FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended October 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-21084
CHAMPION INDUSTRIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
West Virginia 55-0717455
- - ----------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2450 First Avenue
P. O. Box 2968
Huntington, West Virginia 25728
- - ----------------------------------------- ------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (304) 528-2791
Securities registered pursuant to Section 12(b) of Act: None
Securities registered pursuant to Section 12(g) of Act: Common Stock, $1.00 par
value
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 by check mark if the disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
------
The aggregate market value of the voting stock of the registrant held by
non-affiliates as of January 15, 1998 was $52,650,572 of Common Stock, $1.00
par value. The outstanding common stock of the Registrant at the close of
business on January 15, 1998 consisted of 8,388,445 shares of Common Stock,
$1.00 par value.
Total number of pages including cover page - 194.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registration statement on
Form S-1 No. 33-54454, filed on November 10, 1992 are incorporated by reference
into Part IV, Item 14.
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PART I
ITEM 1 - DESCRIPTION OF BUSINESS
HISTORY
Champion Industries, Inc. ("Champion" or the "Company") is a major
commercial printer, business forms manufacturer and office products and
office furniture supplier in regional markets east of the Mississippi River.
The Company's sales offices and production facilities are located in
Huntington, Charleston, Parkersburg and Clarksburg, West Virginia; Lexington
and Owensboro, Kentucky; Baton Rouge and New Orleans, Louisiana; Cincinnati
and Belpre, Ohio; Jackson, Mississippi; Baltimore, Maryland; Kingsport and
Knoxville, Tennessee; Timmonsville, South Carolina; Evansville, Indiana;
Bridgeville, Pennsylvania; and Asheville, North Carolina. The Company's sales
force of approximately 100 salespeople sells printing services, business
forms, office products and office furniture.
The Company was chartered as a West Virginia corporation on July 1, 1992.
Prior to the public offering of the Company's Common Stock, on January 28,
1993 (the "Offering"), the Company's business was operated by The Harrah and
Reynolds Corporation ("Harrah and Reynolds") doing business as Chapman
Printing Company, together with its wholly-owned subsidiaries, The Chapman
Printing Company, Inc. and Stationers, Inc. Incident to the Offering, Harrah
and Reynolds and the Company entered into an Exchange Agreement, pursuant to
which, upon the closing date of the Offering: (i) Harrah and Reynolds
contributed to the Company substantially all of the operating assets of its
printing division, including all inventory and equipment (but excluding any
real estate and vehicles) and all issued and outstanding capital stock of its
subsidiaries, The Chapman Printing Company, Inc. and Stationers, Inc.;
(ii) the Company assumed certain of the liabilities relating to the operations
of the printing divisions of Harrah and Reynolds and its subsidiaries The
Chapman Printing Company, Inc. and Stationers, Inc., excluding debts
associated with real estate, certain accounts payable to affiliates and
certain other liabilities; and (iii) Harrah and Reynolds was issued 2,000,000
shares of Common Stock of the Company.
The Company and its predecessors have been headquartered in Huntington
since 1922. Full scale printing facilities, including web presses for
manufacturing business forms, and sales and customer service operations are
located in Huntington. The Company's Charleston division was established in
1974 through the acquisition of the printing operations of Rose City Press.
Sales and customer service operations, as well as the Company's largest
pre-press department, are located in Charleston. The Parkersburg division
opened in 1977 and was expanded by the acquisitions of Park Press and
McGlothlin Printing Company. In addition to sales and customer service
operations, this division houses a large full-color printing facility and a
state-of-the-art studio, with scanners, electronic color retouching equipment
and 4-, 5- and 6-color presses.
The Lexington division commenced operations in 1983 upon the acquisition
of the Transylvania Company. This location includes a pre-press department,
computerized composition facilities, a press room and bindery department, as
well as sales and customer service operations.
The Company acquired Stationers, Inc. ("Stationers"), an office products,
office furniture and retail bookstore operation located in Huntington in 1987,
and consolidated its own office products and office furniture operations with
Stationers. On August 30, 1991, Stationers, Inc. sold the assets, primarily
inventory and fixtures, of its retail bookstore operation. In July, 1993,
Stationer's expanded through acquisition and began operations in Marietta,
Ohio, under the name "Garrison Brewer."
The Bourque Printing division ("Bourque") commenced operations in June,
1993, upon the acquisition of Bourque Printing, Inc. in Baton Rouge, Louisiana.
This location includes a pre-press department, computerized composition
facilities, a press room with up to 4-color presses and a bindery department
as well as sales and customer service operations. Bourque was expanded through
the acquisition of Strother Forms/Printing in Baton Rouge in 1993 and through
the acquisition of the assets of E. S. Upton Printing Company, Inc. in New
Orleans in 1996.
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The Dallas Printing division ("Dallas") commenced operations in September,
1993 upon the acquisition of Dallas Printing Company, Inc. in Jackson,
Mississippi. This location includes a pre-press department, computerized
composition facilities, a press room with up to 4-color presses and a bindery
department as well as sales and customer service operations.
On November 2, 1993, a wholly-owned subsidiary of the Company chartered
to effect such acquisition purchased selected assets of Tri-Star Printing,
Inc., a Delaware corporation doing business as "Carolina Cut Sheets" in the
manufacture and sale of business forms in Timmonsville, South Carolina. The
Company's subsidiary has changed its name to "Carolina Cut Sheets, Inc."
Carolina Cut Sheets manufactures single-part business forms for sale to
dealers and through the Company's other divisions.
On February 25, 1994, Bourque acquired certain assets of Spectrum Press
Inc. ("Spectrum"), a commercial printer located in Baton Rouge, Louisiana.
On June 1, 1994, the Company acquired certain assets of Premier Data
Graphics, a distributor of business forms and data supplies located in
Clarksburg, West Virginia.
On August 30, 1994, Dallas acquired certain assets of Premier Printing
Company, Inc. ("Premier Printing") of Jackson, Mississippi.
On June 1, 1995, in exchange for issuance of 52,383 shares of its Common
Stock, the Company acquired U.S. Tag & Ticket Company, Inc. ("U.S. Tag"), a
Baltimore, Maryland based manufacturer of tags used in the manufacturing,
shipping, postal, airline and cruise industries.
On November 13, 1995, in exchange for $950,000 cash and the issuance of
66,768 shares of its Common Stock, the Company acquired Donihe Graphics, Inc.
("Donihe"), a high-volume color printer based in Kingsport, Tennessee. The
Company issued the shares without registration under the Securities Act of
1933 based on exemption from registration pursuant to Section 4(2) of said act
and Rule 505 promulgated thereunder, there being four purchasers and all other
provisions of such rule being satisfied.
On February 2, 1996, Bourque purchased various assets and assumed certain
liabilities of E.S. Upton Printing Company, Inc. ("Upton"), for approximately
$750,000 in cash.
On July 1, 1996, the Company acquired Smith & Butterfield Co., Inc.
("Smith & Butterfield"), an office products company located in Evansville,
Indiana and Owensboro, Kentucky. The Company issued 66,666 shares of Common
Stock valued at $1,200,000 in exchange for all of the issued and outstanding
shares of common stock of Smith & Butterfield. The Company issued the shares
without registration under the Securities Act of 1933 based on exemption from
registration pursuant to Section 4(2) of said act and Rule 505 promulgated
thereunder, there being one purchaser and all other provisions of such rule
being satisfied.
On August 21, 1996, the Company purchased the assets of The Merten Company
("Merten") a commercial printer headquartered in Cincinnati, Ohio, for cash
and assumption of liabilities aggregating $2,535,295.
On December 31, 1996, the Company acquired all outstanding capital stock
of Interform Corporation ("Interform"), a business form manufacturer in
Bridgeville, Pennsylvania, for $2,500,000 cash which was financed by a bank.
On May 21, 1997, the Company acquired all the issued and outstanding
common shares of Blue Ridge Printing Co., Inc. of Asheville, North Carolina
and Knoxville, Tennessee ("Blue Ridge"), in exchange for 277,775 shares of
the Company's Common Stock. The transaction has been accounted for as a
pooling of interests. The Company issued the shares without registration
under the Securities Act of 1933 based on exemption from
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registration pursuant to Section 4(2) of said Act and Rule 506 promulgated
thereunder, there being five purchasers and all other provisions of said Rule
being satisfied.
BUSINESS
Champion is a major commercial printer, business forms manufacturer and
office products and office furniture supplier in regional markets east of the
Mississippi River. The Company's sales force sells a full range of printing
services, business forms, office products and office furniture. Management
views these sales activities as complementary since frequent customer sales
calls required for one of its products or services provide opportunities to
cross-sell other products and services. The Company believes it benefits from
significant customer loyalty and customer referrals because it provides
personal service, quality products, convenience and selection with a one-stop
shopping approach.
The Company's printing services range from the simplest to the most
complex jobs, including business cards, books, tags, brochures, posters, tags,
4- to 6- color process printing and multi-part, continuous and snap-out
business forms. The Company's state-of-the-art equipment enables it to provide
computerized composition, art design, paste-up, stripping, film assembly and
color scanner separations. The Company also offers complete bindery and
letterpress services. The Company's segmented gross sales of printing services
in fiscal 1997 consisted of approximately 41% sheet and tag printing, 29%
business forms printing, and 30% process color printing. The printing
operations contributed $88 million, or 81.2% of the Company's total revenues
for the fiscal year ended October 31, 1997.
The Company provides a full range of office products and office furniture
primarily in the budget and middle price ranges. The Company publishes a
catalog of high volume, frequently ordered items purchased directly from
manufacturers. These catalog sales account for the bulk of sales volume and
afford sales personnel flexibility in product selection and pricing. Medium
to large volume customers are offered levels of pricing discounts. In
addition, the Company offers a broad line of general office products through
major wholesalers' national catalogs. The Company recently introduced an
on-line ordering system through software available on a CD-ROM designed and
published by the Company. The Company is a member of a major office products
purchasing organization. Members benefit from volume discounts, which permit
them to offer competitive prices and improve margins. The Company's office
furniture business focuses on the budget to middle price range lines, although
upscale lines are offered as well. Office products and office furniture
operations contributed $20.4 million, or 18.8% of the Company's total revenues,
for the fiscal year ended October 31, 1997.
ORGANIZATION
Champion is organized into sixteen divisions, twelve of which are
wholly-owned subsidiaries. The Huntington headquarters provides centralized
financial management and administrative services to all divisions. Each
division is managed by a division manager who has profit responsibility for
the sales and production operations of the division. Division managers report
directly to the President of the Company. Their compensation depends primarily
on the volume and profit results of their individual operations.
Commercial Printing
-------------------
Ten commercial printing divisions are located in Huntington, Charleston
and Parkersburg, West Virginia; Lexington, Kentucky; Baton Rouge and New
Orleans, Louisiana; Jackson, Mississippi; Cincinnati, Ohio; Kingsport,
Tennessee and Asheville, North Carolina. Each has a sales force, a customer
service operation and a pre-press department that serve the customers in their
respective geographic areas. Although each customer's interface is solely
with its local division's personnel, its printing job may be produced in
another division using the equipment most suited to the quality and volume
requirements of the job. In this way, for example, Champion
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can effectively compete for high quality process color jobs in Lexington by
selling in Lexington, printing in Cincinnati and binding in Huntington. The
full range of printing resources is available to customers in the entire
market area without Champion having to duplicate equipment in each area.
