.5, 8.6, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, 8.13, 8.14, 8.15, 8.16, 8.17,
8.18, 8.21 or any other provisions of any other section herein not referenced
in section 13.1(c);
<PAGE> 54
(c) The Borrower fails or neglects to observe, perform or
comply with any of the provisions of sections, 7.3, 7.5, 7.7, 7.8, 7.9, 7.10,
7.11, 7.12 and the same is not cured to the Agent's satisfaction within ten
(10) days thereafter;
(d) If any representation or warranty made in writing by
or on behalf of the Borrower in this Agreement or in the other Loan Documents
or in any other agreement now existing or hereafter executed between the
Borrower and the Lenders, or in connection with the transactions contemplated
hereby or thereby, shall prove to have been false or incorrect in any material
respect at the time as of which such representation or warranty was made;
(e) The occurrence of any (i) default or event of default
on the part of the Borrower (including specifically, but without limitation,
due to non-payment) under the terms of the Subordinated Debt Loan Documents or
any other agreement, document or instrument pursuant to which the Borrower has
incurred any Indebtedness (other than the Obligations), which default is not
cured within the time, if any, permitted therefor in the agreement, document
or instrument governing such Indebtedness, or (ii) "Potential Event of
Default" or "Event of Default", as such terms are defined in the Interest Rate
Swap Agreement;
(f) There shall occur any material uninsured damage to or
loss, theft or destruction of any of the Collateral;
The Borrower is enjoined, restrained or in any way prevented by
the order of any court or any administrative or regulatory agency from
conducting all or any material part of its business and such order continues
for more than thirty (30) days;
(g) The filing by the Borrower or DT-Mexico of any
voluntary petition seeking liquidation, reorganization, arrangement,
readjustment of debts or for any other relief under the Bankruptcy Code or
under any other act or law pertaining to insolvency or debtor relief, whether
state, federal or foreign, now or hereafter existing;
(h) The filing against the Borrower or DT-Mexico of any
involuntary petition seeking liquidation, reorganization, arrangement,
readjustment of debts or for any other relief under the Bankruptcy Code or
under any other act or law pertaining to insolvency or debtor relief, whether
state, federal or foreign, now or hereafter existing, and such petition is not
dismissed within thirty (30) days of the filing thereof or within such thirty
(30) day period an order for relief under the Bankruptcy Code or any other
applicable act or law shall be entered;
(i) The Borrower ceases to be Solvent, or the Borrower
ceases to conduct its business as now conducted;
(j) A notice of lien, levy or assessment is filed of
record to all or any portion of the Borrower's assets by the United States, or
any department, agency or instrumentality thereof, or by any state, county,
municipal or other local or foreign governmental agency, including, without
limitation, the Pension Benefit Guaranty Corporation, or if any taxes or debts
owing at any time or times hereafter to any one of them becomes a Lien upon
the Collateral or any other asset of the Borrower and the same is not
dismissed, released or discharged within thirty (30) days after the same
becomes a Lien or, in the case of ad valorem taxes, prior to the last day when
payment may be made without penalty;
<PAGE> 55
(k) Any of the Loan Documents for any reason ceases to be
in full force and effect or is declared to be null and void, or the Borrower
denies that it has any further liability under any Loan Document to which it
is a party, or gives notice to such effect;
(l) Any strike, lockout, labor dispute, embargo,
condemnation, act of God or public enemy, or other casualty which causes, for
more than thirty (30) consecutive days, the cessation or substantial
curtailment of revenue producing activities at any facility of the Borrower;
(m) The loss, suspension or revocation of, or failure to
renew, any material license or permit now held or hereafter acquired by the
Borrower;
(n) The Agent does not have or ceases to have a valid and
perfected first priority Lien in the Collateral (subject to Permitted Liens),
in each case, for any reason other than the failure of the Agent to take any
action within its control;
(o) The entry of a judgment or the issuance of a warrant
of attachment, execution or similar process against the Borrower or any of its
assets in excess of One Hundred Thousand U.S. Dollars ($100,000), which shall
not be dismissed, discharged or bonded within thirty (30) days;
(p) If a custodian, trustee, receiver or assignee for the
benefit of creditors is appointed or takes possession of the Collateral, or
any of the Borrower's other assets;
(q) The occurrence of any of the following events: (i) the
happening of a Reportable Event with respect to any profit sharing or pension
plan of the Borrower governed by ERISA; (ii) the termination of any such plan;
(iii) the appointment of a trustee by an appropriate United States District
Court to administer any such plan; (iv) the institution of any proceedings by
the Pension Benefit Guaranty Corporation to terminate any such plan or to
appoint a trustee to administer any such plan; (v) the failure of the Borrower
to furnish to the Agent a copy of each report which is filed by the Borrower
with respect to each such plan promptly after the filing thereof with the
Secretary of Labor or the Pension Benefit Guaranty Corporation; or (vi) the
failure of the Borrower to notify the Agent promptly upon receipt by the
Borrower of any notice of the institution of any proceeding or any other
actions which may result in the termination of any such plan;
(r) There shall occur any change in the Collateral, the
Agent's Lien in the Collateral or the priority of such Lien, or in the
business of the Borrower or its operations, conduct or prospects thereof,
which, individually or in the aggregate, would have a material adverse effect
on the Borrower's ability to repay the Obligations; or
<PAGE> 56
(s) If the litigation styled (i) The Dixon Venture et al
v. The Joseph Dixon Crucible Company et al, Superior Court of New Jersey, Law
Division: Hudson County, Docket No. L-058299-86 (the "ECRA Case") or (ii) The
Dixon Venture v. The Joseph Dixon Crucible Company, Dixon Ticonderoga Company,
Dixon Mill Associates I, Dixon Mill Associates II and Dixon Mill Associates
III, United States District Court, Northern District of New Jersey (Case No.
92-4209(WGB)) (the "CERCLA Case"), or any other litigation now pending or
hereafter brought against the Borrower involving some or all of the facts of
the ECRA Case or the CERCLA Case, results in a judgment or judgments against
DTC in an aggregate amount exceeding the reserves therefor (which shall not
exceed $3,300,000) by $200,000 or more.
ACCELERATION OF THE OBLIGATIONS. Without in any way limiting the
right of the Agent or the Required Lenders to demand payment of any portion of
the Obligations pursuant to sections 3.1 or 12.3 of this Agreement, (a) upon
and after an Event of Default (other than an Event of Default specified in
section 13.1(h) or (i) hereof), all of the Obligations may, at the option of
the Agent or the Required Lenders, and without demand, notice or legal process
of any kind, be declared, and immediately shall become, due and payable, and
(b) upon the occurrence of an Event of Default specified in section 13.1(h) or
(i) hereof, all of the Obligations shall automatically become due and payable,
without demand, notice or legal process of any kind, anything in the Notes or
other contract evidencing any such Obligation or in the Loan Documents or in
any other agreement to the contrary notwithstanding.
DEFAULT RATE OF INTEREST. Upon the occurrence and during the
continuance of an Event of Default, all of the Obligations shall continue to
bear interest, calculated daily on the basis of a 360-day year for the actual
days elapsed, at the applicable Prime Rate plus four percent (4%) per annum
until either such Event of Default is cured to the Agent's satisfaction or
otherwise waived in writing by the Agent or the Obligations are paid in full
and this Agreement is terminated.
NOTICE OF DEFAULT. Each Lender, upon acquiring knowledge of what
it perceives to be an Event of Default, shall promptly notify the other
Lenders thereof (a "Notice of Default"). The Agent shall not be deemed to
have knowledge or notice of the occurrence of any default or Event of Default
unless the Agent has received notice from a Lender or the Borrower referring
to this Agreement, describing such default or Event of Default and stating
that such notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give notice thereof to the Lenders.
The Agent shall take such action with respect to such default or Event of
Default as shall be reasonably directed by the Required Lenders; provided
that, unless and until the Agent shall have received such directions, the
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such default or Event of Default as it
shall deem advisable, in the best interests of the Lenders.
DECLARED DEFAULT. A Declared Default shall be deemed to have
occurred following an Event of Default upon the earliest of (a) the date of
the Agent's written notification to the Borrower (with a copy to the Lenders)
of a "declared default", (b) the date of the Required Lenders' written
notification to the Borrower and the Agent of a declared default, (c) the date
of the occurrence of an Event of Default specified in any of sections 13.1(a),
13.1(d), 13.1(h), 13.1(i), 13.1(j), 13.1(l), 13.1(o) or 13.1(q) above or
resulting from a default under section 8.3 above, and (d) the date three (3)
business days after the occurrence of an uncured Event of Default not
specified in (c) above.
<PAGE> 57
SECTION 14 - RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT
RIGHTS AND REMEDIES. Upon and after the occurrence of any Event
of Default, the Agent shall have, in addition to all other rights and remedies
which the Agent may have under this Agreement, the other Loan Documents, and
applicable law, the following rights and remedies, all of which may be
exercised with or without further notice to the Borrower: (a) all of the
rights and remedies of a secured party under the UCC of the State of Florida
or the Personal Property Security Act (Ontario), or of any other state,
province or jurisdiction where such rights and remedies are asserted; (b) to
foreclose the Liens created under this Agreement and the other Loan Documents
or under any other agreement relating to the Collateral, by any available
judicial procedure or without judicial process; (c) to enter any premises
where the Collateral may be located, through self-help and without judicial
process, without first obtaining a final judgment or giving the Borrower
notice and opportunity for a hearing on the validity of the Agent's claim, for
the purpose of taking possession or removing the same, or require the Borrower
to assemble the Collateral and make it available to the Agent at a place to be
designated by the Agent; and/or (d) to sell, assign, lease, or otherwise
dispose of the Collateral or any part thereof, either at public or private
sale, in lots or in bulk, for cash, on credit or otherwise, with or without
representation or warranties, and upon such terms as shall be acceptable to
the Agent, in its sole discretion, and the Agent may bid or become the
purchaser at any such public sale, free from any right of redemption which is
hereby expressly waived by the Borrower, and the Agent shall have the option
to apply or be credited with the amount of all or any part of the Obligations
owing to the Lenders against the purchase price bid by the Agent at any such
sale. The Agent shall have the exclusive right to maintain, manage and
operate the Collateral, and may employ an independent management company,
sales agent or others to maintain, manage, operate and sell the Collateral,
and may negotiate management, operating or sales contracts, in its sole
discretion. The Agent may, if it deems it reasonable, postpone or adjourn any
sale of the Collateral from time to time by an announcement at the time and
place of such postponed or adjourned sale, without being required to give a
new notice of sale. The Borrower agrees that the Agent has no obligation to
preserve rights to the Collateral against prior Persons or to marshall any
Collateral for the benefit of any Person. The Agent is hereby granted a
license or other right to use, without charge, the Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
and advertising matter, or any property of a similar nature, as it pertains to
the Collateral, in completing production of, advertising for sale, and selling
any Collateral and the Borrower's rights under all licenses and franchise
agreements shall inure to the Agent's benefit. In addition, the Borrower
agrees that, in the event notice is necessary under applicable law, written
notice mailed to the Borrower in the manner specified in section 17.3 hereof
five (5) days prior to the date of public sale of any of the Collateral or
prior to the date after which any private sale or other disposition of the
Collateral will be made shall constitute commercially reasonable notice to the
Borrower.