Business Forms
--------------
Interform Corporation, doing business as Interform Solutions and located
in Bridgeville, Pennsylvania, manufactures business forms and related products
which it sells through a network of independent distributors concentrated in
Eastern Pennsylvania, New Jersey and metropolitan New York, and directly
through its own distributor, the Consolidated Graphics Communications division
in Pittsburgh, Pennsylvania.
Carolina Cut Sheets, Inc., located in Timmonsville, South Carolina,
manufactures single sheet business forms which are sold to other commercial
printers and dealers and through the Company's other divisions.
The Huntington, West Virginia division of Chapman Printing Company
manufactures single sheet and multi-part, snap-out and continuous business
forms for sale through many of the Company's commercial printing divisions.
Tags
----
U.S. Tag, located in Baltimore, Maryland, manufactures and sells tags
used in the manufacturing, shipping, postal, airline and cruise industries
throughout the United States through dealers and the Company's other divisions.
Office Products and Office Furniture
------------------------------------
Stationers, Inc., located in Huntington and Clarksburg (doing business as
"Champion Clarksburg"), West Virginia and Belpre, Ohio (doing business as
"Garrison Brewer"), provides office products and office furniture primarily
to customers in the Company's West Virginia, Ohio and Kentucky market areas.
Products are sold by printing division salespeople and delivered in bulk
daily to each division, or shipped directly to customers.
Smith & Butterfield, located in Evansville, Indiana and Owensboro,
Kentucky, provides office products and office furniture primarily to customers
in the Company's Indiana and Kentucky market areas. Products are sold by Smith
& Butterfield sales personnel and delivered to customers daily.
PRODUCTS AND SERVICES
Printing Services
- - -----------------
Champion's primary business is commercial printing and business forms
manufacturing. The Company, unlike most of its regional competitors, offers
the full range of printing production processes, enabling the Company to
provide customers a one-stop, one-vendor source without the time and service
constraints of subcontracting one or more aspects of production. Major
production areas include: (i) printing of business cards, letterhead,
envelopes, and one, two, or three color brochures; (ii) process color
manufacturing of brochures, posters, advertising sheets and catalogues;
(iii) die cutting and foil stamping; (iv) bindery services, including
trimming, collating, folding and stitching the final product; (v) forms
printing, encompassing roll-to-roll computer forms, checks, invoices, purchase
orders and similar forms in single-part, multi-part, continuous and snap-out
formats; (vi) tag manufacturing; and (vii) high volume process color web
printing of brochures and catalogs.
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The capabilities of the Company's various printing divisions are stated
below.
<TABLE>
<CAPTION>
High
Sales & Volume Continuous Cut
Customer Sheet Full Full and Snap- Sheet
Division Service Pre-Press Printing Color Color out Forms Forms Tags
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - ----------------------------------------------------------------------------------------------------------------------------
Huntington * * * * *
- - ----------------------------------------------------------------------------------------------------------------------------
Charleston * *
- - ----------------------------------------------------------------------------------------------------------------------------
Parkersburg * * * *
- - ----------------------------------------------------------------------------------------------------------------------------
Lexington * * *
- - ----------------------------------------------------------------------------------------------------------------------------
Borque Printing, Inc. * * * *
- - ----------------------------------------------------------------------------------------------------------------------------
Dallas Printing Company, Inc. * * *
- - ----------------------------------------------------------------------------------------------------------------------------
Carolina Cut Sheets, Inc. * * *
- - ----------------------------------------------------------------------------------------------------------------------------
U.S. Tag & Ticket Company, Inc. * * * *
- - ----------------------------------------------------------------------------------------------------------------------------
Donihe Graphics, Inc. * * *
- - ----------------------------------------------------------------------------------------------------------------------------
Upton Printing * * * *
- - ----------------------------------------------------------------------------------------------------------------------------
The Merten Company * * * *
- - ----------------------------------------------------------------------------------------------------------------------------
Interform Corporation * * * * *
- - ----------------------------------------------------------------------------------------------------------------------------
Blue Ridge Printing Co., Inc. * * * *
- - ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Office Products and Office Furniture
- - ------------------------------------
Champion provides its customers with a wide range of product offerings
in two major categories: supplies, such as file folders, paper products, pens
and pencils, computer paper and laser cartridges; and furniture, including
budget and middle price range desks, chairs, file cabinets and computer
furniture. Office supplies are sold primarily by Company salespeople through
the Company's own catalogs. Most office furniture is sold from catalogs and
supplied from in-house stock. Special orders and design projects constitute
a small portion of sales.
MANUFACTURING AND DISTRIBUTION
The Company's pre-press facilities have desktop publishing, typesetting,
laser imagesetting and scanning/retouching equipment, and complete layout,
design, stripping and plate processing operations. Sheet printing equipment
(for printing onto pre-cut, individual sheets) includes single color
duplicators, single to six color presses and envelope presses. Rotary
equipment (for printing onto continuous rolls of paper) includes multi-color
business form web presses, carbon and multi-part collators, and a high speed
5-color half-web press.
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Binding equipment consists of hot-foil, embossing and die cutting equipment,
perforators, folders, folder-gluers, scoring machines, collator/stitcher/
trimmers for saddle stitching, automatic and manual perfect binders, numbering
machines and mailing equipment.
Each of the Company's offices is linked with overnight distribution of
products and on-line electronic telecommunications permitting timely transfer
of various production work from facility to facility as required. While the
Company maintains a fleet of delivery vehicles for intracompany and customer
deliveries, it utilizes the most cost effective and expeditious means of
delivery, including common carriers.
Requirements for the Company's press runs are determined shortly before
the runs are made and, therefore, backlog is not a meaningful measure in
connection with the Company's printing business.
The Company's inventory policy ensures that approximately 60% of the
office products items the Company sells are in stock. Another 30% are
ordered on a daily basis and received overnight. The remaining 10% are items
that come direct from manufacturers and may take one week from placement of
order to delivery to customer. Office furniture sales are made primarily from
the Company's in-house stock. However, special orders from manufacturers may
require up to 90 days for delivery.
CUSTOMERS
The Company believes that its reputation for quality, service,
convenience and selection allows it to enjoy significant loyalty from its
customers. Champion's marketing strategy is to focus on manufacturers,
institutions, financial services companies and professional firms. Consistent
with customary practice in the commercial printing and office products
industries, the Company ordinarily does not have long-term contracts with its
customers, although a number of high volume customers issue yearly purchase
orders. These purchase orders, which are typically for office products but
may include printing services, are for firm prices adjustable for paper price
changes. Depending upon customer satisfaction with price and service, these
purchase orders may be renewed for another year or up to three years without
repeating the full bidding process.
During the fiscal year ended October 31, 1997, no single customer
accounted for more than 1% of total revenues. Due to the project-oriented
nature of customers' printing requirements, sales to particular customers may
vary significantly from year to year depending upon the number and size of
their projects.
SUPPLIERS
The Company has not experienced difficulties in obtaining materials in
the past and does not consider itself dependent on any particular supplier for
supplies. The Company has negotiated Company-wide paper purchasing agreements
directly with paper manufacturers and is a member of a major office products
buying group, which management believes provide the Company with a competitive
advantage.
COMPETITION
The markets for the Company's printing services and office products are
highly competitive, with success based primarily on price, quality, production
capability, capacity for prompt delivery and personal service.
Champion's printing competitors are numerous and range in size from very
large national companies with substantially greater resources than the Company
to many smaller local companies. In recent years, despite consolidation within
the printing industry, there has been a substantial increase in technological
advances in new equipment, resulting in excess capacity and highly competitive
pricing. The Company has remained competitive by maintaining its printing
equipment at state-of-the-art levels and emphasizing personal attention to
customers.
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Large national and regional mail order discount operations provide
significant competition in the office products and office furniture business.
The economics afforded by membership in a national purchasing association and
by purchasing directly from manufacturers, and the high level of personal
services to customers contribute substantially to the Company's ability to
compete in the office supply and office furniture market segments.
ENVIRONMENTAL REGULATION
The Company is subject to the environmental laws and regulations of the
United States and the states in which it operates concerning emissions into
the air, discharges into waterways and the generation, handling and disposal
of waste materials. The Company's past expenditures relating to environmental
compliance have not had a material effect on the Company. These laws and
regulations are constantly evolving, and it is impossible to predict
accurately the effect they may have upon the capital expenditures, earnings
and competitive position of the Company in the future. Based upon information
currently available, management believes that expenditures relating to
environmental compliance will not have a material impact on the financial
condition of the Company.
GEOGRAPHIC CONCENTRATION AND ECONOMIC CONDITIONS
The Company's operations and the majority of its customers are located
east of the Mississippi River. The Company and its profitability may be more
susceptible to the effects of unfavorable or adverse local or regional
economic factors and conditions than a company with a more geographically
diverse customer base.
SEASONALITY
Historically, the Company has experienced a greater portion of its annual
sales and net income in the second and fourth quarters than in the first and
third quarters. The second quarter generally reflects increased orders for
printing of corporate annual reports and proxy statements. A post-Labor Day
increase in demand for printing services and office products coincides with
the Company's fourth quarter.
EMPLOYEES
On October 31, 1997, the Company had 897 full-time employees.
The Company's subsidiary, Interform Corporation is party to a collective
bargaining agreement with the United Steelworkers of America, AFL-CIO-CLC on
behalf of its Local Union 8263 covering all production and maintenance
employees (currently numbering 96) at its Bridgeville, Pennsylvania facility.
The Company believes relations with the union and covered employees are good.
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EXECUTIVE OFFICERS OF CHAMPION
Position and offices with Champion;
Name Age Principal occupation or employment last five years
- - ------------------------------------------------------------------------------
Marshall T. Reynolds 61 President, Chief Executive Officer and Chairman of
the Board of Directors of Company from December
1992 to present; President and general manager of
Harrah and Reynolds, predecessor of the Company
from 1964 (and sole shareholder from 1972) to
1993; Director (from 1983 to November 1993) and
Chairman of the Board of Directors (from 1983 to
November 1993) of Banc One West Virginia
Corporation (formerly Key Centurion Bancshares,
Inc.)
Michael D. McKinney 44 Vice President and General Sales Manager of
Company since September 1995; Vice President and
Division Manager - Huntington, of Company from
December 1992 to September 1995; Division Manager
- Huntington, of Harrah and Reynolds from October
1991 to 1992; Division Manager - Lexington, of
Harrah and Reynolds from August 1982 to October
1991.
William M. Campbell 62 Vice President and Division Manager - Parkersburg,
of Company from December 1992 to present; Division
Manager - Parkersburg, of Harrah and Reynolds from
June 1977 to 1992.
Ronald W. Taylor 40 Vice President and Division Manager - Lexington,
of Company from December 1992 to present; Division
Manager - Lexington, of Harrah and Reynolds from
January 1992 to December 1992; Sales
Representative, Lexington Division of Harrah and
Reynolds from 1986 to January 1992.
J. Mac Aldridge 56 Vice President of Company and Division Manager -
Huntington since September 1995; Vice President
and Division Manager - Stationers, of Company
since December 1992; President and General Manager
of Stationers since November 1989; Sales
Representative of Huntington Division of Harrah
and Reynolds from July 1983 to October 1989.
Gary A. Blackshire 45 Vice President and Division Manager - Charleston,
of Company since December 1992; Division Manager -
Charleston, of Harrah and Reynolds from April 1992
to December 1992; Sales Representative of
Charleston Division of Harrah and Reynolds from
1975 until April 1992.
R. Douglas McElwain 50 Vice President and Division Manager - Bourque
Printing, of Company since December 1993; General
Manager of Bourque Printing from June 1993 to
December 1993; Sales Representative of Charleston
Division of Harrah and Reynolds and Company from
1986 until June 1993.
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Position and offices with Champion;
Name Age Principal occupation or employment last five years
- - ------------------------------------------------------------------------------
David G. Pilcher 55 Vice President of Company since April, 1997;
President of Interform Corporation since January,
1995; President of Printing Center Media (Fort
Worth, Texas) from 1989 to 1995.
L. David Brumfield 60 Vice President and Division Manager - Dallas
Printing since May, 1997; President and General
Manager, Radisson Hotel, Huntington, from 1992 to
1997.
Joseph C. Worth, III 48 Vice President and Chief Financial Officer of
Company since June 1992.
Toney K. Adkins 48 Vice President of Company since November, 1995;
President, KYOWVA Corrugated Container Company,
Inc. from 1991 to 1996.
Walter R. Sansom 68 Secretary of Company since December 1992;
Production Coordinator of Company since December
1992 and of Harrah and Reynolds from August 1968
to December 1992.
ITEM 2 - PROPERTIES
The Company conducts its operations from 20 different physical locations,
14 of which are leased, and 6 of which are owned in fee simple by Company
subsidiaries. The properties leased, and certain of the lease terms, are set
forth below:
<TABLE>
<CAPTION>
Division occupying Square Expiration
Property property feet Annual rental of term
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2450 1st Avenue Champion headquarters 85,000 $116,400 2008
Huntington, West Virginia(1) and Chapman Printing -
Huntington
1945 5th Avenue Stationers 37,025 60,000 2007
Huntington, West Virginia(1)
615-619 4th Avenue Stationers 59,641 21,600 2003
Huntington, West Virginia(1)
405 Ann Street Chapman Printing - 36,614 57,600 2003
Parkersburg, West Virginia(1) Parkersburg
1563 Hansford Street Chapman Printing - 21,360 49,920 2003
Charleston, West Virginia(1) Charleston
</TABLE>
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<TABLE>
<CAPTION>
Division occupying Square Expiration
Property property feet Annual rental of term
- - ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
890 Russell Cave Road Chapman Printing - 20,135 57,600 2000
Lexington, Kentucky(1) Lexington
214 Stone Road Stationers - Garrison 15,146 42,000 1999
Belpre, Ohio(1) Brewer
2800 Lynch Road Smith & Butterfield 42,375 116,640 1999
Evansville, Indiana(1)
113-117 East Third St. Smith & Butterfield 8,500 14,400 2002
Owensboro, Kentucky(1)
1901 Mayview Road Interform Corporation 120,000 316,000 2003
Bridgeville, Pennsylvania(1)
736 Carondelet Street Upton Printing 15,000 62,700 2000
New Orleans, Louisiana
1515 Central Parkway The Merten Company 40,000 97,200 2001
Cincinnati, Ohio(1)
2217 Robb Street U.S. Tag 26,000 52,000 2000
Baltimore, Maryland(1)
Palmetto Industrial Park Carolina Cut Sheets 16,200 35,724 monthly
Timmonsville, S. Carolina
</TABLE>
(1) Lease is "triple net", whereby Company pays for all utilities, insurance,
taxes, repairs and maintenance, and all other costs associated with
properties.
The Dallas Printing Division owns, and operates from, a single-story
masonry structure of approximately 19,600 square feet at 321-323 East Hamilton
Street, Jackson, Mississippi.
The Bourque Printing Division owns, and operates from, a single-story
building of approximately 18,501 square feet at 13112 South Choctaw Drive,
Baton Rouge, Louisiana.
Stationers' Clarksburg operation is conducted from a single-story masonry
building of approximately 20,800 square feet owned by the Company at 700 N.
Fourth Street, Clarksburg, West Virginia.
Donihe owns, and operates from, a single-story steel building of
approximately 38,500 square feet situated on roughly 14.5 acres at 766
Brookside Drive, Kingsport, Tennessee.
Blue Ridge owns, and operates from (i) a two-story masonry building of
approximately 9,066 square feet and a contiguous 1,692 square foot former
residential structure at 544 and 560 Haywood Road, Asheville, North Carolina,
and (ii) a two-story steel building of approximately 12,500 square feet on
approximately 3 acres at 1485 Amherst Road, Knoxville, Tennessee.
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ITEM 3 - LEGAL PROCEEDINGS
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Champion common stock has traded in the over-the-counter market on the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") National Market System since the Offering under the symbol "CHMP".
The following table sets forth the high and low closing prices for
Champion common stock for the period indicated. The range of high and low
closing prices are based on data from NASDAQ, and do not include retail
mark-up, mark-down or commission.
Fiscal 1996 Fiscal 1997
----------------- -----------------
High Low High Low
First Quarter $15.52 $13.12 $19.40 $17.00
Second quarter 16.60 12.80 19.75 17.00
Third quarter 15.40 13.60 19.50 16.13
Fourth quarter 18.00 13.60 19.25 18.00
At the close of business on January 15, 1998, there were 541 shareholders
of record of Champion Common Stock.
The following table sets forth the quarterly dividends per share declared
on Champion common stock.
Fiscal 1996 Fiscal 1997 Fiscal 1998
-------------------------------------------
First quarter $.032 $.040 $.050
Second quarter .040 .050 --
Third quarter .040 .050 --
Fourth quarter .040 .050 --
-12-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The Consolidated Income Statement and Balance Sheet Data of the Company
set forth below at and for the years ended October 31, 1993 through 1997 have
been derived from the audited Consolidated Financial Statements of the
Company. The information set forth below should be read in conjunction with
the Consolidated Financial Statements of the Company (and notes thereto)
appearing elsewhere herein and the information contained in "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
In 1997, the Company acquired all the outstanding common stock of Blue Ridge.
This combination has been accounted for as a pooling of interests.
Accordingly, all prior period financial information has been restated as
though they had always been combined.
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(In thousands, except share and per share data)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Printing....................................... $ 22,899 $ 30,001 $ 35,371 $ 49,242 $ 87,979
Office products and office furniture........... 10,691 13,229 14,532 17,115 20,406
--------- --------- --------- --------- ---------
Total revenues............................ 33,590 43,230 49,903 66,357 108,385
Cost of sales:
Printing....................................... 13,478 17,755 22,251 33,015 59,850
Office products and office furniture........... 6,836 8,605 9,670 11,077 13,289
--------- --------- --------- --------- ---------
Total cost of sales....................... 20,314 26,360 31,921 44,092 73,289
Selling, general and administrative expense...... 10,155 12,486 12,788 16,197 28,079
--------- --------- --------- --------- ---------
Income from operations........................... 3,121 4,384 5,194 6,068 7,167
Interest income................................ 129 67 11 25 20
Interest expense............................... (140) (132) (252) (693) (1,586)
Other income................................... 69 212 113 224 737
--------- --------- --------- --------- ---------
Income before income taxes....................... 3,179 4,531 5,066 5,624 6,338
Income taxes................................... (1,278) (1,859) (2,060) (2,252) (2,571)
--------- --------- --------- --------- ---------
Net income....................................... $ 1,901 $ 2,672 $ 3,006 $ 3,372 $ 3,768
========= ========= ========= ========= =========
Earnings per share............................... $ .26 $ .33 $ .37 $ .40 $ .45
========= ========= ========= ========= =========
Weighted average shares outstanding.............. 7,299,035 8,098,799 8,176,716 8,356,032 8,441,083
Cash dividends per share......................... $ .041 $ .098 $ .122 $ .152 $ .19
</TABLE>
<TABLE>
<CAPTION> At October 31,
---------------------------------------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.................................. $ 9,603 $ 10,040 $ 11,148 $ 13,579 $ 18,935
Total assets..................................... 21,050 25,690 28,643 44,063 60,346
Current portion of long term debt................ 484 538 1,077 2,437 4,244
Long-term debt, net of current portion........... 1,131 1,124 2,405 7,561 15,156
Shareholders' equity............................. 15,027 17,739 19,794 24,641 26,850
</TABLE>
-13-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a commercial printing, business form manufacturing and
office products and office furniture supplier in regional markets east of the
Mississippi. The Company has grown primarily through strategic acquisitions
and internal growth. Through such growth, the Company has realized economies
of scale and operational efficiencies.
The Company's largest acquisition since the Offering was the purchase of
Interform on December 31, 1996. The addition of Interform's sales in the
business forms segment has increased the printing component of the Company's
revenue mix. Through sales to independent distributors, and through it's
own distributor, Consolidated Graphic Communications, Interform provides
the Company's manufacturing divisions access to the large northeastern
markets of Pennsylvania, New Jersey and New York.
The Company's most recent acquisition was the addition of Blue Ridge
Printing Co., Inc. located in Asheville, North Carolina and Knoxville,
Tennessee. Blue Ridge is a premier commercial color printer specializing in
sales to and through advertising agencies. A portion of its sales utilize the
proprietary QuadRaster [trademark symbol] technology which creates color
printing of significantly higher resolution and impact than traditional color
imaging methods. This technology provides the opportunity for increased sales
of high-end color jobs throughout the Company.
The Company's net revenues consist primarily of sales of commercial
printing, business forms, tags, other printed products, office supplies,
office furniture, data products and office design services. Revenues are
recognized by the Company when products are shipped or services are rendered
to the customer. The Company's revenues are subject to quarterly fluctuations
caused by variations in demand for its products.
The Company's cost of sales primarily consist of raw materials, including
paper, ink, pre-press supplies and purchased office supplies, furniture and
data products, and manufacturing costs including direct labor, indirect labor
and overhead. Significant factors affecting the Company's cost of sales include
the costs of paper (in both printing and office supplies) and other raw
materials, and the costs of labor.
The Company's operating costs consist of selling, general and
administrative components. These costs include salaries and commissions for
sales personnel, and salaries and wages for customer service, accounting,
administrative and executive personnel.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated information
derived from the Company's Consolidated Income Statements, including certain
information presented as a percentage of total revenues. In 1997, the Company
acquired all the outstanding common stock of Blue Ridge. This combination has
been accounted for as a pooling of interests. Accordingly, all prior period
financial information has been restated as though they had always been
combined.
-14-
<PAGE>
<TABLE>
<CAPTION>
Year Ended October 31,
($ in thousands)
-------------------------------------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Printing...................................... $ 87,979 81.2% $ 49,242 74.2% $ 35,371 70.9%
Office products and office furniture.......... 20,406 18.8 17,115 25.8 14,532 29.1
-------- ----- -------- ----- -------- -----
Total revenues.......................... 108,385 100.0 66,357 100.0 49,903 100.0
Cost of sales:
Printing...................................... 59,850 55.2 33,015 49.8 22,251 44.6
Office products and office furniture.......... 13,289 12.3 11,077 16.7 9,670 19.4
-------- ----- -------- ----- -------- -----
Total cost of sales...................... 73,139 67.4 44,092 66.5 31,921 64.0
Selling, general and administrative expenses.... 28,079 25.9 16,197 24.4 12,788 25.6
-------- ----- -------- ----- -------- -----
Income from operations.......................... 7,167 6.6 6,068 9.1 5,194 10.4
Other income (expense):
Interest income............................. 20 0.0 25 0.0 11 0.0
Interest expense............................ (1,586) (1.4) (693) (1.0) (252) (0.5)
Other income................................ 737 0.7 224 0.4 114 0.2
-------- ----- -------- ----- -------- -----
Income before income taxes...................... 6,337 5.9 5,624 8.5 5,066 10.1
Income taxes.................................. (2,571) (2.4) (2,251) (3.4) (2,059) (4.1)
-------- ----- -------- ----- -------- -----
Net income...................................... $ 3,767 3.5% $ 3,372 5.1% $ 3,006 6.0%
======== ===== ======== ===== ======== =====
</TABLE>
The following discussion and analysis presents the significant changes in the
financial position and results of operations of the Company and should be read
in conjunction with the audited consolidated financial statements and notes
thereto included elsewhere herein.