<PAGE> 58
APPLICATON OF PROCEEDS. The net cash proceeds resulting from the
collection, liquidation, sale, lease or other disposition of the Collateral
shall be applied first to the expenses (including all reasonable attorneys'
fees) of retaking, holding, storing, processing and preparing for sale,
selling, collecting, liquidating and the like, and then to the satisfaction of
all Obligations, as follows: first, to any fees and expenses then due and
payable; second, to accrued interest on the Loans; third, to the outstanding
principal of the Loans and any other Obligations then outstanding under or in
connection with this Agreement, the Term Loan Agreement, the Foreign Exchange
Agreement and the Interest Rate Swap Agreement, all in accordance with each
Lender's Pro Rata Share (as defined in the Intercreditor Agreement); fourth to
any other Obligations then outstanding, pro rata to each Lender in the
proportion that such Lender's other Obligations bears to all other Obligations
of all Lenders; and fifth, to the Borrower or as any court of competent
jurisdiction may direct. The Borrower shall be liable to the Lenders and
shall pay to the Lenders on demand any deficiency which may remain after such
sale, disposition, collection or liquidation of the Collateral. The Agent
shall remit to the Borrower or the Person entitled thereto any surplus
remaining after all Obligations have been paid in full. If any of the
Collateral shall require repairs, maintenance, preparation or the like, the
Agent shall have the right, but shall not be obligated, to perform such
repairs, maintenance or preparation, for the purpose of putting the same in
such saleable form as the Agent shall deem appropriate, but the Agent shall
have the right to sell or dispose of the Collateral without any such repairs,
maintenance or preparation. The Borrower will, at the Agent's request,
assemble all the Collateral and make it available to the Agent at places which
the Agent may select, whether at premises of the Borrower or elsewhere, and
will make available to the Agent all premises and facilities of the Borrower
for the purpose of the Agent's taking possession of the Collateral or of
removing or putting the Collateral in saleable form. In the event of the
appointment of a receiver for any of the Collateral during the pendency of a
foreclosure proceeding or otherwise, Lenders shall share in the profits and
expenses of the receivership in proportion to their respective Pro Rata Shares
(as such term is defined in the Intercreditor Agreement), but subject to the
terms above.
<PAGE> 59
APPOINTMENT OF THE AGENT AS THE BORROWER'S LAWFUL ATTORNEY. The
Borrower hereby irrevocably designates, makes, constitutes and appoints the
Agent (and all Persons designated by the Agent) as the Borrower's true and
lawful attorney (and agent-in-fact) and the Agent, or the Agent's agent, may,
upon and after the occurrence of an Event of Default, without notice to the
Borrower, and at such time or times thereafter as the Agent or said agent, in
its sole discretion, may determine, in the Borrower's or the Agent's name: (i)
demand payment of the Accounts; (ii) enforce payment of the Accounts, by legal
proceedings or otherwise; (iii) exercise all of the Borrower's rights and
remedies with respect to the collection of the Accounts; (iv) settle, adjust,
compromise, extend or renew the Accounts; (v) settle, adjust or compromise any
legal proceedings brought to collect the Accounts; (vi) if permitted by
applicable law, sell or assign the Accounts upon such terms, for such amounts
and at such time or times as the Agent deems advisable; (vii) discharge and
release the Accounts; (viii) take control, in any manner, of any item of
payment or proceeds referred to in section 3.2 or section 3.3 hereof; (ix)
prepare, file and sign the Borrower's name on a proof of claim in bankruptcy
or similar document against any Account Debtor; (x) prepare, file and sign the
Borrower's name on any notice of Lien, assignment or satisfaction of Lien or
similar document in connection with the Accounts; (xi) do all acts and things
necessary, in the Agent's sole discretion, to fulfill the Borrower's
obligations under this Agreement; (xii) endorse the name of the Borrower upon
any of the items of payment or proceeds referred to in section 3.2 or section
3.3 hereof and deposit the same to the account of the Agent on account of the
Obligations; (xiii) endorse the name of the Borrower upon any chattel paper,
document, instrument, invoice, freight bill, bill of lading or similar
document or agreement relating to the Accounts or Inventory; (xiv) use the
Borrower's stationery and sign the name of the Borrower to verifications of
the Accounts and notices thereof to Account Debtors; and (xv) use the
information recorded on or contained in any data processing equipment and
computer hardware and software relating to the Accounts and Inventory to which
the Borrower has access. All acts of the Agent or its designee, except the
Agent's acts of gross negligence or willful misconduct, taken pursuant to this
section 14.3 are hereby ratified and confirmed and the Agent or its designee
shall not be liable for any acts of omission or commission nor for any error
of judgment or mistake of fact or law. This power, being coupled with an
interest, is irrevocable by the Borrower until all Obligations are paid in
full and all Letters of Credit, Foreign Exchange Contracts and the Interest
Rate Swap Agreement are canceled or terminated.
<PAGE> 60
RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC. The enumeration
of the Lenders, the Agent's and First Union's rights and remedies set forth in
this Agreement is not intended to be exhaustive and the exercise by the
Lender, Agent or First Union of any right or remedy shall not preclude the
exercise of any other rights or remedies, all of which shall be cumulative,
and shall be in addition to any other right or remedy given hereunder, under
the Loan Documents or under any other agreement between the Borrower and the
Lenders, the Agent or First Union or which may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on
the part of the Lenders, the Agent or First Union in exercising any right,
power or privilege shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or privilege preclude other or
further exercise thereof or the exercise of any other right, power or
privilege or shall be construed to be a waiver of any Event of Default. No
course of dealing between the Borrower and the Lenders, the Agent or First
Union or the Lenders', the Agent's or First Union's employees shall be
effective to change, modify or discharge any provision of this Agreement or to
constitute a waiver of any Event of Default. Neither the Lenders, the Agent
nor First Union shall, under any circumstances or in any event whatsoever,
have any liability for any error, omission or delay of any kind occurring in
the liquidation of the Collateral or for any damages resulting therefrom
except damages directly attributable to the Agent's or First Union's gross
negligence or willful misconduct.
SECTION 15 - PAYMENT OF EXPENSES
Whether or not the transactions contemplated by this Agreement shall be
consummated, the Borrower will:
<PAGE> 61
FEES AND EXPENSES. Pay or reimburse the Agent and the Lenders
upon demand for all expenses (including, without limitation, reasonable
attorneys' and paralegals' expenses) incurred or paid (a) by the Agent in
connection with: (i) the preparation, execution, delivery, interpretation,
modification or amendment of this Agreement or the other Loan Documents; (ii)
charges for appraisers, examiners, auditors or similar Persons whom the Agent
or a Lender may engage with respect to rendering opinions concerning the
Borrower's financial condition and the condition and value of the Collateral;
(iii) any attempt to inspect, verify, protect, collect, sell, liquidate or
otherwise dispose of the Collateral; (iv) the filing and recording of all
documents required by the Agent to perfect the Agent's Liens in the
Collateral, including, without limitation, any documentary stamp tax or any
other taxes incurred because of such filing or recording, and (b) by the Agent
and the Lenders in connection with: (i) any litigation, contest, dispute,
suit, proceeding or action (whether instituted by the Agent, the Lenders,
First Union or the Borrower or any other Person) in any way relating to the
Collateral, this Agreement or the other Loan Documents, or the Borrower's
business or affairs; (ii) any attempt to enforce any rights of the Lenders or
First Union or any participant against the Borrower or any other Person which
may be obligated to the Lenders by virtue of this Agreement or the other Loan
Documents, including without limitation, the Account Debtors. Additionally,
the Borrower shall pay to the Agent on demand any and all fees, costs and
expenses which the Agent pays to a bank or other similar institution arising
out of or in connection with (i) the forwarding to the Borrower or any other
Person on the Borrower's behalf by the Agent of proceeds of the Revolving
Credit Loans made by the Lenders to the Borrower pursuant to this Agreement,
and (ii) the depositing for collection by the Agent of any check or item of
payment received and/or delivered to the Agent on account of the Obligations
and reimburse the Agent, on demand, for any claims asserted by any bank in
connection with a Depository Account established at such bank for the deposit
of proceeds of the Collateral, or any returned or uncollected checks received
by such bank as proceeds of the Collateral.
STAMP TAXES. Indemnify and save the Lenders, the Agent and First
Union harmless from and against any and all liability and loss with respect
to or resulting from the nonpayment or delayed payment of any and all
intangibles, documentary stamp and other similar taxes, fees and excises, if
any, including any interest and penalties, which may be, or be determined to
be, payable in connection with the transactions contemplated by this Agreement
or in any modification hereof or thereof.
BROKERAGE FEES. Indemnify and hold the Agent, the Lenders and
First Union harmless from and against any and all finder's or brokerage fees
and commissions which may be payable in connection with the transactions
contemplated by this Agreement other than any fees or commissions of finders
or brokers engaged by the Agent, the Lenders or First Union.
<PAGE> 62
SECTION 16 - THE AGENT
AUTHORIZATION AND ACTION. Each Lender hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement and the other Loan Documents as are
delegated to the Agent by the terms hereof and thereof, together with such
powers as are reasonably incidental thereto. As to any matters not expressly
provided for by this Agreement and the other Loan Documents (including,
without limitation, enforcement or collection of the Notes), the Agent shall
not be required to exercise any discretion or take any action, but shall be
required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required
Lenders; provided, however, that the Agent shall not be required to take any
action which the Agent in good faith believes exposes it to personal liability
or which is contrary to this Agreement or applicable law. The Agent agrees to
promptly give to each Lender copies of each notice given to it by Borrower
pursuant to the terms of this Agreement or the other Loan Documents. Each
Lender shall be deemed to have consented to any action proposed to be taken by
the Agent if, within ten (10) days after receipt by such Lender of the Agent's
written request for such consent, such Lender shall have failed to deliver
written notice to the Agent that it does not consent to such request, which
notice shall state with reasonable specificity the reasons why such Lender
does not consent to the Agent's proposed action. In the event the Agent
requests the consent of a Lender and such consent is denied ("Dissenting
Lender") then the Dissenting Lender shall, within three (3) Business Days
following any request by the Agent, Transfer (hereinafter defined) or offer to
transfer to such Lender(s) as the Agent may specify, the interest in the
Obligations of the Dissenting Lender for a price equal to the then outstanding
principal amount thereof plus accrued and unpaid interest and fees due to the
Dissenting Lender, such Transfer to be effective upon the Dissenting Lender's
(a) delivery to the transferee Lender of fully executed transfer documentation
reasonably acceptable to such transferee Lender, and (b) receipt of the
aforesaid price by wire transfer, all of which shall, in any event, be
completed within ____ ( ) days after the Agent's Transfer request.
AGENT'S RELIANCE, ETC. None of the Agent, or any of its
Affiliates or any of the respective directors, officers, agents or employees
of the Agent or any such Affiliate, shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement
or the other Loan Documents, except for its or their own gross negligence or
wilful misconduct. Without limitation of the generality of the foregoing, the
Agent (i) may consult with legal counsel (including, without limitation,
counsel to Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (ii) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or any of the
other Loan Documents except as specifically set forth in any of the Loan
Documents; (iii) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or any of the other Loan Documents on the part of Borrower or to
inspect the property (including, without limitation, the books and records) of
Borrower except as specifically set forth in any of the Loan Documents;
(iv) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement
or any of the other Loan Documents or any other instrument or document
furnished pursuant hereto or thereto, provided, that such instrument or
document (or an executed copy thereof) has been furnished to such Lender; and
(v) shall incur no liability under or in respect of this Agreement or any of
the other Loan Documents by acting upon any notice, consent, certificate or
other instrument or writing (which may be by telegram, cable or
telex) believed by it, in good faith, to be genuine and signed or sent by the
proper party or parties.