Year Ended October 31, 1997 Compared to Year Ended October 31, 1996
- - -------------------------------------------------------------------
Revenues
- - --------
Total revenues increased 63.3% in fiscal 1997 to $108.4 million from
$66.4 in fiscal 1996. Printing revenue increased 78.7% in fiscal 1997 to $88.0
million from $49.2 million in 1996. Office products and office furniture
revenue increased 19.2 % in fiscal 1997 to $20.4 million from $17.1 million
in fiscal 1996. This was achieved through new acquisitions which accounted for
increased printing sales of $34.3 million and increased office products and
office furniture sales of $3.3 million. The office products and office
furniture change in sales ws also impacted by a one-time furniture sale
totaling $500,000 in 1996.
-15-
<PAGE>
Cost of Sales
- - -------------
Total cost of sales increased 65.9% in fiscal 1997 to $73.1 million from
$44.1 million in fiscal 1996. Printing cost of sales increased 81.3% in fiscal
1997 to $59.9 million from $33.0 million in fiscal 1996, due primarily to
sales volume and the impact of newly acquired divisions with lower sales
margins. Office products and office furniture cost of sales increased 20.0%
in fiscal 1997 to $13.3 million from $11.1 million in fiscal 1996, primarily
due to sales volume.
Operating Expenses and Income
- - -----------------------------
Selling, general and administrative expenses increased as a percentage of
sales in fiscal 1997 to 25.9% from 24.4% in fiscal 1996 due to increased costs
associated with acquisitions. For the reasons stated above, income from
operations increased 18.1% in fiscal 1997 to $7.2 million from $6.1 million
in fiscal 1996.
Other Income/Expense
- - --------------------
Interest expense increased $894,000 from $0.7 million in fiscal 1996 to
$1.6 million in fiscal 1997 as a result of the debt assumed in the Interform
acquisition. Other income increased from $224,000 in fiscal 1996 to $737,000
in fiscal 1997 due primarily to a $330,000 one-time recognition of deferred
gain from the previous sale of Stationers, Inc.'s bookstore operations,
$131,000 of fee payments from distributors to Interform and a $141,500
one-time positive resolution of the disposal of Interform's Lock Haven,
Pennsylvania operation.
Net Income
- - ----------
Income taxes in fiscal 1997 increased slightly to 40.6% from 40.0% in
fiscal 1996 due to the Company's expansion into states with higher tax rates.
For the reasons stated above, net income for fiscal 1997 increased 11.7% to
$3.8 million, or $0.45 per share, from $3.4 million, or $0.40 per share, in
fiscal 1996.
Year Ended October 31, 1996 Compared to Year Ended October 31, 1995
- - -------------------------------------------------------------------
Revenues
- - --------
Total revenues increased 33.0% in fiscal 1996 to $66.4 million from $49.9
million in fiscal 1995. Printing revenue increased 39.2% in fiscal 1996 to
$49.2 million from $35.4 million in 1995. Office products and office furniture
revenue increased 17.8 % in fiscal 1996 to $17.1 million from $14.5 million in
fiscal 1995. This was achieved through new acquisitions which accounted for
increased printing sales of $12.6 million and increased office products and
office furniture sales of $1.7 million. The office products and office
furniture divisions also experienced $900,000 of sales growth due to increased
sales efforts and a one-time furniture sale totaling $500,000.
Cost of Sales
- - -------------
Total cost of sales increased 38.1% in fiscal 1996 to $44.1 million from
$31.9 million in fiscal 1995. Printing cost of sales increased 48.4% in fiscal
1996 to $33.0 million from $22.3 million in fiscal 1995, due primarily to
sales volume and the addition of newly acquired divisions with lower sales
margins. Office products and office furniture cost of sales increased 14.5% in
fiscal 1996 to $11.1 million from $9.7 million in fiscal 1995, primarily due
to sales volume.
-16-
<PAGE>
Operating Expenses and Income
- - -----------------------------
Selling, general and administrative expenses declined as a percentage of
sales in fiscal 1996 to 24.4% from 25.6% in fiscal 1995 due to cost controls
implemented by management and spreading overhead expenses over increasing
revenues. For the reasons stated above, income from operations increased
16.8% in fiscal 1996 to $6.1 million from $5.2 million in fiscal 1995.
Other Income/Expense
- - --------------------
Interest expense on a comparative basis increased $441,000 as a result of
increased debt.
Net Income
- - ----------
Income taxes remained relatively constant at about 40%. For the reasons
stated above, net income increased 12.2% to $3.4 million, or $0.40 per share,
for fiscal 1996, from $3.0 million, or $0.37 per share, in fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its acquisitions, capital
expenditures and working capital through cash generated from operating
activities and debt. At October 31, 1997 working capital was $19.0 million
compared to $13.6 million at October 31, 1996. Working capital was increased
by the addition of positive working capital of acquired businesses. At
October 31, 1996, working capital was $13.6 million compared to $11.1 million
at October 31, 1995. Working capital was positively impacted by acquired
businesses in 1997 and 1996. In the event the Company seeks to accelerate
internal growth or make additional acquisitions, additional financing would
be necessary.
Cash Flows from Operating Activities
- - ------------------------------------
Cash flows from operations for the years ended October 31, 1997, 1996
and 1995 were $2.0 million , $3.3 million, and $500,000. The 1997 cash flows
from operations decreased primrily as a result of investment in inventories
to support increased sales. The 1996 cash flows from operations increased as
a result of increased net income, depreciation expense, deferred income taxes,
accrued income taxes and accounts receivable and decreased accounts payable.
Cash Flows from Investing and Financing Activities
- - --------------------------------------------------
Cash flows (used in)/provided by financing activities for the years ended
October 31, 1997, 1996, 1995 were ($1.5 million), $1.5 million and ($600,000).
Cash flows used in investing activities for the years ended October 31, 1997,
1996 and 1995 were ($2.0 million), ($3.8 million) and ($3.5 million).
Acquisitions of businesses and capital equipment in 1997 were funded from
working capital, long-term debt and the issuance of common stock.
Acquisitions of businesses and capital equipment in 1996 were funded from
working capital, long-term debt and issuance of common stock. The primary
source of funding in 1995 was working capital and long-term debt. Equipment
and vehicles have generally been financed through leases. During the past
three years, capital equipment has been financed through long term debt and
capital leases. Dividends paid in fiscal years 1997, 1996 and 1995 were
$1.6 million, $1.2 million and $1.0 million.
-17-
<PAGE>
INFLATION AND ECONOMIC CONDITIONS
Management believes that the effect of inflation on the Company's
operations has not been material and will continue to be immaterial for the
foreseeable future. The Company does not have long term contracts; therefore,
to the extent permitted by competition, it has the ability to pass through to
its customers most cost increases resulting from inflation, if any.
SEASONALITY
Historically, the Company has experienced a greater portion of its annual
sales and net income in the second and fourth quarters than in the first and
third quarters. The second quarter generally reflects increased orders for
printing of corporate annual reports and proxy statements. A post-Labor Day
increase in demand for printing services and office products coincides with
the Company's fourth quarter.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and other information required by this item are
contained in the financial statements and footnotes thereto listed in the
index on page F-1 of this report, infra.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS OF THE REGISTRANT
<TABLE>
<CAPTION>
Name, Age, Position and Offices
with Company and Year Became Director Principal Occupations for Past Five Years
- - ------------------------------------- ---------------------------------------------------------
<S> <C>
Robert H. Beymer - 70 President of First Sentry Bank, Huntington, West Virginia
Director - 1992 from 1996 to present; General Partner, Eastern Heights
Shopping Center, Ltd., from 1976 to present; Consultant
to One Valley Bank of Huntington (Huntington, West
Virginia) from 1986 to 1993; President of First Guaranty
Bank (Hammond, Louisiana) from December 1992 to June
1994; Director of Stationers, Inc. (a Company subsidiary)
from 1990 to present.
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Position and Offices
with Company and Year Became Director Principal Occupations for Past Five Years
- - ------------------------------------- ---------------------------------------------------------
<S> <C>
Philip E. Cline - 64 Since January 1, 1997; President, Chief Executive Officer
Director - 1992 and Director, Broughton Foods Company, Interim President
and Chief Executive Officer, Broughton Foods Company from
November, 1996 to January 1, 1997; Consultant from
January, 1996 to November, 1996; Executive Vice President
(1995 to 1996), Vice President and Treasurer (1968 to
1995) of J. H. Fletcher & Co. (manufacturer of
underground mining equipment); Director of Banc One West
Virginia Corporation (formerly Key Centurion Bancshares,
Inc.) from 1983 to present.
Harley F. Mooney, Jr. - 69 Brig. Gen. U.S. Army (Ret.), Managing Partner, Mooney-
Director - 1992 Osborne & Associates (management consulting) from 1985 to
present; Director of Stationers, Inc. (a Company
subsidiary) from 1989 to present; consultant to
Stationers, Inc. from 1988 to 1990; consultant to The
Harrah and Reynolds Corporation since 1988; Director of
Ohio River Bank, Ironton, Ohio from 1995 to present.
Todd L. Parchman - 43 Partner, Parchman, Vaughan & Company (investment bankers)
Director - 1993 since May, 1996; Senior Vice President (from 1990 to May,
1996) and Director (from 1994 until May, 1996), Ferris,
Baker Watts, Incorporated.
A. Michael Perry - 61 President (from 1983 to December 1993), Chief
Director - 1992 Executive Officer (from 1983 to present) and Chairman
of Board from November 1993 to present of Banc One West
Virginia Corporation (formerly Key Centurion Bancshares,
Inc.).
Marshall T. Reynolds - 61 President, Chief Executive Officer and Chairman of the
President and Chief Executive Officer, Board of Directors of Company from 1992 to present;
Director and Chairman of the Board of President and general manager of The Harrah and Reynolds
Directors - 1992 Reynolds Corporation, predecessor of the Company from
1964 (and sole shareholder from 1972) to 1993; Chairman
of the Board of Directors, Broughton Foods Company since
November 1996; Director (from 1983 to November 1993) and
Chairman of the Board of Directors (from 1983 to November
1993) of Banc One West Virginia Corporation (formerly Key
Centurion Bancshares, Inc.).
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
Name, Age, Position and Offices with
with Company and Year Became Director Principal Occupations for Past Five Years
- - ------------------------------------- ---------------------------------------------------------
<S> <C>
Neal W. Scaggs - 61 President, Baisden Brothers, Inc. (retail and wholesale
Director - 1992 hardware) from 1963 to present; Director of Banc One West
Virginia Corporation (formerly Key Centurion Bancshares,
Inc.) from 1984 to present.