<PAGE> 63
FUCC AND AFFILIATES. Subject to the terms of the Intercreditor
Agreement, with respect to its commitment as a Lender hereunder, the Loans
made by it and each Note issued to it, FUCC shall have the same rights and
powers under this Agreement as the other Lenders and may exercise the same as
though it were not the Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include FUCC in its individual capacity. FUCC
and its Affiliates may accept deposits from, lend money to, act as trustee
under indentures of, and generally engage in any kind of business with,
Borrower or any of its Affiliates and any Person who may do business with
Borrower or any of its Affiliates, all as if FUCC were not the Agent and
without any duty to account therefor to the other Lenders.
LENDER CREDIT DECISION. Bank of Boston and NBC each acknowledges
that it has, independently and without reliance upon the Agent or any other
Lender and based on the Financials and such other documents and information as
it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Bank of Boston and NBC each also acknowledges that it
will, independently and without reliance upon the Agent or any other Affiliate
of the Agent, except with respect to documents and written information
furnished solely to the Agent pursuant to the terms of the Loan Documents, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under this Agreement and other Loan Documents; provided, however, that the
Agent shall have no responsibility or liability for the accuracy of
information received from Borrower and furnished to Bank of Boston and NBC.
INDEMNIFICATION. Bank of Boston and NBC each agrees to indemnify
the Agent and its Affiliates, and their respective directors, officers,
employees, agents and advisors (to the extent not reimbursed by Borrower),
ratably according to the respective principal amounts of the Notes then held
by the Lenders, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses and
disbursements (including, without limitation, fees and disbursements of legal
counsel) of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against, the Agent in any way relating to or arising out of
this Agreement or the other Loan Documents, except the Foreign Exchange
Agreement or the Interest Rate Swap Agreement, or any action taken or omitted
by the Agent under this Agreement or the other Loan Documents, except the
Foreign Exchange Agreement or the Interest Rate Swap Agreement; provided,
however, that neither Bank of Boston nor NBC shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or wilful misconduct. Without limitation of the foregoing,
Bank of Boston and NBC agree to reimburse the Agent promptly upon demand for
their ratable shares of any out-of-pocket expenses (including, without
limitation, fees and disbursements of legal counsel) reasonably incurred by
the Agent in connection with the preparation, execution, delivery, administra-
tion, modification, amendment or enforcement (whether through negotiations,
legal proceedings or otherwise) of, or legal advice in respect of its rights
or responsibilities under, this Agreement or the other Loan Documents, to the
extent that the Agent is not reimbursed for such expenses by Borrower.
<PAGE> 64
SUCCESSOR AGENT. The Agent may resign at any time by giving
written notice thereof to Bank of Boston and NBC and Borrower. The Required
Lenders jointly shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders, and
shall have accepted such appointment, within thirty (30) days after the
retiring Agent's giving of notice of resignation or the Lenders' removal of
the retiring Agent, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent, which shall be a commercial bank or other financial
institution acceptable to Lenders and having a combined capital and surplus of
at least $500,000,000. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents, except for
liability as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement and the other Loan Documents.
SECTION 17 - MISCELLANEOUS.
SURVIVAL OF AGREEMENTS. All agreements, covenants,
representations and warranties contained herein or made in writing by or on
behalf of the Borrower in connection with the transactions contemplated hereby
shall survive the execution and delivery of this Agreement and the other Loan
Documents. No termination or cancellation (regardless of cause or procedure)
of this Agreement shall, in any way, affect or impair the powers, obligations,
duties, rights and liabilities of the parties hereto in any way with respect
to (a) any transaction or event occurring prior to such termination or
cancellation, (b) the Collateral, or (c) any of the Borrower's undertakings,
agreements, covenants, warranties and representations contained in this
Agreement and the other Loan Documents and all such undertakings, agreements,
covenants, warranties and representations shall survive such termination or
cancellation. The Borrower further agrees that, to the extent that the
Borrower makes a payment or payments to the Lenders or First Union, which
payment or payments or any part thereof are subsequently invalidated, declared
to be fraudulent or preferential, set aside and/or required to be repaid to a
trustee, receiver or any other party under any bankruptcy, insolvency or
similar state or federal law, common law or equitable cause, then, to the
extent of such payment or repayment, the Obligation or part thereof intended
to be satisfied shall be revived and continued in full force and effect as if
such payment had not been received by the Lenders or First Union.
<PAGE> 65
GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED,
IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW
PROVISIONS) OF THE STATE OF FLORIDA. AS PART OF THE CONSIDERATION FOR NEW
VALUE THIS DAY RECEIVED, THE BORROWER HEREBY CONSENTS TO THE JURISDICTION OF
ANY STATE OR FEDERAL COURT LOCATED WITHIN DADE COUNTY, STATE OF FLORIDA, AND
CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL
DIRECTED TO THE BORROWER AT THE ADDRESS STATED IN SECTION 17.3 HEREOF AND
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL
RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS,
PROPER POSTAGE PREPAID. EACH OF THE BORROWER AND THE LENDERS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY SUIT OR PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. THE
BORROWER WAIVES ANY OBJECTION WHICH THE BORROWER MAY HAVE BASED ON LACK OF
JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO ANY SUIT OR
PROCEEDING INSTITUTED BY THE LENDERS UNDER THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS IN ANY STATE OR FEDERAL COURT LOCATED WITHIN DADE COUNTY, FLORIDA
AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 17.2 SHALL AFFECT THE RIGHT
OF THE AGENT OR THE LENDERS TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF THE LENDERS TO BRING ANY ACTION OR
PROCEEDING AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION WHICH HAS JURISDICTION OVER THE BORROWER OR ITS PROPERTY. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS TO ENTER INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS, MAKE THE LOANS AND EXTEND THE OTHER
FINANCIAL ACCOMMODATIONS CONTEMPLATED HEREUNDER AND THEREUNDER.
NOTICE. All notices and other communications hereunder shall be
in writing and shall be deemed to have been validly served, given or delivered
three (3) days after deposit in the United States mails, with postage prepaid,
and addressed to the party to be notified as follows:
If to Borrower: Dixon Ticonderoga Company
195 International Parkway
Heathrow, Florida 32746-5036
Attn: Gino Pala, CEO
Facsimile Number: (407) 829-2570
With a copy to: Richard F. Joyce, Esq., Vice Chairman
Dixon Ticonderoga Company
195 International Parkway
Heathrow, Florida 32746-5036
Facsimile Number: (407) 829-2570
If to FUCC as
Agent: First Union Commercial Corporation
c/o First Union National Bank
First Union Financial Center
By hand delivery: 200 South Biscayne Boulevard
11th Floor, MC:FL:6090
Miami, Florida 33131
Attn: Ms. Kerry Maxwell,
Vice President
<PAGE> 66
By mail or
facsimile: P.O. Box 025475, MC: FL 6090
Miami, Florida 33102-5475
Attn: Ms. Kerry Maxwell,
Vice President
Facsimile Number: (305) 789-1223
With a copy to: Stearns Weaver Miller Weissler Alhadeff &
Sitterson, P.A.
150 West Flagler Street, Suite 2200
Miami, Florida 33130
Attn: Stuart D. Ames, Esq.
Facsimile Number: (305) 789-3395
If to Bank of Boston: The First National Bank of Boston
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: G. Dennis Wilson,
Assistant Vice President
Facsimile Number: (770) 393-4166
If to NBC: National Canada Finance Corp., a National
Bank of Canada subsidiary
5200 Town Center Drive
Suite 306
Boca Raton, Florida 33486
Facsimile Number: (407) 367-1705
or to such other address as each party may designate for itself by like
notice, or on the date of delivery to such party at such address, if notice is
given or delivered by hand, telex, telegram or facsimile transmittal.
INDEMNIFICATION OF THE LENDERS, FIRST UNION AND FIRST UNION-NC.
From and at all times after the date of this Agreement, and in addition to all
of the Lenders', First Union's and First Union-NC's other rights and remedies
against the Borrower, the Borrower agrees to hold the Lenders and First Union
harmless from, and to indemnify the Lenders, First Union and First Union-NC
against, all losses, damages, costs and expenses (including, but not limited
to, attorneys' and paralegals' fees, costs and expenses) incurred by any of
the Lenders, First Union or First Union-NC from and after the date hereof,
whether direct, indirect or consequential, as a result of or arising from or
relating to any suit, action or proceeding by any Person, whether threatened
or initiated, asserting a claim for any legal or equitable remedy against any
Person under any statute or regulation, including, but not limited to, any
federal or state securities laws, or under any common law or equitable cause
or otherwise, arising from or in connection with the negotiation, preparation,
execution or performance of, or the financing transactions contemplated by,
this Agreement and the other Loan Documents, the Lenders' furnishing of funds
to the Borrower pursuant to this Agreement or First Union's issuance of
Letters of Credit or First Union-NC's purchase of Foreign Exchange Contracts
for the account of the Borrower or First Union-NC's interest rate protection
for the Borrower pursuant to the Interest Rate Swap Agreement; provided,
however, that the foregoing indemnification shall not protect a Lender, First
Union or First Union-NC from loss, damage, cost or expense directly
attributable to such Lender's, First Union's or First Union-NC's willful
misconduct or gross negligence. All of the foregoing losses, damages, costs
and expenses of the Lenders, First Union and First Union-NC shall be payable
by the Borrower upon demand by the Lenders or First Union, as the case may be,
and shall be additional Obligations hereunder secured by the Collateral.
<PAGE> 67
WAIVERS BY THE BORROWER. Except as otherwise provided for in this
Agreement, the Borrower waives (a) presentment, demand and protest and notice
of presentment, protest, non-payment, maturity and all other notices; (b)
notice prior to taking possession or control of the Collateral or any bond or
security which might be required by any court prior to allowing the Agent to
exercise any of the its remedies; and (c) the benefit of all valuation,
appraisement and exemption laws.
LAWFUL CHARGES. It is the intent of the parties that the rate of
interest and all other charges due from the Borrower be lawful.
Notwithstanding anything to the contrary contained in this Agreement or any
Note, if, at any time until payment in full of the Obligations, the rate of
interest payable with respect to the Loans (the "Stated Rate") exceeds the
highest lawful rate 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 Stated Rate shall be equal to the
Maximum Lawful Rate; provided, however, that if at any time thereafter the
Stated Rate is less than the Maximum Lawful Rate, the Borrower shall continue
to pay interest hereunder at the Maximum Lawful Rate until such time as the
total interest received by the Lenders from the making of Loans hereunder is
equal to the total interest which the Lenders would have received had the
Stated Rate been (but for the operation of this paragraph) the interest rate
payable since the Closing Date. Thereafter, the interest rate payable
hereunder shall be the Stated Rate unless and until the Stated Rate again
exceeds the Maximum Lawful Rate, in which event this paragraph shall again
apply. In no event shall the total interest received by the Lenders pursuant
to the terms hereof exceed the amount which the Lenders could lawfully have
received had the interest due hereunder been calculated for the full Term at
the Maximum Lawful Rate. If, for any reason, payment of a portion of interest
or charges as required by this Agreement would exceed the limit established by
applicable law, then the obligation to pay interest or charges shall automati-
cally be reduced to such limit and, if any amounts in excess of such limit
shall have been paid, then such amounts shall be applied to the unpaid
principal amount of the Obligations or refunded so that, under no
circumstances, shall interest or charges required hereunder exceed the maximum
rate allowed by law.
<PAGE> 68
ASSIGNMENT. The Borrower may not sell, assign or transfer this
Agreement, or the other Loan Documents or any portion thereof, including,
without limitation, the Borrower's rights, title, interests, remedies, powers,
and duties hereunder or thereunder. The Borrower hereby consents to the
Lenders' participation, sale, assignment, transfer or other disposition, at
any time or times hereafter, of this Agreement or the other Loan Documents, or
of any portion hereof or thereof, including, without limitation, the Lender's
rights, title, interests, remedies, powers and duties hereunder or thereunder.
No Lender shall sell, assign, pledge, hypothecate or otherwise transfer
(collectively, "Transfer"), other than by operation of law or to a Person
which succeeds to the banking business of such Lender, all or any part of its
interest in the Obligations in connection with this Agreement or the Term Loan
Agreement, the Collateral or its rights under this Agreement without the prior
written consent of the Agent. In connection with the granting of such
consent, the Agent shall be furnished with such indemnification(s) from the
transferring Lender and/or transferee Lender as the Agent may require.
Notwithstanding the aforesaid provisions, each Lender may Transfer all or any
portion of its interest in this Agreement, the Term Loan Agreement and the
related documents to any lending institution which is an Affiliate of such
Lender. Any Person acquiring any participation interest in any such
document(s) and agreement(s) as set forth in this section (each, a
"Participant") shall execute a written consent agreeing to be governed by the
Intercreditor Agreement, and no Participant shall acquire any rights hereunder
except by and through the Lender from which it acquired its interest. No
legal action, however, including any action based on derivative rights
hereunder, may be initiated by any Participant hereunder, nor shall any
Participant acquire any right to enter into the determinations and
decision-making processes contained in this Agreement. It is the
responsibility of each Lender to ensure performance of the obligations of its
Participant(s), and recourse by a Lender for the failure of any Participant
shall be against the Lender which made a Transfer to such Participant.
AMENTMENTS, WAIVERS AND CONSENTS. Except as set forth below, any
term, covenant, agreement or condition of this Agreement or any of the other
Loan Documents may be amended or waived by the Lenders, and any consent given
by the Lenders, if, but only if, such amendment, waiver or consent is in
writing signed by the Required Lenders (or by the Agent with the consent of
the Required Lenders) and delivered to the Agent and, in the case of an
amendment, signed by the Borrower; provided, that no amendment, waiver or
consent shall, without the prior written consent of each Lender, (a) increase
the amount or extend the time of the obligation of the Lenders to make Loans
or issue or participate in Letters of Credit (including, without limitation,
pursuant to section 12.1), (b) extend the originally scheduled time or times
of payment of the principal of any Loan or Letter of Credit related obligation
or the time or times of payment of interest on any Loan or Letter of Credit
related obligation or the time or times of payment of any fees relating to any
Loan or Letter of Credit related obligation, (c) reduce the rate of interest
or fees payable on any Loan or Letter of Credit related obligation, (d) permit
any subordination of the principal or interest on any Loan or Letter of Credit
related obligation, (e) release any Collateral or related Loan Document (other
than as specifically permitted in this Agreement or the applicable Loan
Document), (f) amend the provisions of this section 17.8 or the definition of
Required Lenders, or (g) amend the provisions of Exhibit A attached hereto
pertaining to the Borrowing Base and Availability, except with respect to
Foreign Exchange Contracts and the Interest Rate Swap Agreement. In addition,
no amendment, waiver or consent to the provisions of (a) section 16 shall be
made without the written consent of the Agent and (b) section 2.1.1 or section
2A shall be made without the written consent of FUCC.
<PAGE> 69
SEVERABILITY. To the extent any provision of this agreement is
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
ENTIRE AGREEMENT. This Agreement and the other documents, certificates
and instruments referred to herein constitute the entire agreement between the
parties and supersede and rescind any prior agreements relating to the subject
matter hereof.
BINDING EFFECT; JOINT AND SEVERAL OBLIGATIONS. (a) All of the terms of
this Agreement and the other Loan Documents, as the same may from time to time
be amended, shall be binding upon, inure to the benefit of and be enforceable
by the respective successors and assigns of the Borrower and the Lenders.
This provision, however, shall not be deemed to modify section 17.7.
(a) The obligations of each entity comprising the
Borrower, i.e., DTC and DTI, under each of the Loan Documents are as co-
borrowers and shall be joint and several, with each of them being liable for
all the Obligations, and it shall not be necessary for the Lenders to serve
legal process on, proceed against or join both such entities in any legal
proceeding to obtain payment of the Obligations or otherwise enforce their
rights under any of the Loan Documents.
Captions. The captions to the various sections and subsections of this
Agreement have been inserted for convenience only and shall not limit or
affect any of the terms hereof.
Disbursement of Loan Proceeds. The Borrower hereby authorizes and
directs the Agent to disburse, for and on behalf of the Borrower and for the
Borrower's account, the proceeds of Loans made by the Lenders to the Borrower
pursuant to this Agreement to such Person or Persons as the Borrower shall
direct, whether in writing or orally.
CONFLICT OF TERMS. The provisions of the other Loan Documents and any
Schedule of Accounts or Schedule of Inventory are incorporated in this
Agreement by this reference thereto. Except as otherwise provided in this
Agreement and except as otherwise provided in the other Loan Documents, if any
provision contained in this Agreement is in conflict with, or inconsistent
with, any provision of the other Loan Documents, the provision which affords
Agent, the Lender and First Union the greatest rights and remedies shall
control.
INJUNCTIVE RELIEF. The Borrower recognizes that, in the event the
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy of law may prove to be inadequate
relief to the Lenders. The Borrower therefore agrees that the Agent, if the
Agent so requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and sealed in their corporate names by their duly authorized
<PAGE> 70
officers as of the date first above written.
BORROWER:
DIXON TICONDEROGA COMPANY,
a Delaware corporation
By: /s/ Kenneth A. Baer
--------------------------------
Name: Kenneth A. Baer
Title: Treasurer
DIXON TICONDEROGA INC.,
an Ontario corporation
By: /s/ Kenneth A. Baer
--------------------------------
Name: Kenneth A. Baer
Title: Assistant Secretary
AGENT:
FIRST UNION COMMERCIAL CORPORATION,
a North Carolina corporation, as Agent
By: /s/ Kerry Maxwell
--------------------------------
Name: Kerry Maxwell
Title: Vice President
LENDERS:
FIRST UNION COMMERCIAL CORPORATION,
a North Carolina corporation, as Agent
By: /s/ Kerry Maxwell
--------------------------------
Name: Kerry Maxwell
Title: Vice President
Address:
200 South Biscayne Boulevard
11th Floor, MC:FL:6090
Miami, Florida 33131
<PAGE> 71
THE FIRST NATIONAL BANK OF BOSTON,
a national banking association
By: /s/ William C. Purinton
--------------------------------
Name: William C. Purinton,
Title: Vice President
Address:
Mail Stop 01-09-06
100 Federal Street
Boston, Massachusetts 02110
NATIONAL BANK OF CANADA,
a Canadian chartered bank
By: /s/ Frank P. Johnston
--------------------------------
Name: Frank P. Johnston
Title: Group Vice President
<PAGE> 72
Exhibit A
Borrowing Base/Availability
I. Borrowing Base. The "Borrowing Base" for the Revolving Credit Loans
and Letters of Credit at any date shall be the sum of the following as the
same exists on that date:
(a) eighty-five percent (85%) of the face amount of Eligible
Accounts; plus
(b) eighty-five percent (85%) of the face amount of Eligible
Foreign Accounts; plus
(b) (c) fifty percent (50%) of the FIFO cost of Eligible
Inventory consisting of raw materials and packaged finished
goods; plus
(d) forty percent (40%) of the FIFO cost of Eligible Inventory
consisting of unpackaged finished goods; plus
(e) forty percent (40%) of the FIFO cost of Eligible Inventory
consisting of packaging materials;
provided, however, that Lenders shall, subject to all of the terms and
conditions set forth in the Agreement (including section 2.1 thereof)
and the other Loan Documents, make additional Revolving Credit Loans
which exceed the Borrowing Base (each an "Overadvance" and collectively,
the "Overadvances") to Borrower from time to time from the Closing Date
until September 30, 1996, in an aggregate amount at any one time
outstanding not to exceed Three Million Five Hundred Thousand Dollars
($3,500,000) (the "Overadvance Facility");
and provided, further, that the aggregate amount of Revolving Credit
Loans shall not exceed the following sublimits which can be advanced
against the following categories of Collateral: (i) against Educational
Supplies Distributor Accounts, the sublimit is the lesser of forty per-
cent (40%) of all Accounts or Nine Million U.S. Dollars ($9,000,000) at
any time outstanding, (ii) against Eligible Foreign Accounts, the
sublimit is One Million Dollars ($1,000,000), (iii) against Eligible
Inventory, the sublimit is Sixteen Million U.S. Dollars ($16,000,000),
and (iv) against Eligible Inventory of packaging materials, the sublimit
is Eight Hundred Thousand Dollars ($800,000).
If the results of any two (2) consecutive field audits conducted
by the Agent reveal a Dilution Percentage equal to or greater than seven
percent (7%), the Agent reserves the right, in its sole discretion, to reduce
the foregoing advance rates applicable to Eligible Accounts and Eligible
Foreign Accounts from time to time upon any increase occurring in the Dilution
Percentage of the Eligible Accounts or Foreign Eligible Accounts. No such
reduction shall establish a custom, and each such modification shall become
effective immediately for purposes of calculating new Loans hereunder.
The Agent may, in its sole discretion, at any time or times after
the Closing Date, decrease the ratio (i.e., advance rate) of its Loans against
Eligible Accounts, Eligible Foreign Accounts or Eligible Inventory for any
reason the Agent shall deem necessary without establishing a custom, and each
such decrease shall become effective immediately for purposes of calculating
the new Loans hereunder.
<PAGE> 73
In addition, the Agent may, at any time or times after the Closing
Date, establish one or more reserves against each category of the Borrowing
Base in its sole discretion.