Glenn W. Wilcox, Sr. - 66 Chairman of the Board of Directors of Wilcox Travel
Director - 1997 Agency, Inc. since 1953; Chairman of the Board of
Directors (since 1974) and President (from 1974 to 1977)
of Blue Ridge Printing Co., Inc.
</TABLE>
Mr. Reynolds is chairman of the board of directors of Premier Financial
Bancorp, Inc., of Georgetown, Kentucky, which has a class of securities
registered pursuant to the Securities Exchange Act of 1934. Mr. Reynolds is a
director of Abigail Adams National Bancorp, Inc., of Washington, DC, which has
a class of securities registered pursuant to the Securities Exchange Act of
1934.
Mr. Reynolds is chairman of the board of directors, Mr. Cline is
president, chief executive officer and a director and Mr. Scaggs is a director
of Broughton Foods Company, of Marietta, Ohio, which has a class of securities
registered pursuant to the Securities Exchange Act of 1934.
Mr. Reynolds and Mr. Beymer are directors of First Guaranty Bank of
Hammond, Louisiana, which has a class of securities registered pursuant to the
Securities Exchange Act of 1934.
Mr. Parchman is a director of Morgan Group, Inc., which has a class of
securities registered pursuant to the Securities Exchange Act of 1934. Ferris,
Baker Watts, Incorporated, of which Mr. Parchman was an officer and director
until May, 1996, served as representative of the several underwriters involved
in the January 1993 public offering of Company Common Stock. Pursuant to
agreement among Mr. Reynolds, the Company and Ferris, Baker Watts,
Incorporated, Mr. Parchman was appointed to the Company's Board of Directors
at the closing of such offering.
DIRECTOR MEETINGS, COMMITTEES AND ATTENDANCE
The Board of Directors has two standing committees, a Compensation
Committee and an Audit Committee.
The Compensation Committee reviews and recommends to the Board the
compensation and employee benefits of officers of the Company and administers
the 1993 Stock Option Plan. The Compensation Committee did not meet during
fiscal 1997, and currently consists of Messrs. Beymer, Mooney and Perry.
The Audit Committee meets with the Company's management, independent
auditors and internal accountants, reviews the accounting principles and the
scope and control of the Company's financial reporting practices, and makes
reports and recommendations to the Board with respect to audit matters. The
Audit Committee met 2 times during fiscal 1997, and currently consists of
Messrs. Cline, Parchman and Scaggs.
The Board does not have a nominating committee, as nominations are made
by the Board as a whole.
During fiscal 1997, there were 10 meetings of the Company Board of
Directors. All directors attended 75% or more of the aggregate of meetings of
the Board and their committees held during their respective terms.
-20-
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during fiscal year 1997
all filing requirements applicable to its officers, directors and greater than
ten-percent beneficial owners were complied with.
-21-
<PAGE>
ITEM 11 - EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS AND OFFICERS
COMPENSATION OF DIRECTORS
Company directors who are not employees of the Company are paid a
director's fee of $500 per Company Board meeting attended and $100 per
committee meeting attended. In addition, Company directors Robert H. Beymer
and Harley F. Mooney, Jr. were each paid directors' fees of $500 per
Stationers, Inc. Board meeting attended, for total Stationers, Inc. directors'
fees of $6,000 each in fiscal year 1997. The Company reimbursed directors Todd
L. Parchman and Glenn W. Wilcox, Sr. for their travel expenses incurred in
attendance at monthly Board meetings, aggregating $4,977 and $162,
respectively, in fiscal year ended October 31, 1997.
The Company's Blue Ridge Printing Co., Inc. subsidiary ("Blue Ridge") is
party to a Deferred Compensation Agreement dated July 1, 1993 and a
Split-Dollar Life Insurance Agreement dated July 1, 1992 with Company director
Glenn W. Wilcox, Sr., who was the principal shareholder and chairman of the
board of directors of Blue Ridge prior to the Company's acquisition of Blue
Ridge in May of 1997. Pursuant to the Deferred Compensation Agreement, if
Mr. Wilcox is employed by Blue Ridge upon attaining age 69, Blue Ridge has
agreed to pay him (or his designated beneficiary in the event of his death
after retirement prior to receiving all benefits) an annual retirement benefit
of $50,000 for ten years. Blue Ridge may prepay its obligations in whole or
part at a discounted rate.
In the event Mr. Wilcox dies while employed by Blue Ridge prior to
commencement of payments under the Deferred Compensation Agreement, no
benefits will be payable thereunder, but death benefits will be paid under
the Split-Dollar Life Insurance Agreement. Pursuant to that Agreement, Blue
Ridge pays annual premiums on a policy of life insurance owned by Mr. Wilcox.
At Mr. Wilcox's death, or termination of the Agreement, as therein provided,
Blue Ridge is entitled to receive from the proceeds of such policy the
aggregate premiums paid by it less that portion of the annual premium taxable
to Mr. Wilcox, with Mr. Wilcox or his beneficiaries being entitled to the
balance of proceeds.
COMPENSATION OF EXECUTIVE OFFICERS
Summary of Cash and Certain Other Compensation
----------------------------------------------
The following table shows, for the fiscal years ended October 31, 1995,
1996 and 1997, the cash compensation paid by the Company and its subsidiaries,
as well as certain other compensation paid or accrued for those years, to each
of the five most highly compensated executive officers of the Company in all
capacities in which they served:
-22-
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------
Long Term
Annual Compensation Compensation
Awards
(a) (b) (c) (d) (g) (i)
<S> <C> <C> <C> <C> <C>
All other
Name and Principal Position Year Salary Bonus Options(1) Compensation(2)
($) ($) (#) ($)
Marshall T. Reynolds 1997 150,000 -0- -0- 78
President and Chief 1996 150,000 -0- -0- 134
Executive Officer, Chairman 1995 150,000 -0- -0- 134
of the Board of Directors
Gary A. Blackshire 1997 50,016 131,608 2,500 150
Vice President, Division Manager 1996 50,016 108,006 3,125 150
1995 50,016 92,540 3,906 150
David G. Pilcher,(3) 1997 160,000 -0- -0- -0-
Vice President, Division Manager
J. Mac Aldridge, 1997 50,016 104,913 2,500 150
Vice President, Division Manager 1996 50,016 102,909 3,125 150
1995 50,016 101,440 3,906 150
R. Douglas McElwain, 1997 50,016 94,581 2,500 150
Vice President, Division Manager 1996 50,467 80,000 3,125 150
1995 50,016 99,402 3,906 150
</TABLE>
(1) All options are granted at the market price of Company common stock on
the date of the grant. Pursuant to the anti-dilution provisions of the
Company's 1993 Stock Option Plan, all share amounts and exercise prices
have been adjusted, as appropriate, for stock dividends and stock
splits paid on Company common stock through October 31, 1997.
(2) This item consists of matching contributions by the Company to its
401(k) Plan on behalf of each of the named executives to match pre-tax
elective deferral contributions (included under Salary) made by each to
such plan. Participation in the 401(k) Plan is open to any employee of
the Company on the first day of the thirteenth month following
employment. Participants may contribute 2% of their annual
compensation, up to a maximum of $300 per year.
(3) Mr. Pilcher's employment with the Company commenced on December 31,
1996.
-23-
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR - 1997
<TABLE>
<CAPTION>
Number of % of total Potential realizable value
securities options at assumed annual rates
underlying granted to Exercise of stock price
options granted employees price Expiration appreciation for option
Name Type(1) # in fiscal year ($/share) date term(2)
0%($) 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marshall T. Reynolds ISO -0-
President and Chief NQSO -0-
Executive Officer, ---- -----
Chairman of the TOTAL -0- N/A N/A N/A N/A N/A N/A
Board of Directors
Gary A. Blackshire ISO 2,500
Vice President, NQSO -0-
Division Manager ---- -----
TOTAL 2,500 7.1% $17.90 12/16/2001 -0- 12,364 27,320
David G. Pilcher ISO -0-
Vice President, NQSO -0-
Division Manager ---- -----
TOTAL -0- N/A N/A N/A N/A N/A N/A
J. Mac Aldridge ISO 2,500
Vice President, NQSO -0-
Division Manager ---- -----
TOTAL 2,500 7.1% $17.90 12/16/2001 -0- 12,364 27,320
R. Douglas McElwain ISO 2,500
Vice President, NQSO -0-
Division Manager ---- -----
TOTAL 2,500 7.1% $17.90 12/16/2001 -0- 12,364 27,320
</TABLE>
(1) Incentive Stock Option (ISO) or Non-qualified Stock Option (NQSO). These
options were granted on December 16, 1996, and vested immediately. Options
have a term of five years and are exercisable at any time during such
five years as to any or all options, conditioned upon optionee's employment
by Company at time of exercise (or exercise within 90 days following
termination of employment due to death or disability). As a result of the
Company's 25% stock dividend, treated as a 5 for 4 stock split, paid on
January 27, 1997, the number of shares subject to option and exercise
price were adjusted from 2,000 shares and $22.38 to 2,500 shares and
$17.90, respectively.
(2) Potential gains are net of exercise price, but before taxes associated
with exercise. These amounts represent assumed annual rates of
appreciation, at 0%, 5% and 10%, for the 5 year option term, based on
Securities and
-24-
<PAGE>
Exchange Commission rules, and do not represent the Company's estimate
or projection of the price of the Company's Common Stock in the future.
Additionally, these values do not take into account certain provisions
of the options providing for termination of the options following
termination of employment. Actual gains, if any, on stock option
exercises depend upon the actual future performance of the Company's
Common Stock. Accordingly, the potential realizable values set forth in
this table may not be achieved.
The following table shows the number of shares covered by both exercisable
and non-exercisable stock options as of October 31, 1997. Also reported are
the values for "in-the-money" options which represent the positive spread
between the exercise price of any such existing stock options and the fiscal
year-end price of Company Common Stock.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
Number of Value of Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End(#) FY-End($)(2)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise(#) Value Realized($)(1) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Marshall T. Reynolds
President and Chief
Executive Officer,
Chairman of the
Board of Directors -0- -0- -0- -0-
Gary A. Blackshire
Vice President,
Division Manager -0- -0- 14,414/0 $97,974/0
David G. Pilcher
Vice President,
Division Manager -0- -0- -0- -0-
J. Mac Aldridge
Vice President,
Division Manager -0- -0- 14,414/0 $97,974/0
R. Douglas McElwain
Vice President,
Division Manager -0- -0- 14,414/0 $97,974/0
</TABLE>
-25-
<PAGE>
(1) Aggregate market value of the shares covered by the option less the
aggregate price paid by the executive.
(2) Market value of shares covered by in-the-money options on October 31, 1997
(based on $18.63 per share, the closing price of Company Common Stock on
the NASDAQ Stock Market on October 31, 1997), less option exercise prices.