Without limiting the generality of the foregoing, the Agent
intends to establish the following reserves against the Borrowing Base:
A. Until such time as the Subordinated Debt shall have been paid
in full and completely discharged, the Agent will establish a reserve
against the Borrowing Base in order to assure that there is sufficient
Availability to fund each required principal payment of the Subordinated
Debt. This reserve shall be established and maintained by adding
thereto, on the first day of each calendar month, an amount equal to
one-twelfth (1/12) of the next succeeding installment of principal
required to be paid on the Subordinated Debt (or in the amount of the
entire principal balance of the Subordinated Debt if the maturity
thereof falls within the following 12-month period) and by reducing such
accumulated reserve on the date of each principal payment of
Subordinated Debt by the amount of the principal payment so made. As an
example of the operation of this reserve, on August 1, 1996 and on the
first day of each month thereafter through and including July 1, 1997,
the Agent will establish a reserve equal to one-twelfth (1/12) of
$3,325,000 (the principal amount due on August 1, 1997) and, if and when
the full principal installment of $3,325,000 is paid, by reducing the
reserve by the amount of such payment; and on August 1, 1997, the Agent
will again and monthly thereafter establish such a reserve to assure
sufficient Availability for the payment due on August 1, 1998, and so
on. Such reserves have been, and will continue to be, established to
assure sufficient Availability for the payment due on August 1, 1996.
B. From and after the Closing Date and until a Final Disposition
(as hereinafter defined) in the litigation styled (i) The Dixon Venture
et al v. The Joseph Dixon Crucible Company et al, Superior Court of New
Jersey, Law Division: Hudson County, Docket No. L-058299-86 (the "ECRA
Case"), (ii) The Dixon Venture v. The Joseph Dixon Crucible Company,
Dixon Ticonderoga Company, Dixon Mill Associates I, Dixon Mill
Associates II and Dixon Mill Associates III, United States District
Court, Northern District of New Jersey (Case No. 92-4209 (WGB)) (the
"CERCLA Case"), and (iii) all other litigation now pending or hereafter
brought against the Borrower involving some or all of the facts of the
ECRA Case or the CERCLA Case, the Agent will increase by $100,000 per
month, beginning July 31, 1996, the $800,000 reserve against the Borrow-
ing Base, until such reserve is equal to $3,300,000. After a Final
Disposition of all such litigation, the Agent will eliminate such
reserve upon the Borrower's payment of all amounts called for by the
Final Disposition. As used herein, the term "Final Disposition" with
respect to a particular case shall mean a final judgment of the courts
(including appellate courts) in the case from which no further appeals
are possible or a final settlement of the particular case with all
parties unconditionally releasing each other from all liabilities and
obligations arising out of the subject matter of, or claims made in, the
case (except for liability for performance of any agreement entered into
in connection with such settlement).
<PAGE> 74
II. Availability. "Availability" at any date shall be the Borrowing
Base at such date plus the Overadvance Facility less the sum of the following
as the same exist on that date: (a) one hundred percent (100%) of the
aggregate amount of all outstanding Revolving Credit Loans; plus (b) one
hundred percent (100%) of the aggregate amount of all undrawn Standby Letters
of Credit issued pursuant to section 2.1.1 of the Agreement; plus (c) fifty
percent (50%) of the aggregate amount of all undrawn Trade Letters of Credit
issued pursuant to section 2.1.1 of the Agreement; plus (d) (i) one hundred
percent (100%) of all outstanding Spot Foreign Exchange Contracts, and (ii)
twenty percent (20%) of all outstanding Forward Foreign Exchange Contracts
until two (2) days prior to the value date, at which time, the reserve shall
equal one hundred percent (100%) plus (e) one hundred percent of the amount
which the Agent, in its sole discretion, determines to be the aggregate amount
of the "Loss", "Settlement Amount" and "Unpaid Amount", as such terms are
defined in the Interest Rate Swap Agreement.
<PAGE>
=============================================
$7,750,000.08
=============================================
AMENDED AND RESTATED TERM LOAN AGREEMENT
by and among
DIXON TICONDEROGA COMPANY,
a Delaware corporation,
and
DIXON TICONDEROGA INC.,
an Ontario corporation,
(collectively, the "Borrower")
and
FIRST UNION COMMERCIAL CORPORATION,
a North Carolina corporation,
and
FIRST NATIONAL BANK OF BOSTON,
a national banking association,
and
NATIONAL BANK OF CANADA,
a Canadian chartered bank
(collectively, the "Lenders")
and
FIRST UNION COMMERCIAL CORPORATION,
as "Agent"
=============================================
July 10, 1996
=============================================
<PAGE> i
TABLE OF CONTENTS
Page
SECTION 1 - DEFINITIONS
Defined Terms 2
UCC Terms 4
SECTION 2 - TERM LOAN
Term Loan 4
SECTION 3 - PAYMENTS
Payments 4
Interest Rate 4
Principal Payments 8
Receipt of Payments 8
Application of Payments and Collections 9
Maximum Rate of Interest 9
SECTION 4 - SECURITY FOR THE OBLIGATIONS
Security Interest in the Collateral 10
Supplemental Documentation 10
Cross-Collateralization 10
SECTION 5 - CLOSING
Closing 10
Conditions of Term Loan 10
Term Notes 10
Revolving Credit Agreement 11
Property Insurance 11
Title Insurance 11
Additional Documentation 11
No Waiver of Conditions Precedent 11
SECTION 6 - REPRESENTATIONS AND WARRANTIES 11
SECTION 7 - AFFIRMATIVE COVENANTS 11
SECTION 8 - NEGATIVE COVENANTS 12
SECTION 9 - TERM OF AGREEMENT
Term 12
Effect of Termination of Revolving Credit Loan 12
SECTION 10 - EVENTS OF DEFAULT
Events of Default 12
Acceleration of the Obligations 12
SECTION 11 - RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT
Rights and Remedies 13
Application of Proceeds 13
Rights and Remedies Cumulative; Non-Waiver; Etc. 13
<PAGE> ii
SECTION 12 - TAXES 14
SECTION 13 - MISCELLANEOUS
Survival of Agreements 14
Governing Law; Waiver of Jury Trial 15
Notice 15
Amendment 15
Severability 15
Entire Agreement 15
Binding Effect 15
Captions 16
Conflict of Terms 16
Injunctive Relief 16
SECTION 14 - AGENCY 16
<PAGE> 1
AMENDED AND RESTATED TERM LOAN AGREEMENT
AMENDED AND RESTATED TERM LOAN AGREEMENT is dated as of July 10, 1996,
among DIXON TICONDEROGA COMPANY, a Delaware corporation ("DTC"), and DIXON
TICONDEROGA INC., an Ontario corporation ("DTI") (DTC and DTI may sometimes
collectively be referred to hereinafter as "Borrower"), and FIRST UNION
COMMERCIAL CORPORATION, a North Carolina corporation ("FUCC"), THE FIRST
NATIONAL BANK OF BOSTON, a national banking association ("Bank of Boston"),
and NATIONAL BANK OF CANADA, a Canadian chartered bank ("NBC") (FUCC, Bank of
Boston and NBC are sometimes individually referred to hereinafter as a
"Lender" and collectively as the "Lenders"), and FIRST UNION COMMERCIAL
CORPORATION, a North Carolina corporation, as Agent (hereinafter, in such
capacity, together with any successor thereto in such capacity, referred to as
the "Agent") to the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower and FUCC are parties to a Revolving Credit Loan
and Security Agreement, dated as of May 12, 1994 (the "Existing Credit
Agreement"), and a Term Loan Agreement ("Existing Term Agreement") of that
same date, which agreements have been modified by a First Modification of
Revolving Credit Loan and Security Agreement and Term Loan Agreement dated as
of February 10, 1995; a Second Modification of Revolving Credit Loan and
Security Agreement and Term Loan Agreement dated as of June 30, 1995; a Third
Modification of Revolving Credit Loan and Security Agreement dated as of July
31, 1995; and Fourth Modification of Revolving Credit Loan, Foreign Exchange
and Security Agreement dated as of May 24, 1996;
WHEREAS, the Borrower has requested an increase in the amount of the
financial accommodations which FUCC has extended to it, by amending and
restating the Existing Credit Agreement; and
WHEREAS, FUCC has assigned to Lenders the promissory notes evidencing
the loans made to Borrower pursuant to the Existing Credit Agreement and the
Existing Term Agreement, as those two agreements have been modified by the
above-described modification, and has assigned to Agent the Mortgages securing
those loans, along with all the other loan documents in connection therewith;
and
WHEREAS, the Lenders are willing to extend increased financial
accommodations to the Borrower in the form of a $40,000,000 revolving line of
credit and letter of credit facility in accordance with, and subject to, the
terms and conditions set forth in an Amended and Restated Revolving Credit
Loan and Security Agreement ("Revolving Credit Agreement"); and
WHEREAS, the Lenders are willing to amend and restate the term debt by
extending loans to the Borrower in the aggregate principal amount of
$7,750,000.08, being made in accordance with, and subject to, the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants,
agreements, terms and conditions contained herein, the parties hereto hereby
agree as follows:
<PAGE> 2
SECTION 1 - DEFINITIONS
DEFINED TERMS. All capitalized terms not defined in this
Agreement shall have the meanings given to such terms in the Revolving Credit
Agreement. For purposes of this Agreement, in addition to the terms defined
elsewhere in this Agreement, the following terms shall have the meanings set
forth below (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Agreement" or "this Agreement" shall include all amendments,
restatements, modifications and supplements hereto and shall refer to this
Agreement as the same may be in effect at the time such reference becomes
operative.
"Environmental Agreement" shall mean the Ratification of Environmental
Compliance and Indemnification Agreement executed in connection herewith.
"Event of Default" shall have the meaning specified in section 10
hereof.
"Lender" or "Lenders" shall have the meanings assigned to those terms in
the introduction to this Agreement.
"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; 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 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.
"Loan Documents" shall mean and collectively refer to this Agreement,
the Revolving Credit Agreement, the Environmental Agreement, the Notes, the
Mortgages, the Letter of Credit Agreement, the Foreign Exchange Agreement, all
Foreign Exchange Contracts, the Interest Rate Swap Agreement, the
Intercreditor Agreement, all documents heretofore, now or hereafter executed
by or in behalf of Borrower and/or delivered to FUCC or Lenders or Agent with
respect to this Agreement, all Supplemental Documentation and any and all
other documents and agreements described as "Loan Documents" in section 1.1 of
the Revolving Credit Agreement.
"Mortgages" shall mean, collectively, those Mortgage and Security
Agreements and Deeds of Trust dated as of May 12, 1994, executed by DTC, in
favor of FUCC, securing repayment of the Obligations, or any portion thereof,
which Mortgages encumber the Mortgaged Property and have been assigned to
Agent, and as
<PAGE> 3
thereafter modified and amended, collectively, by the Mortgage Modification
Agreements of even date herewith, together with any renewals, substitutions or
extensions thereof, in whole or in part.
"Mortgaged Property" shall mean the real property of DTC, described on
Schedule I attached hereto and made a part hereof, together with all personal
property of Borrower or either of them located on or used in connection with
such real property, all of which is encumbered by the Mortgages.
"Obligations" shall have the meaning given to such term in the Revolving
Credit Agreement.
"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 rates 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" under this Agreement and the other
Loan Documents shall be 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.
"Prime Tranche" shall mean that portion of the Term Loan, if any,
accruing interest at the Adjusted Prime Rate.
"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 Amended and
Restated Revolving Credit Loan and Security Agreement dated of even date
herewith by and between Borrower, Lenders, and Agent, pursuant to which the
Lenders shall have extended credit facilities to Borrower in the aggregate
maximum principal amount of $40,000,000, as the same may be amended, modified
or restated from time to time.
"Supplemental Documentation" shall mean all agreements, instruments,
documents, financing statements, mortgages, deeds of trust, certificates of
title and other written matter necessary or requested by the Agent to perfect
and maintain perfected the Agent's security interest in the Mortgaged Property
and to consummate the transactions contemplated by this Agreement.
"Term Loan" shall mean, collectively, the three term loans made by
Lenders to Borrower pursuant to this Agreement, in the aggregate principal
amount of $7,750,000.08, which term loans are evidenced by the Term Notes.
<PAGE> 4
"Term Notes" shall mean the three promissory notes of even date
herewith, made, executed and delivered to Lenders by Borrower, evidencing the
Term Loan, copies of which are attached to this Agreement as Exhibits A-1, A-
2, and A-3, together with any amendments, modifications and supplements
thereto, and any renewals, substitutions or extensions thereof, in whole or in
part.
"Title Insurance Commitments" shall have the meaning specified in
section 5.2.4 hereof.
UCC TERMS. All other terms contained in this Agreement shall,
when the context so indicates, have the meanings provided for by the Uniform
Commercial Code of the State of Florida, and in any other jurisdiction, as
applicable, to the extent the same are used or defined therein.
SECTION 2 - TERM LOAN
TERM LOAN. Subject to all of the terms and conditions set forth
in this Agreement and the other Loan Documents, Lenders agree to make a Term
Loan to the Borrower on the Closing Date as evidenced by the following:
(a) Amended and Restated Term Note in the face amount of
$3,900,768.79 in favor of FUCC;
(b) Amended and Restated Term Note in the face amount of
$2,567,187.53 in favor of Bank of Boston; and
(c) Amended and Restated Term Note in the face amount of
$1,282,043.76 in favor of NBC.
The Term Loan shall be subject to the provisions of this Agreement, and shall
be payable in accordance with the terms and provisions of the Term Notes and
this Agreement.
SECTION 3 - PAYMENTS
PAYMENTS. All Obligations of Borrower to Lenders shall be
repayable at Agent's offices at 200 South Biscayne Boulevard, 11th Floor; MC:
FL6090, Miami, Florida 33131, or at such other place or places as Agent may
designate from time to time. That portion of the Obligations consisting of
amounts payable on account of the Term Loan, shall be payable by Borrower to
Agent in accordance with the terms of the Term Notes and of this Agreement.
The balance of the Obligations, if any, shall be payable by Borrower to Agent
as and when provided in this Agreement, the Mortgages or the other Loan
Documents or upon the Agent's demand, whichever is earlier.
INTEREST RATE. Borrower shall pay Interest to Lenders on the
Principal amount outstanding under the Term Notes at a rate determined in
accordance with Subsections 3.2(a) or (b) below (the "Applicable Interest
Rate").
<PAGE> 5
(a) Prime Rate Option. Pursuant to the Prime Rate Option,
interest shall accrue and be payable 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 is changed. 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 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 calculated and 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 and be payable 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 Business Day of each calendar month, irre-
spective 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 Agreement and the Revolving Credit 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 3.2(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 the Agent 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) Eurodollar
Business Day prior to the effective date of any conversion to or renewal of 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);
(2) the amount and type of conversion or renewal; and (3) the length of the
applicable LIBOR Period. If, within the time period required under this
Subsection 3.2(c), the Agent 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. Upon
receipt of an Interest Rate Election Notice from Borrower, the Agent shall
immediately notify the Lenders of any conversion or renewal, and the date(s)
thereof.
(d) Restrictions on LIBOR Option. Notwithstanding Subsection
3.2(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:
<PAGE> 6
(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 outstanding 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 there-
for shall be permitted during the continuance of an Event of Default, or event
which, with the giving of notice or passage of time, or both, would constitute
an Event of Default;
(iii) Borrower may not elect an interest rate option for a LIBOR
Tranche with a LIBOR Period extending beyond the Commitment Termination Date;
(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. The Agent determines (which determination 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. The Agent determines (which determination 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 the Agent shall give Borrower prompt notice thereof, and so long as such
condition remains in effect, Lenders shall be under no obligation to make or
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 Agreement 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 a Prime Tranche;
<PAGE> 7
(vi) notwithstanding any other provision in this Agreement to
the contrary, in the event that Agent determines that it is unlawful for
Lenders (A) to honor their 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 the Agent shall promptly
notify Borrower thereof and Lenders' obligation to convert any portion of the
Term Loan to a LIBOR Tranche or renew any previously converted LIBOR Tranche
hereunder shall be suspended until such time as Lenders may again make and
maintain LIBOR loans, and any LIBOR Tranche shall be converted into a Prime
Tranche in accordance with Subsection 3.2(c); and
(vii) if any LIBOR Tranche is to be converted pursuant to
clause (vi) of this Subsection 3.2(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 the Agent
gives notice to Borrower that 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) a Prime
Tranche.
(e) Additional Compensation for LIBOR Tranche Conversion. Upon
notice to Borrower from the Agent, Borrower shall pay to the Agent such amount
as the Agent determines shall be sufficient to compensate Lenders 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 the Agent pursuant to the provisions
of this Agreement or the Revolving Credit Agreement; or
(ii) any failure by Borrower to borrow or convert a LIBOR
Tranche to a Prime Tranche on the date for borrowing or converting, as speci-
fied in the relevant notice under this Section 3.2;
such compensation to include, without limitation, an amount equal to, if any,
(X) any loss sustained by any Lender(s) as a result of reinvesting or
redeploying any amount prepaid at a rate lower than such 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. Agent's
determination of any such amounts, as specified in Agent's notice to Borrower,
shall be conclusive absent bad faith or manifest error.
<PAGE> 8
(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 are necessary to compensate Lenders as provided in Subsection 3.2(e)
hereof, as the Agent may upon request advise Borrower; provided, however, that
any estimate communicated by the Agent to Borrower of the losses, costs and
expenses resulting from such payment or prepayment shall not be binding upon
Lenders, who will subsequently adjust the estimated amount as determined
pursuant to Subsection 3.2(e) hereof. Each such payment or prepayment shall
be applied first to reimburse Lender for any losses sustained by Lenders as
provided in Subsection 3.2(e) hereof.
PRINCIPAL PAYMENTS. In addition to and concurrently with the
monthly payments of Interest, Borrower shall pay to Agent monthly installments
of Principal in an amount equal to (a) $125,000 from June 1, 1996, through May
1, 1998; and (b) $138,888.92 from June 1, 1998,through May 1, 2001.
RECEIPT OF PAYMENTS.
(a) Borrower as Trustee for Lenders. In the event Borrower (or
any of its Affiliates, shareholders, directors, officers, employees or agents)
shall receive any monies, checks, notes, drafts or any other items of payment
relating to and/or proceeds of the Mortgaged Property, Borrower agrees with
Lenders and Agent that Borrower shall hold all items of payment in trust for
Lenders and as the property of Lenders, separate from the funds of Borrower,
and no later than the first Business Day following the receipt thereof,
Borrower shall deliver the same or cause the same to be deposited with Agent,
together with such endorsements or executions as may be necessary to collect
such monies or sums evidenced by any such items or instruments of payment,
which monies shall be applied in accordance with the terms of this Agreement.
(b) Interest Computation. For the purpose of computing interest
hereunder, all such items of payment shall be deemed applied by the Agent on
account of the Obligations upon the earlier of (i) upon receipt by Agent in
Miami, Florida, if received in immediately available funds by federal funds
bank wire transfer or (ii) one (1) Business Day after such payment is received
by Agent in Miami, if received by any other method of payment; provided,
however, that no such item received by the Agent shall constitute payment to
Lenders unless such item is actually collected by the Agent. Each such item
of payment shall, for purposes of determining the occurrence of an Event of
Default, be deemed received upon actual receipt by the Agent, unless the same
is subsequently dishonored for any reason whatsoever.
<PAGE> 9
APPLICATION OF PAYMENTS AND COLLECTIONS. Borrower irrevocably
waives the right to direct the application of any and all payments and
collections at any time or times hereafter received by the Agent from or on
behalf of Borrower, and Borrower does hereby irrevocably agree that the Agent
and the Lenders shall have the continuing exclusive right to apply and to
reapply any and all such payments and collections received at any time or
times hereafter by the Agent or the Lenders against the Obligations, in such
manner as the Agent or the Lenders, in their sole discretion, may determine,
notwithstanding any entry by the Agent or the Lenders upon any of their
respective books and records. Notwithstanding the foregoing, provided no
Event of Default shall have occurred, that portion of each regularly scheduled
installment required pursuant to the Term Notes which is to have been
allocated to principal thereunder shall be applied in reduction of the
principal balance of the Term Notes. Notwithstanding anything to the contrary
contained herein or in any other Loan Document, all sums received by Agent in
connection with the disposition of the Mortgaged Property shall be applied in
accordance with the provisions of section 11 of this Agreement.
MAXIMUM RATE OF INTEREST. Notwithstanding anything to the
contrary contained in this Agreement or the Term Notes, if at any time until
payment in full of the Term Notes the rate of interest applicable thereunder
or hereunder (the "Stated 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 or under the
Term Notes shall be equal to the Maximum Lawful Rate, provided, however, that
if at any time thereafter the Stated 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 Agent from the making
of advances hereunder is equal to the total interest which Agent would have
received had the Stated Rate been (but for the operation of this paragraph)
the interest rate payable since the date of the Term Notes. Thereafter, the
interest rate payable hereunder shall be the Stated Rate unless and until the
Stated Rate again exceeds the Maximum Lawful Rate, in which event this
paragraph shall again apply. In no event shall the total interest received by
Agent pursuant to the terms hereof exceed the amount which Agent and Lenders
could lawfully have received had the interest due hereunder or under the Term
Notes 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 Agent and Lenders have received interest hereunder in
excess of the Maximum Lawful Rate, Agent and Lenders shall promptly apply such
excess first to any interest due and not yet paid under the Term Notes, then
to the principal amount of the Term Notes, then to any interest due and not
yet paid under the Revolving Credit Loans evidenced by the Revolving Credit
Notes, then to the principal amount of the Revolving Credit Notes, and there-
after shall refund any excess to Borrower.
<PAGE> 10
SECTION 4 - SECURITY FOR THE OBLIGATIONS
SECURITY INTEREST ON COLLATERAL. To secure the prompt payment
and performance of the Obligations, Borrower has granted to Agent a Lien and
continuing general security interest in and to the Mortgaged Property.
SUPPLEMENTAL DOCUMENTATION. At the Agent's request, Borrower
shall execute and/or deliver to the Agent, at any time or times hereafter, all
Supplemental Documentation that the Agent may request, in form and substance
acceptable to the Agent, and pay all charges, expenses and fees the Agent may
incur in filing any of the Supplemental Documentation, and all taxes relating
thereto. Borrower hereby irrevocably makes, constitutes and appoints the
Agent (and all Persons designated by the Agent for that purpose) as Borrower's
true and lawful agent and attorney in-fact to sign the name of Borrower on any
of the Supplemental Documentation and to deliver any of the Supplemental
Documentation to such Persons as the Agent, in its sole discretion, may elect.
Borrower ratifies and approves all acts of such attorney and agrees that such
power is irrevocable so long as any Obligations of Borrower are outstanding.
Borrower agrees that a carbon, photographic, photostatic, or other
reproduction of this Agreement or a financing statement is sufficient as a
financing statement and may be filed by the Agent in any filing office.