Options are in-the-money if the market value of the shares covered thereby
is greater than the option exercise price. All options are granted at the
market price of Company common stock on the date of the grant. Pursuant to
the anti-dilution provisions of the Company's 1993 Stock Option Plan, all
share amounts and exercise prices have been adjusted, as appropriate, for
stock dividends and stock splits paid on Company common stock through
October 31, 1997.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Mr. Reynolds' $150,000 salary for fiscal year 1997 was equal to the base
salary established in his former employment agreement with the Company. This
salary was based upon Mr. Reynolds' extensive experience in the commercial
printing industry and the desirability of maintaining the availability of his
services for the Company. It is not tied to any objective standards of
Company's stock performance or earnings in fiscal year 1997. The Compensation
Committee believes the base salary is appropriate in light of, among other
factors, the Company's revenue growth of approximately 63%, net income growth
of approximately 12%, and return on equity of approximately 14% for the year
as well as Mr. Reynolds' efforts in successfully leading the Company and in
directing its acquisition program in 1997. Mr. Reynolds' employment agreement
provided that he will receive such annual bonus as may be determined by the
Compensation Committee. He requested that the Compensation Committee not
consider or grant any such bonus for fiscal year 1997, and no bonus was
granted.
With respect to the salaries and other compensation of the Company's
executive officers (other than Mr. Reynolds), the Compensation Committee
believes that Mr. Reynolds, as Chief Executive Officer, is in the best
position to establish such compensation and acts upon his recommendations.
The Company's compensation package for executive officers consists of base
salary plus the opportunity to earn a cash bonus and discretionary stock
options. The base salaries are set at levels Mr. Reynolds believes sufficient
to attract and retain qualified executives. Cash bonuses are based upon net
profit of each of the Company's divisions for which each executive officer is
responsible, as well as Mr. Reynolds' assessment of the executive's individual
performance and level of responsibility. Stock options are intended to attract
and retain executive management by affording them an opportunity to receive
additional compensation based upon performance of the Company=s Common Stock,
and are based upon Mr. Reynolds' assessment of each executive officer's
overall performance.
Members of the Compensation Committee:
Robert H. Beymer
Harley F. Mooney, Jr.
A. Michael Perry
STOCK PERFORMANCE GRAPH
The following line graph compares, from January 29, 1993, the first full
trading day on which the Company's Common Stock was publicly traded, through
October 31, 1997, the cumulative total return among
-26-
<PAGE>
the Company, the Russell 2000 Index and a peer group index, based on an
investment of $100 on January 29, 1993, in the Company's Common Stock and each
index, and assuming reinvestment of all dividends, if any, paid on such
securities. The 8 companies in the peer group index are: American Business
Products, Inc., Banta Corporation, Cadmus Communications Corp., Graphic
Industries, Inc., New England Business Service, Outlook Graphics Corp.,
Standard Register Company and United Stationers, Inc. Duplex Products, Inc.,
and Paris Business Forms, Inc. have been removed from the peer group because
they were acquired by Reynolds and Reynolds in 1996 and 1997, respectively.
COMPARISON OF CUMULATIVE TOTAL RETURN
Champion Industries, Inc., Russell 2000 Index and Peer Group Index
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
01/29/93 10/29/93 10/31/94 10/31/95 10/31/96 10/31/97
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Champion Industries, Inc. $100 $151 $318 $407 $404 $416
Russell 2000 Index 100 114 112 130 147 187
Peer Index 100 95 102 152 182 185
</TABLE>
-27-
<PAGE>
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF SHARES
PRINCIPAL SHAREHOLDER
No person is known to the Company to be the beneficial owner of more than
5% of the Company Common Stock at January 15, 1998 except as follows:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
<S> <C> <C> <C>
Common Stock Marshall T. Reynolds 4,775,877 shares(1) 57%
2450 1st Avenue
Huntington, West Virginia
25728
</TABLE>
(1) 4,773,437 shares through a controlled corporation, The Harrah and
Reynolds Corporation, of which Mr. Reynolds is the sole shareholder;
2,440 shares are held by Mr. Reynolds' wife. 1,561,797 shares are
pledged as collateral to secure loans made to Mr. Reynolds in the
ordinary course of business by several commercial banks. Any
disposition of such pledged shares upon a default by Mr. Reynolds
under such loans could result in a change of control of the Company.
The Company has no reason to believe that any such default will occur.
SECURITY OWNERSHIP OF OFFICERS AND DIRECTORS
The following table sets forth certain information concerning ownership
Of Company Common Stock as of January 15, 1998 by (i) each of the directors
and nominees, (ii) each executive officer named in the Summary Compensation
table contained herein, and (iii) all directors and executive officers as a
group. Except as otherwise noted, each beneficial owner listed below has sole
voting and investment power with respect to the shares listed next to the
owner's name.
Percentage
Name of Beneficial Owner Shares Beneficially Owned of Class
Robert H. Beymer 5,244(1) *
Philip E. Cline 7,593 *
Harley F. Mooney, Jr. 13,190 *
Todd L. Parchman 1,267 *
A. Michael Perry 12,206 *
Marshall T. Reynolds 4,775,877(2) 57%
Neal W. Scaggs 48,827(3) *
Glenn W. Wilcox, Sr. 125,000 *
J. Mac Aldridge 40,827(4)(8) *
Gary A. Blackshire 29,313(5)(8) *
David G. Pilcher 2,000(6) *
R. Douglas McElwain 28,870(7)(8) *
All directors and executive officers
as a group (19 persons)(9) 5,270,630 61%
-28-
<PAGE>
* The percentage of shares of Company Common Stock beneficially owned by
each person listed above (other than Marshall T. Reynolds, who
beneficially owns 57%) is less than 1%.
(1) Includes 2,316 shares owned by wife; reporting person has no voting or
investment power with respect to those 2,316 shares.
(2) Includes 4,773,437 shares owned by a controlled corporation; 2,440 shares
owned by wife; reporting person has no voting or investment power with
respect to these 2,440 shares.
(3) Shares joint voting and investment power with wife.
(4) Joint voting and investment power shared with wife with respect to 24,413
shares.
(5) Includes 303 shares held by wife as custodian for minor child, with
respect to which reporting person has no voting or investment power;
joint voting and investment power shared with wife with respect to 12,596
shares.
(6) Includes presently exercisable options to purchase 2,000 shares of Common
Stock pursuant to 1993 Stock Option Plan.
(7) Joint voting and investment power shared with wife with respect to 12,456
shares.
(8) Includes presently exercisable options to purchase 16,414 shares of Common
Stock pursuant to 1993 Stock Option Plan.
(9) Includes presently exercisable options to purchase an aggregate of 134,730
shares of Common Stock pursuant to 1993 Stock Option Plan. These shares
are not included for purposes of computing the percentage of Common Stock
held by all directors and executive officers as a group.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTONS
TRANSACTIONS WITH DIRECTORS, OFFICERS, AND PRINCIPAL SHAREHOLDERS
INTERCOMPANY TRANSACTIONS
The Company has certain relationships and transactions with Harrah and
Reynolds and its affiliated entities. Management believes that all existing
agreements and transactions described herein between the Company and Harrah
and Reynolds and its affiliates are on terms no less favorable to the Company
than those available from unaffiliated parties. Management's belief is
premised upon (i) its review of real estate appraisals obtained from unrelated
third parties and of market rentals of properties comparable to those leased
by the Company; and (ii) its review of the terms of vehicle leases offered by
unrelated third parties with respect to vehicles comparable to those leased by
the Company. The transactions described below have been approved in accordance
with the Company's disinterested director voting policy.
-29-
<PAGE>
Realty Leases
Harrah and Reynolds, Marshall T. Reynolds or affiliated entities and
Company officers own the fee interest in certain real estate used by the
Company in its business, and lease this real estate to the Company. All
realty leases are "triple net," whereby the Company pays for all utilities,
insurance, taxes, repairs and maintenance, and all other costs associated with
the properties. The properties leased, and certain of the lease terms, are set
forth below.
<TABLE>
<CAPTION>
ANNUAL EXPIRATION
PROPERTY LESSOR SQUARE FEET RENTAL OF TERM
<S> <C> <C> <C> <C>
2450 1st Avenue ADJ Corp.(1) 85,000 $116,400 2008
Huntington, West Virginia
1945 5th Avenue Harrah and Reynolds 37,025 60,000 2007
Huntington, West Virginia
615-619 4th Avenue ADJ Corp.(1) and 59,641 21,600 2003
Huntington, West Virginia Harrah and Reynolds
405 Ann Street Printing Property Corp.(2) 36,614 57,600 2003
Parkersburg, West Virginia
1563 Hansford Street BCM Company, Ltd.(3) 21,360 49,920 2003
Charleston, West Virginia
890 Russell Cave Road Printing Property Corp.(2) 20,135 57,600 2000
Lexington, Kentucky
</TABLE>
-30-
<PAGE>
(1) ADJ Corp. is a West Virginia corporation. Two-thirds of the outstanding
capital stock of ADJ Corp. is owned by Marshall T. Reynolds' two sons,
one of whom resides with Mr. Reynolds. One-third of the outstanding
capital stock is owned by the son of director A. Michael Perry.
(2) Printing Property Corp. is a West Virginia corporation wholly-owned by
Mr. Reynolds.
(3) BCM Company, Ltd. is a general partnership owned by Michael D. McKinney,
William M. Campbell (both executive officers of the Company) and David
Brumfield, former Charleston Division Manager of Harrah and Reynolds.
Vehicle Lease
-------------
Champion Leasing Corp., a wholly-owned subsidiary of Harrah and Reynolds,
leases to the Company and its subsidiaries, pursuant to a master vehicle lease,
11 motor vehicles, which include automobiles and delivery vehicles for use by
the Company's employees. Each vehicle is leased for a term of 24 months from
the date it was first placed in service, and thereafter on a month-to-month
basis, with monthly rental commitments averaging from $10 to $760 per month.
All operating expenses, including taxes, insurance and fuel are paid by the
Company. The leases are accounted for as operating leases in the financial
statements.
ADDITIONAL RELATED PARTY TRANSACTIONS
Marshall T. Reynolds is the Chairman of the Board of Directors and a
significant shareholder of River City Associates, Inc., a West Virginia
corporation which owns and operates the Radisson Hotel Huntington, in
Huntington, West Virginia. Harley F. Mooney, Jr. and A. Michael Perry,
directors of the Company, serve as directors of River City Associates, Inc.
River City Associates, Inc. in the ordinary course of business purchases
stationery, office products, office furniture, forms and various other
printed products from the Company. Such purchases aggregated $45,385, and
constituted 0.04% of total revenues, in the Company's fiscal year ended
October 31, 1996.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Documents filed for this part of the report are filed as a separate
section following the signature page. Reference is made to the
Consolidated Financial Statements and Schedule B Table of Contents on
Page F-1.
1. See Page No. F-1.
2. Schedules, other than those listed on page F-1, are omitted because of
the absence of conditions under which they are required or because the
information required is included in the consolidated financial statements
and notes thereto.
-31-
<PAGE>
3. EXHIBITS
Number Description Reference
- - -------------------------------------------------------------------------------
(2) Plan of acquisition, Agreement of Merger dated March 24,
reorganization, arrangement, 1997 between Company and Blue Ridge
liquidation or succession Printing Co., Inc., filed as
Exhibit 2.1 to Form 8-K dated
April 3, 1997 filed April 3, 1997
is incorporated herein by
reference.
(3) 3.1 Articles of Incorporation Filed as Exhibit 3.1 to Form 10-Q
dated June 16, 1997, filed on
June 16, 1997, incorporated herein
by reference.
3.2 Bylaws Filed as Exhibit 3.2 to
Registration Statement on Form
S-1, File No. 33-54454, filed on
November 10, 1992, incorporated
herein by reference.
(4) Instruments defining the See Exhibit 3.1 above.
rights of security holders,
including debentures.
(10) Material Contracts Realty Lease dated January 28, 1993
between ADJ Corp. and Company
regarding 2450 1st Avenue,
Huntington, West Virginia, filed as
Exhibit 10.1 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.
-32-
<PAGE>
3. EXHIBITS (continued)
Realty Lease dated January 28, 1993
between The Harrah and Reynolds
Corporation and Company regarding
615 4th Avenue, Huntington, West
Virginia, filed as Exhibit 10.2 to
Form 10-K dated January 27, 1994,
filed January 31, 1994, is
incorporated herein by reference.
Realty Lease dated January 28, 1993
between ADJ Corp. and Company
regarding 617-619 4th Avenue,
Huntington, West Virginia, filed as
Exhibit 10.3 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.
Realty Lease dated January 28, 1993
between The Harrah and Reynolds
Corporation and Company regarding
1945 5th Avenue, Huntington, West
Virginia, filed as Exhibit 10.4 to
Form 10-K dated January 27, 1994,
filed January 31, 1994, is
incorporated herein by reference.
Realty Lease dated January 28, 1993
between Printing Property Corp. and
Company regarding 405 Ann Street,
Parkersburg, West Virginia, filed
as Exhibit 10.5 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.
Realty Lease dated January 28, 1993
between Printing Property Corp. and
Company regarding 890 Russell Cave
Road, Lexington, Kentucky, filed as
Exhibit 10.6 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.
Realty Lease dated January 28, 1993
between BCM Company, Ltd. and
Company regarding 1563 Hansford
Street, Charleston, West Virginia,
filed as Exhibit 10.7 to Form 10-K
dated January 27, 1994, filed
January 31, 1994, is incorporated
herein by reference.
-33-
<PAGE>
3. EXHIBITS (continued)
Master Vehicle Lease dated January
28, 1993 between Champion Leasing
Corp. and Company, filed as Exhibit
10.8 to Form 10-K dated January 27,
1994, filed January 31, 1994, is
incorporated herein by reference.
Line of credit pursuant to Note of
Stationers, Inc. in principal
amount of $500,000, payable to The
Twentieth Street Bank, filed as
Exhibit 10.5 to Registration
Statement on Form S-1, File No.
33-54454, filed on November 10,
1992, is incorporated herein by
reference.
$2,000,000 line of credit pursuant
to Letter Agreement, Loan
Agreement, Commercial Promissory
Note and Guaranty Agreement dated
September 24, 1993 with Bank One,
West Virginia, Huntington, N.A.,
filed as Exhibit 10.11 to Form 10-K
dated January 27, 1994, filed
January 31, 1994, is incorporated
herein by reference.
Lease dated April 11, 1994 between
Terry and Anis Wyatt and Stationers
Inc. regarding 214 Stone Road,
Belpre, Ohio, filed as Exhibit 10.1
to Form 10-K dated January 26,
1995, filed January 27, 1995, is
incorporated herein by reference.
Form of Indemnification Agreement
between Company and all directors
and executive officers, filed as
Exhibit 10.4 to Registration
Statement on Form S-1, File No.
33-54454, filed on November 10,
1992, is incorporated herein by
reference.
Lease Agreement dated June 1, 1995
between Owl Investors Joint Venture
and U.S. Tag & Ticket Company, Inc.
regarding 2217 Robb Street,
Baltimore, Maryland filed as
Exhibit 10.1 to Form 10-K dated
January 26, 1996, filed January 26,
1996, is incorporated herein by
reference.
-34-
<PAGE>
3. EXHIBITS (continued)
Lease Agreement dated November 1,
1991 between Randall M. Schulz,
successor trustee of The
Butterfield Family Trust No. 2 and
Smith & Butterfield Co., Inc.
regarding 2800 Lynch Road,
Evansville, Indiana, filed as
Exhibit 10.2 to Form 10-K dated
January 28, 1997, filed January
28, 1997, is incorporated herein
by reference.
Lease Agreement dated June 1, 1972
between Earl H. and Elaine D.
Seibert and Smith & Butterfield
Co., Inc. regarding 113-117 East
Third Street, Owensboro, Kentucky,
filed as Exhibit 10.3 to Form 10-K
dated January 28, 1997, filed
January 28, 1997, is incorporated
herein by reference.
Agreement of Lease dated August 21,
1996 between Marion B. and Harold
A. Merten, Jr. and CM Acquisition
Corp. (now The Merten Company)
regarding 1515 Central Parkway,
Cincinnati, Ohio, filed as
Exhibit 10.4 to Form 10-K dated
January 28, 1997, filed January
28, 1997, is incorporated herein
by reference.
Agreement of Lease dated October 1,
1988 between Ronald H. Scott and
Frank J. Scott t/d/b/a St. Clair
Leasing Co. and Interform
Corporation, regarding 1901 Mayview
Road, Bridgeville, Pennsylvania, as
amended by Amendment No. 1 dated
November 30, 1989, as amended by
Amendment No. 2 dated April 24,
1992, and as amended by Stipulation
and Order of Court (United States
Bankruptcy Court for the Western
District of Pennsylvania in the
matter of Interform Corporation v.
Ronald H. Scott and Frank J. Scott
t/d/b/a St. Clair Leasing Company,
Bankruptcy No. 94-20094-JLC)
entered August 17, 1994, filed as
Exhibit 10.5 to Form 10-K dated
January 28, 1997, filed January
28, 1997, is incorporated herein
by reference.
-35-
<PAGE>
3. EXHIBITS (continued)
(10.1) $12,500,000 Term Loan Credit
Agreement by and among Champion
Industries, Inc. and the Banks
Party Thereto and PNC Bank,
National Association, as Agent,
dated as of March 31, 1997, as
amended by Amendment No. 1 to
Credit Agreement dated August 1,
1997. Page 64
(10.2) Business Loan Agreement between
Stationer's Inc. and First Sentry
Bank dated March 11, 1997 in
original principal amount of
$800,000, with attendant
Promissory Note. Page 145
(10.3) Commercial Gross Lease between M.
Field Gomila et al and Bourque
Printing dba Upton Printing dated
October 29, 1997, regarding 740
and 746 Carondolet Street, New
Orleans, Louisiana. Page 159
Executive Compensation Plans Company's 1993 Stock Option Plan,
and Arrangements effective March 22, 1994, filed as
Exhibit 10.14 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.
(10.4) Deferred Compensation Agreement
dated July 1, 1993 between Blue
Ridge Printing Co., Inc. and
Glenn W. Wilcox, Sr. Page 179
(10.5) Split Dollar Life Insurance
Agreement dated July 1, 1993
between Blue Ridge Printing Co.,
Inc. and Glenn W. Wilcox, Sr.
Page 186
(11) Statement re computation of Exhibit 11 Page 191
per share earnings
(21) Subsidiaries of the Registrant Exhibit 21 Page 192
(23) Consent of Ernst & Young LLP Exhibit 23 Page 193
(27) Financial Data Schedule Exhibit 27 Page 194
-36-
<PAGE>
(b) Champion filed the following reports on Form 8-K during the last quarter
of the period covered by this report:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CHAMPION INDUSTRIES, INC.
By /s/ Marshall T. Reynolds
-------------------------------------
Marshall T. Reynolds
President and Chief Executive Officer
By /s/ Joseph C. Worth, III
-------------------------------------
Joseph C. Worth, III
Vice President and Chief Financial
Officer
Date: January 29, 1998
-37-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the dates indicated.
SIGNATURE AND TITLE DATE
/s/ Robert H. Beymer January 29, 1998
- - ------------------------------------------
Robert H. Beymer, Director
/s/ Philip E. Cline January 29, 1998
- - ------------------------------------------
Philip E. Cline, Director
/s/ Harley F. Mooney, Jr. January 29, 1998
- - ------------------------------------------
Harley F. Mooney, Jr., Director
/s/ Todd L. Parchman January 29, 1998
- - ------------------------------------------
Todd L. Parchman, Director
/s/ A. Michael Perry January 29, 1998
- - ------------------------------------------
A. Michael Perry, Director
/s/ Marshall T. Reynolds January 29, 1998
- - ------------------------------------------
Marshall T. Reynolds, Director
/s/ Neal W. Scaggs January 29, 1998
- - ------------------------------------------
Neal W. Scaggs, Director
/s/ Glenn W. Wilcox, Sr. January 29, 1998
- - ------------------------------------------
Glenn W. Wilcox, Sr., Director
-38-
<PAGE>
CHAMPION INDUSTRIES, INC.
Audited Consolidated Financial Statements
and Schedule
October 31, 1997
CONTENTS
Report of Independent Auditors (Item 8).....................................F-2
Audited Consolidated Financial Statements and Schedule (Item 8)
Consolidated Balance Sheet...............................................F-3
Consolidated Income Statements...........................................F-5
Consolidated Statements of Shareholders' Equity..........................F-6
Consolidated Statements of Cash Flows....................................F-7
Notes to Consolidated Financial Statements...............................F-8
Schedule VIII--Valuation and Qualifying Accounts (Item 14)...............F-20
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Champion Industries, Inc.