CROSS-COLLATERALIZATION. The Mortgaged Property, the Collateral
and all other collateral which the Agent may at any time acquire from any
other source in connection with the Obligations shall constitute collateral
for all Obligations without apportionment or designation as to particular
Obligations, and all Obligations, howsoever and whensoever incurred, shall be
secured by all of the Mortgaged Property. The terms and provisions of Section
4.5 of the Revolving Credit Agreement are incorporated into this Agreement by
this reference thereto.
SECTION 5 - CLOSING
CLOSING. The closing hereunder shall take place on the date and
at the time of the execution of this Agreement, or at such other time as the
parties hereto shall mutually agree.
CONDITIONS OF TERM LOAN. The obligation of Lenders to disburse
the Term Loan under this Agreement is subject to: (a) the accuracy and
correctness of the representations and warranties of Borrower contained herein
and in the other Loan Documents and in any certificate delivered pursuant to
this Agreement or the other Loan Documents; (b) the performance by Borrower of
its agreements contained herein and in the other Loan Documents; and (c) the
satisfaction of all of the following conditions:
Term Notes. The Term Notes, in form and substance
satisfactory to the Lenders and the Agent and their special counsel, shall have
been duly authorized, executed and delivered by Borrower, shall be in full
force and effect and no default shall exist thereunder.
<PAGE> 11
Revolving Credit Agreement. All of the conditions of
closing set forth in Section 5 of the Revolving Credit Agreement shall have
been satisfied in full and the closing under the Revolving Credit Agreement
shall have taken place simultaneously with the closing under this Agreement.
Property Insurance. The Agent shall have received certifi-
cates of insurance upon the Mortgaged Property in accordance with the
requirements of the Mortgages.
Title Insurance. Agent shall have received commitments
(the "Title Insurance Commitments") to issue endorsements to the existing
mortgagee's title insurance policies, which Title Insurance Commitments shall
(a) have been issued by Lawyers' Title Insurance Corporation, (or by Old
Republic National Title Insurance Company, with regard to the Tennessee
property), (b) insure to Agent that the Mortgages continue to be first liens
on the Mortgaged Property, (c) be in an aggregate amount not less than those
amounts reflected on the existing mortgagee policies, (d) have had all
requirements and conditions precedent therein satisfied, and (e) be subject
only to such matters as are acceptable to Agent, in its sole and absolute
discretion. The Title Insurance Commitments shall contain such endorsements
as Agent may, in its sole discretion, deem appropriate or desirable.
Additional Documentation. Agent shall have received any
and all documentation which it shall deem necessary and proper in connection
with the Mortgages, including, but not limited to, affidavits of Borrower, in
form and content acceptable to Agent, containing such representations and
warranties as Agent shall deem proper.
NO WAIVER OF CONDITIONS PRECEDENT. If the Lenders make the Term
Loan hereunder prior to the fulfillment of any of the conditions precedent set
forth in section 5.2 hereof, the making of the Term Loan shall constitute only
an extension of time for the fulfillment of such condition and not a waiver
thereof, and Borrower shall thereafter use its best efforts to fulfill each
such condition promptly.
SECTION 6 - REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Agreement and to make the
Term Loan, Borrower hereby restates and reaffirms to Lenders and Agent all of
the warranties and representations made by Borrower in the Mortgages, the
Existing Credit Agreement, the Existing Term Agreement, and all other Loan
Documents, which warranties and representations, by this reference, are
incorporated herein and made a part hereof, and upon which warranties and
representations Lenders and Agent shall be entitled to rely.
SECTION 7 - AFFIRMATIVE COVENANTS
Until payment in full of all Obligations, Borrower covenants and agrees
that, unless Consent is given in accordance with the terms and provisions of
the Revolving Credit Agreement, Borrower will perform all Obligations,
agreements and covenants required to be performed by it udner the terms of this
<PAGE> 12
Agreement,the Mortgages, the Revolving Credit Agreement and the other Loan
Documents and any other agreements now or hereafter existing or entered into
between Borrower, the Lenders and Agent.
SECTION 8 - NEGATIVE COVENANTS
Until payment in full of all Obligations, Borrower covenants and agrees
that, unless Consent is given in accordance with the terms and provisions of
the Revolving Credit Agreement, Borrower will not violate any of the negative
covenants contained in this Agreement, the Mortgages, the Revolving Credit
Agreement or any other Loan Document, which covenants, by this reference, are
incorporated herein and made a part hereof.
SECTION 9 - TERM OF AGREEMENT
TERM. The provisions of this Agreement shall continue in full
force and effect until the Maturity Date (as such term is defined in the Term
Notes).
EFFECT OF TERMINATION OF REVOLVING CREDIT LOAN. Upon the
Commitment Termination Date, all Obligations of Borrower to Lenders or Agent,
whether or not incurred under this Agreement, and notwithstanding any term or
credit allowed by any instrument evidencing the Obligations, shall become
immediately due and payable without notice, demand, presentment, protest or
notice of any kind, all of which are hereby waived by Borrower. Notwith-
standing any such termination, until all Obligations of every nature
whatsoever shall have been fully paid and satisfied, the Agent shall be
entitled to retain its Liens in the Mortgaged Property, and Borrower shall
continue to comply fully with the terms of this Agreement and the Mortgage,
and shall turn over all proceeds of the Mortgaged Property to the Agent, and
the Agent shall retain all of its other rights and remedies hereunder.
SECTION 10 - EVENTS OF DEFAULT
EVENTS OF DEFAULT. The occurrence of any one or more Events of
Default under the Notes, Mortgages, this Agreement, Revolving Credit Agreement
or any other Loan Document shall constitute an "Event of Default" under this
Agreement.
ACCELERATION OF THE OBLIGATIONS. (a) Upon and after an Event of
Default (other than an Event of Default specified in section 13.1(h) or (i) of
the Revolving Credit Agreement), all of the Obligations may, at the option of
the Agent or the Required Lenders (as that term is defined in the Revolving
Credit Agreement), and without demand, notice or legal process of any kind, be
declared, and immediately shall become, due and payable, and (b) upon the
occurrence of an Event of Default specified in section 13.1(h) or (i) of the
Revolving Credit Agreement, all of the Obligations shall automatically become
due and payable, without demand, notice or legal process of any kind, anything
in the Notes or other contract evidencing any such Obligation or in the Loan
Documents or in any other agreement to the contrary notwithstanding.
<PAGE> 13
SECTION 11 - RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT
RIGHTS AND REMEDIES. Upon and after the occurrence of any Event
of Default, the Lenders and Agent shall have all of the rights and remedies
which the Lenders and Agent may have under the Notes, the Mortgages, this
Agreement, the Revolving Credit Agreement, the other Loan Documents, and
applicable law, all of which may be exercised by Lenders or Agent with or
without further notice to Borrower.
APPLICATION OF PROCEEDS. The net cash proceeds resulting from the
collection, liquidation, sale, lease or other disposition of the Mortgaged
Property shall be applied first to the expenses (including all reasonable
attorneys' fees) of retaking, holding, storing, processing and preparing the
Mortgaged Property for sale, selling or liquidating the Mortgaged Property and
collecting such proceeds, and then to the satisfaction of all Obligations as
set forth in Section 14.2 of the Revolving Credit Agreement, the provisions of
which are incorporated herein by reference. Borrower shall be liable to
Lenders and Agent and shall pay to Lenders and Agent on demand any deficiency
which may remain after such sale, disposition, collection or liquidation of
the Mortgaged Property. The Agent shall remit to Borrower or the Person
entitled thereto any surplus remaining after all Obligations and all other
obligations of Borrower to Lenders and Agent under the other Loan Documents
have been paid in full. If any of the Mortgaged Property shall require
repairs, maintenance, preparation or the like, or is in an unfinished state,
the Agent shall have the right, but shall not be obligated to perform such
repairs, maintenance, preparation or completion for the purpose of putting the
same in such saleable form as the Agent shall deem appropriate, but the Agent
shall have the right to sell or dispose of the Mortgaged Property without such
processing.
RIGHTS AND REMEDIES CUMULATIVE; NON-WAIVER; ETC. The enumeration
of Lenders' and Agent's rights and remedies set forth in this Agreement is not
intended to be exhaustive and the exercise by Lenders or Agent of any right or
remedy shall not preclude the exercise of any other rights or remedies, all of
which shall be cumulative, and shall be in addition to any other right or
remedy given hereunder, under the Mortgages, Loan Documents or under any other
agreement between Borrower and Lenders or Agent or which may now or hereafter
exist in law or in equity or by suit or otherwise. No delay or failure to
take action on the part of Lenders or Agent in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or
shall be construed to be a waiver of any Event of Default. No course of
dealing between Borrower and Lenders or Agent or the agents or employees of
any of them shall be effective to change, modify or discharge any provision of
this Agreement or to constitute a waiver of any Event of Default. Agent shall
not, under any circumstances or in any event whatsoever, have any liability
for any error, omission or delay of any kind occurring in the liquidation of
the Mortgaged Property or for any damages resulting therefrom except damages
directly attributable to the Agent's gross negligence or willful misconduct.
<PAGE> 14
SECTION 12 - TAXES
Whether or not the transaction contemplated by this Agreement shall be
consummated, Borrower shall indemnify and save Lenders and Agent harmless from
and against any and all liability and loss with respect to or resulting from
the nonpayment or delayed payment of any and all recording taxes, intangible
personal property, documentary stamp and other similar taxes, fees and
excises, if any, including any interest and penalties, which may be, or be
determined to be, payable in connection with the transactions contemplated by
this Agreement or in any modification hereof or thereof.
SECTION 13 - MISCELLANEOUS
SURVIVAL OF AGREEMENTS. All agreements, covenants,
representations and warranties contained herein or made in writing by or on
behalf of Borrower in connection with the transactions contemplated hereby
shall survive the execution and delivery of this Agreement, the Mortgages and
the other Loan Documents. No termination or cancellation (regardless of cause
or procedure) of this Agreement shall in any way affect or impair the powers,
obligations, duties, rights and liabilities of the parties hereto in any way
with respect to (a) any transaction or event occurring prior to such
termination or cancellation, (b) the Collateral, or (c) any of Borrower's
undertakings, agreements, covenants, warranties and representations contained
in this Agreement and the other Loan Documents and all such undertakings,
agreements, covenants, warranties and representations shall survive such
termination or cancellation. Borrower further agrees that to the extent
Borrower makes a payment or payments to Agent, which payment or payments or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy, insolvency or similar state or federal
law, common law or equitable cause, then, to the extent of such payment or
repayment, the Obligation or part thereof intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
received by Agent.