We have audited the accompanying consolidated balance sheets of Champion
Industries, Inc. and Subsidiaries as of October 31, 1997 and 1996, and the
related consolidated income statements, statements of shareholders' equity,
and cash flows for each of the three years in the period ended October 31,
1997. Our audits also included the financial statement schedule listed in the
index at Item 14(a). These financial statements and the schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and the schedule based upon our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Champion Industries, Inc. and Subsidiaries at October 31, 1997 and 1996, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended October 31, 1997, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
/s/ Ernst & Young LLP
Charleston, West Virginia
January 23, 1998
F-2
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
OCTOBER 31,
1997 1996
-------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 912,290 $ 2,460,879
Accounts receivable, net of allowance of $1,140,000 nd $548,000 19,075,180 11,683,573
Inventories 11,576,651 7,446,025
Property held for sale 300,000 -
Other current assets 283,642 410,706
Deferred income tax assets 981,619 560,511
-------------------------------
Total current assets 33,129,382 22,561,694
Property and equipment, at cost:
Land 784,889 795,336
Buildings and improvements 4,144,472 4,124,217
Machinery and equipment 22,852,103 16,716,660
Equipment under capital leases 5,720,594 4,401,928
Furniture and fixtures 1,684,275 1,329,459
Vehicles 1,914,362 1,318,437
-------------------------------
37,100,695 28,686,037
Less accumulated depreciation (13,825,053) (10,852,764)
-------------------------------
23,275,642 17,833,273
Cash surrender value of officers' life insurance 921,213 784,089
Goodwill, net of accumulated amortization 2,558,356 2,565,287
Other assets 461,120 318,233
-------------------------------
3,940,689 3,667,609
-------------------------------
Total assets $60,345,713 $44,062,576
-------------------------------
-------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets (continued)
OCTOBER 31,
1997 1996
-------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,657,365 $ 1,667,705
Notes payable 2,425,000 1,300,000
Accrued payroll and commissions 2,052,130 1,065,721
Taxes accrued and withheld 571,477 806,638
Accrued income taxes 450,027 1,311,437
Accrued expenses 798,848 394,617
Current portion of long-term debt:
Notes payable 2,842,844 1,690,078
Capital lease obligations 1,401,519 746,708
------------------------------
Total current liabilities 14,194,210 8,982,904
Long-term debt, net of current portion:
Notes payable 11,328,588 4,447,934
Capital lease obligations 3,827,368 3,113,083
Deferred income tax liability 3,589,889 2,073,891
Deferred compensation 555,886 473,601
Deferred gain - 330,443
------------------------------
Total liabilities 33,495,941 19,421,856
Commitments and contingencies - -
Shareholders' equity:
Common stock, $1 par value, 10,000,000
shares authorized; 8,384,930 and 8,382,682
shares issued and outstanding 8,384,930 8,382,682
Additional paid-in capital 7,450,328 7,442,502
Retained earnings 11,014,514 8,815,536
------------------------------
Total shareholders' equity 26,849,772 24,640,720
------------------------------
Total liabilities and shareholders' equity $60,345,713 $44,062,576
==============================
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Income Statements
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996 1995
-----------------------------------------------------
<S> <C> <C> <C>
Revenues:
Printing $ 87,978,709 $ 49,242,232 $ 35,370,827
Office products and office furniture 20,405,929 17,114,644 14,532,229
-----------------------------------------------------
Total revenues 108,384,638 66,356,876 49,903,056
Cost of sales:
Printing 59,849,596 33,014,938 22,250,920
Office products and office furniture 13,289,403 11,076,854 9,670,370
-----------------------------------------------------
Total cost of sales 73,138,999 44,091,792 31,921,290
Selling, general and administrative expenses 28,079,009 16,197,359 12,787,876
-----------------------------------------------------
Income from operations 7,166,630 6,067,725 5,193,890
Other income (expense):
Interest income 20,116 25,287 10,705
Interest expense (1,586,418) (692,914) (252,368)
Other 737,097 223,589 113,505
-----------------------------------------------------
(829,205) (444,038) 128,158
-----------------------------------------------------
Income before income taxes 6,337,425 5,623,687 5,065,732
Income taxes (2,570,644) (2,251,319) (2,059,447)
-----------------------------------------------------
Net income $ 3,766,781 $ 3,372,368 $ 3,006,285
=====================================================
Earnings per share $0.45 $0.40 $0.37
=====================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------ PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1994 5,292,717 $5,292,717 $7,829,209 $ 4,617,564 $17,739,490
Net income for 1995 - - - 3,006,285 3,006,285
Dividends ($0.122 per share) - - - (958,060) (958,060)
Stock issued in acquisitions 52,383 52,383 (42,808) - 9,575
Cash paid in lieu of fractional shares (168) (168) (3,413) - (3,581)
Stock split (five shares for four) 1,266,789 1,266,789 (1,266,789) - -
--------------------------------------------------------------------------
Balance, October 31, 1995 6,611,721 6,611,721 6,516,199 6,665,789 19,793,709
Net income for 1996 - - - 3,372,368 3,372,368
Dividends ($0.152 per share) - - - (1,222,621) (1,222,621)
Stock issued in acquisition 150,126 150,126 (2,549,874) - 2,700,000
Cash paid in lieu of fractional shares (146) (146) (2,590) - (2,736)
Stock split (five shares for four) 1,620,981 1,620,981 (1,620,981) - -
--------------------------------------------------------------------------
Balance, October 31, 1996 8,382,682 8,382,682 7,442,502 8,815,536 24,640,720
Net income for 1997 - - - 3,766,781 3,766,781
Dividends ($0.19 per share) - - - (1,567,803) (1,567,803)
Stock options exercised (2,441 shares) 2,441 2,441 11,310 - 13,751
Cash paid in lieu of fractional shares (193) (193) (3,484) - (3,677)
--------------------------------------------------------------------------
Balance, October 31, 1997 8,384,930 $8,384,930 $7,450,328 $11,014,514 $26,849,772
==========================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996 1995
---------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,766,781 $ 3,372,368 $ 3,006,285
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation, amortization and accretion 3,179,515 2,002,480 1,314,937
Deferred gain on sale of assets (371,041) (23,260) (19,128)
Deferred income tax benefit 334,409 236,860 (65,135)
Deferred compensation 82,285 92,933 109,911
Changes in assets and liabilities:
Accounts receivable (1,690,650) (1,579,298) (923,706)
Inventories (1,758,510) (88,812) (1,487,066)
Other current assets 152,345 (232,237) (35,769)
Accounts payable 236,195 (902,376) (85,317)
Accrued payroll 616,772 (222,450) 71,751
Taxes accrued and withheld (235,161) 255,134 (44,280)
Accrued income taxes (946,031) 650,031 (1,298,839)
Accrued expenses (1,383,537) (255,416) (24,119)
----------------------------------------------------
Net cash provided by operating activities 1,983,372 3,305,957 519,525
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (2,163,775) (2,538,459) (3,409,124)
Proceeds from sales of assets 163,103 34,745 -
Businesses acquired, net of cash received 254,676 1,118,792 18,206
Increase in other assets (297,364) (137,655) (88,796)
----------------------------------------------------
Net cash used in investing activities (2,043,360) (3,760,161) (3,479,714)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on notes payable 1,575,000 1,300,000 -
Proceeds from long-term debt 1,306,919 3,122,343 2,393,559
Principal payments on long-term debt (2,812,791) (1,672,249) (815,506)
Dividends paid (1,567,803) (1,222,621) (958,060)
Proceeds from exercise of stock options 13,751 - -
Cash paid in lieu of fractional shares (3,677) (2,736) (3,581)
----------------------------------------------------
Net cash provided by (used in) financing activities (1,488,601) 1,524,737 616,412
----------------------------------------------------
Net increase (decrease) in cash (1,548,589) 1,070,533 (2,343,777)
Cash and cash equivalents at beginning of year 2,460,879 1,390,346 3,734,123
----------------------------------------------------
Cash and cash equivalents at end of year $ 912,290 $2,460,879 $1,390,346
====================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-7
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
October 31, 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Champion conform to generally
accepted accounting principles. The preparation of the financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results could
differ from these estimates. The following is a summary of the more
significant accounting and reporting policies.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements of Champion Industries,
Inc. and Subsidiaries (the "Company") include the accounts of The Chapman
Printing Company, Inc., Bourque Printing, Inc., Dallas Printing Company,
Inc., Stationers, Inc., Carolina Cut Sheets, Inc., U.S. Tag & Ticket Company,
Inc., Donihe Graphics, Inc., Smith and Butterfield Co., Inc., and The Merten
Company, Interform Corporation, and Blue Ridge Printing Company, Inc.
Significant intercompany transactions have been eliminated in consolidation.
CASH EQUIVALENTS
The Company considers all highly liquid investments, with an original maturity
of three months or less, to be cash equivalents.
Cash and cash equivalents consist principally of cash on deposit with banks
and repurchase agreements for government securities held in one bank. At
October 31, 1997 and 1996, the Company held overnight repurchase agreements
for $50,621 and $119,393 of Federal National Mortgage Association securities
with stated interest rates of 4.0% and 4.06%.
INVENTORIES
Inventories are principally stated at the lower of first-in, first-out cost
or market. Manufactured finished goods and work-in-process inventories include
material, direct labor and overhead based on standard costs, which approximate
actual costs.
PROPERTY AND EQUIPMENT
Depreciation of property and equipment and amortization of leasehold
improvements and equipment under capital leases are recognized primarily on
the straight-line and declining-balance methods in amounts adequate to
amortize costs over the estimated useful lives of the assets as follows:
Buildings and improvements 5-40 years
Machinery and equipment 5-10 years
Furniture and fixtures 5-10 years
Vehicles 3-5 years
F-8
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
The Company leases certain equipment under financing agreements which are
classified as capital leases. These leases are for a term of five years and
contain purchase options at the end of the original lease term. Amortization
of assets recorded under capital lease agreements is included in depreciation
expense.
Major renewals, betterments and replacements are capitalized, while
maintenance and repair costs are charged to operations as incurred. Upon the
sale or disposition of assets, the cost and related accumulated depreciation
are removed from the accounts with the resulting gains or losses reflected
in income. Depreciation expense approximated $3,021,000, $1,905,000 and
$1,183,000 for the years ended October 31, 1997, 1996, and 1995.
GOODWILL
The excess cost over fair value of net assets of acquired businesses, goodwill,
is being amortized by the straight-line method over 10 to 30 years. The
carrying value of goodwill is evaluated periodically for impairment. This
evaluation includes the review of operating performance and future
undiscounted cash flows of the underlying businesses. Any impairment loss is
recognized in the period when it is determined that the carrying value of the
goodwill may not be recoverable. Accumulated amortization at October 31, 1997
and 1996, approximated $956,000 and $824,000. Amortization expense approximated
$132,000, $98,000 and $132,000 for the years ended October 31, 1997, 1996, and
1995.
INCOME TAXES
Provisions for income taxes currently payable and deferred income taxes are
based on the liability method. Under this method, deferred tax assets and
liabilities are determined based on differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted
tax rates and laws that will be in effect when the differences are expected
to reverse.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expene for the years
ended October 31, 1997, 1996, and 1995 approximated $646,000, $378,000 and
$346,000.
2. INVENTORIES
Inventories consisted of the following:
OCTOBER 31,
1997 1996
-------------------------
Printing:
Raw materials $ 3,030,425 $2,507,717
Work in process 2,867,270 1,530,933
Finished goods 2,806,475 572,228
Office products and office furniture 2,872,481 2,835,147
-------------------------
$11,576,651 $7,446,025
=========================
F-9
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
3. CREDIT ARRANGEMENTS
The Company has an unsecured line of credit with a bank for borrowings to a
maximum of $2,000,000 with interest payable quarterly at the prime rate plus
0.5%. This line of credit, which expires on May 31, 1998, contains certain
restrictive financial covenants. There was $2,000,000 outstanding under this
facility at October 31, 1997 and $1,100,000 outstanding at October 31, 1996.
The Company also has an unsecured line of credit with a bank for borrowings
to a maximum of $800,000 with interest payable quarterly at the bank's
prime rate. This line of credit expires on March 11, 1998, and is guaranteed
by the President of the Company. There was $425,000 outstanding under this
facility at October 31, 1997 and 1996.
4. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
1997 1996
-----------------------------
<S> <C> <C>
Unsecured term note payable to a bank, due in
monthly installments of $149,000 plus interest
at the prime rate with the note maturing
April 2004 $11,600,431 $ -
Installment notes payable to banks, due in monthly
installments totaling $103,000 with interest rates
approximating the prime rate and the last note maturing
October 2002, collateralized by equipment, vehicles,
inventory, accounts receivable, and, on certain notes,
the personal guarantee of the President of the Company 2,122,215 3,987,464
Unsecured installment notes payable to banks, due in
monthly installments totaling $27,000, with interest
rates approximating the bank's prime rate, with the
last note maturing August 1999 448,786 2,150,548
Capital lease obligations, due in monthly installments
totaling $177,000, including interest at the bank's
prime rate, less .50% to 1%, through March 2004 5,228,887 3,859,791
-----------------------------
19,400,319 9,997,803
Less current portion 4,244,363 2,436,786
-----------------------------
Long-term debt, net of current portion $15,155,956 $7,561,017
==============================
</TABLE>
The unsecured term note agreement contains restrictive financial covenants
requiring the Company to maintain certain financial ratios.
F-10
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Maturities of long-term debt for each of the next five years follows:
NOTES CAPITAL
PAYABLE LEASES TOTAL
----------------------------------------
1998 $2,842,844 $1,401,519 $4,244,363
1999 2,368,790 1,346,313 3,715,103
2000 2,174,840 1,004,298 3,179,138
2001 2,065,791 836,592