<PAGE> 15
GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED,
IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW
PROVISIONS) OF THE STATE OF FLORIDA. AS PART OF THE CONSIDERATION FOR NEW
VALUE THIS DAY RECEIVED, BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN DADE COUNTY, FLORIDA, AND CONSENTS THAT
ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO
BORROWER AT THE ADDRESS STATED IN SECTION 13.3 HEREOF AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR
THREE (3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE
PREPAID. EACH OF BORROWER AND LENDER HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. BORROWER WAIVES ANY OBJECTION
WHICH BORROWER MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR
FORUM NON CONVENIENS TO ANY SUIT OR PROCEEDING INSTITUTED BY LENDERS OR AGENT
UNDER THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS IN ANY STATE OR FEDERAL COURT
LOCATED WITHIN DADE COUNTY, FLORIDA, AND CONSENTS TO THE GRANTING OF SUCH
LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN
THIS SECTION 13.2 SHALL AFFECT THE RIGHT OF THE LENDERS OR AGENT TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE
LENDERS OR AGENT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH HAS JURISDICTION OVER
BORROWER OR ITS PROPERTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDERS
AND AGENT TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, MAKE THE
TERM LOAN AND EXTEND OTHER FINANCIAL ACCOMMODATIONS CONTEMPLATED HEREUNDER AND
THEREUNDER.
NOTICE. All notices and other communications hereunder shall be
delivered in accordance with the provisions of section 17.3 of the Revolving
Credit Agreement.
AMENDMENT. This Agreement and the other Loan Documents cannot be
amended, changed, discharged or terminated orally, but only in accordance with
the terms and provisions of the Revolving Credit Agreement.
SEVERABILITY. To the extent any provision of this Agreement is
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
ENTIRE AGREEMENT. This Agreement, the Notes, the Mortgages, the
Revolving Credit Agreement and the other Loan Documents, certificates and
instruments referred to herein constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede and
rescind any prior agreements relating to the subject matter hereof.
BINDING EFFECT. All of the terms of this Agreement and the other
Loan Documents, as the same may from time to time be amended, shall be binding
upon, inure to the benefit of and be enforceable by the respective successors
and assigns of Borrower, Lenders and Agent.
<PAGE> 16
CAPTIONS. The captions to the various sections and subsections of
this Agreement have been inserted for convenience only and shall not limit or
affect any of the terms hereof.
CONFLICT OF TERMS. The provisions of and obligations contained in
the Revolving Credit Agreement and other Loan Documents are incorporated in
this Agreement by this reference thereto. Except as otherwise provided in
this Agreement and except as otherwise provided in the other Loan Documents,
if any provision contained in this Agreement is in conflict with, or
inconsistent with, any provision of the other Loan Documents, the provision
contained in this Agreement shall control.
INJUNCTIVE RELIEF. Borrower recognizes that in the event Borrower
fails to perform, observe or discharge any of its obligations or liabilities
under this Agreement, any remedy of law may prove to be inadequate relief to
Lenders and Agent. Borrower therefore agrees that the Lenders and Agent, if
the Agent so requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
SECTION 14 - AGENCY
The provisions of and obligations contained in Section 16 of the
Revolving Credit Agreement are incorporated into this Agreement by this
reference thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and sealed in their corporate names by their duly authorized
corporate officers as of the date first above written.
BORROWER:
DIXON TICONDEROGA COMPANY, a Delaware
corporation
By: /s/ Kenneth A. Baer
--------------------------------
Kenneth A. Baer, Treasurer
DIXON TICONDEROGA INC., an Ontario
corporation
By: /s/ Kenneth A. Baer
--------------------------------
Kenneth A. Baer,
Assistant Secretary
<PAGE> 17
AGENT:
FIRST UNION COMMERCIAL CORPORATION, a
North Carolina corporation, as Agent for
all the Lenders
By: /s/ Kerry Maxwell
--------------------------------
Kerry Maxwell,
Vice President
LENDERS:
FIRST UNION COMMERCIAL CORPORATION, a
North Carolina corporation
By: /s/ Kerry Maxwell
--------------------------------
Kerry Maxwell,
Vice President
THE FIRST NATIONAL BANK OF BOSTON,
a national banking association
By: /s/ William C. Purinton
-------------------------------
William C. Purinton,
Vice President
NATIONAL BANK OF CANADA,
a Canadian chartered bank
By: /s/ Frank P. Johnston
--------------------------------
Name: Frank P. Johntson
Title: Group Vice President
<PAGE> 1
Principal Mutual Life Insurance Company
711 High Street
Des Moines, IA 50392-0800
July 3, 1996
Mr. Richard Asta
Chief Financial Officer
Dixon Ticonderoga Company
195 International Parkway
Heathrow, FL 32746-5036
Dear Mr. Asta:
Reference is made to those Senior Subordinated Note Agreements, each
dated as of July 1, 1989 (as amended from time to time referred to
herein singularly as the Note Agreement) by and between Dixon
Ticonderoga Company (the Company) and each of the purchasers listed on
Schedule I attached hereto (collectively, the Noteholders). Pursuant to
the Note Agreement, the Company issued, and the Noteholders purchased,
senior subordinated promissory notes of the Company (collectively, the
Notes) in the aggregate principal amount of $20,000,000.00 due August 1,
1999. Capitalized terms used but not defined herein shall have the
meanings described to them in the Note Agreement.
You have informed the Noteholders that you and First Union Commercial
Corporation (FUCC) are contemplating an increase in and syndication of
the Revolving Credit Loan and Security Agreement pursuant to which FUCC
makes up to an aggregate of $30,000,000 of revolving credit loans to the
Company and its subsidiary, Dixon Ticonderoga, Inc. (referred to herein
collectively with the Company as the Borrower) and the Term Loan
Agreement pursuant to which FUCC made a Term Loan to the Borrower in the
original principal amount of $10,000,000. You have further informed the
Noteholders that FUCC, as a condition to its execution and delivery of
the Credit Agreements, has required that the Noteholders acknowledge the
change in the Lender and amount of Revolving Credit Loans and agree to
amend Section 5.8 of the Note Agreement.
By the execution hereof by the Company and the holders of more than
sixty-six and two thirds (66 2/3rds) percent in aggregate principal
amount of the Notes outstanding as of the date hereof, the Company and
each Noteholder agrees and consents to the following amendment, but only
to the extent expressly provided herein, and subject to the terms and
conditions set forth below (collectively this Agreement).
1. Definitions. Section 8.1 of the Note Agreement is amended and
modified as follows:
A. The following definitions are amended in their entirety:
Lender shall mean First Union Commercial Corporation, a North
Carolina corporation, Bank of Boston, a national banking association and
National Bank of Canada, a Canadian chartered bank.
<PAGE> 2
Revolving Credit Agreement shall mean that certain Amended and
Restated Loan and Security Agreement dated as of July 10, 1996, between
the Company, Dixon Ticonderoga, Inc. and the Lender pursuant to which
the Lender has agreed to make up to an aggregate of $40,000,000 of
Revolving Credit Loans (as defined in the Revolving Credit Agreement),
and issue letters of credit for the account of the Company and Dixon
Ticonderoga, Inc.
Term Loan Agreement shall mean that certain Amended and Restated
Term Loan Agreement dated as of July 10, 1996, between the Company,
Dixon Ticonderoga, Inc. and the Lender pursuant to which the Lender has
made a Term Loan (as defined in the Term Loan Agreement) to the Company
and Dixon Ticonderoga, Inc. in the principal amount of 7,750,000.08.
2. Section 5.8 of the Note Agreement is amended and modified in its
entirety as follows:
5.8 Permitted Secured Indebtedness. The Company will not
create, assume or incur or in any manner be or become liable in respect
of Indebtedness secured by liens described in Section 5.10(f) and
Section 5.10(g) in excess of $52,000,000 in aggregate principal amount
outstanding.
3. Condition Precedent. The amendments and covenant granted by the
Note holders herein is expressly subject to and shall be effective at
such time as the Company and the holders of at least sixty-six and two
thirds percent (66 2/3%) in aggregate principal amount of the Notes
outstanding on the date hereof shall have executed this Agreement.
4. Representations of the Company. The Company, by its execution and
delivery of this Agreement, hereby represents and warrants to each
Noteholder as follows:
4.1 As of the date of this Agreement, no Default or Event of
Default under the Note Agreement exists or is continuing.
4.2 The representations and warranties of the Company referred to in
Section 3.1 of the Note Agreement are true and correct and complete in
all material respects as if made on the date hereof, except as to those
representations and warranties made as of a specific date, which are
true and correct and materially complete as of such date.
4.3 No dissolution proceeding with respect to the Company have
been commenced or are contemplated, and there has been no material
adverse change in the business, conditions or operations (financial or
otherwise) of the Company and its Restricted Subsidiaries, taken as a
whole since July 1, 1989, except as previously disclosed to the
Noteholders.
5. Default. The Company and the Noteholders agree that is any
representation or warranty of the Company set forth in this Agreement
shall provide to be false or misleading in any respect as of the time
when the same shall have been made or the Company shall fail to include
in such representation or warranty any fact or statement necessary in
light of the circumstances in which such representation or warranty was
made to make such representation or warranty not misleading in any
respect as of the time when the same shall have been made, then an Event
of Default shall exist under the Note Agreement.
<PAGE> 3
6. Miscellaneous.
6.1 It is expressly understood and agreed that this Agreement
shall not constitute either (a) a modification, alteration or amendment
of the terms, conditions, and covenants of the Note Agreement or the
Notes, both of which shall remain unchanged and in full force and
effect, except as otherwise specifically set forth herein, or (b) a
waiver, release, or limitation upon the exercise by the Noteholders or
any of them of any of the rights, legal or equitable, hereunder.
Nothing herein is intended or shall be construed to relieve the Company
in any way or to any extent from any of the obligations, covenants or
agreements imposed upon the Company by the Note Agreement or the Notes
or otherwise, or from the consequences of any default hereunder.
6.2 The Note Agreement and the Notes are in all respects
ratified an confirmed, and all the terms, conditions and provisions
thereof, as amended hereby, shall be and remain in full force and
effect.
6.3 The execution of this Agreement by the Noteholders shall not
in any way constitute, or be construed as a waiver of any provision of,
or of any Default or Event of Default, nor shall it constitute an
agreement or obligation of any Noteholder to give its consent to any
future waiver, consent or amendment of the Note Agreement or to any
future transaction which would, absent consent of the Noteholders,
constitute a Default or Event of Default under the Note Agreement.
6.4 This Agreement may be executed in as many counterparts as
may be deemed necessary or convenient and by the different parties
hereto on separate counterparts (provided that the Company will execute
each counterpart), and each of which, when so executed, shall be deemed
to be an original, but all such counterparts shall constitute but one
and the same agreement.
6.5 This Agreement shall be deemed effective as of the date
hereof, provided that the provisions and the conditions precedent set
forth in Section 6 hereof have been completely satisfied.
6.6 This Agreement (a) shall be binding to the parties hereto
and their respective successors and assigns and shall inure to the
benefit of the parties hereof and their respective successors and
assigns, (b) constitutes the entire agreement among the parties hereto
with respect to the matters addressed herein, and (c) shall be governed
by and construed and enforced in accordance with the laws of the State
of Florida.
6.7 The Lender shall be a third party beneficiary of this
Agreement and, as such, entitled to enforced the provisions hereof
against any of the parties hereto.
DIXON TICONDEROGA COMPANY
/s/ Gino N. Pala
- ------------------------------------------------
By: Gino N. Pala
<PAGE> 4
PRINCIPAL MUTUAL LIFE INSURANCE COMPANY
/s/ Jon M. Davidson
- ------------------------------------------------
By: Jon M. Davidson
/s/ Clint Woods
- ------------------------------------------------
By: Clint Woods
THE MINNESOTA MUTUAL LIFE INSURANCE COMPANY
- ------------------------------------------------
By:
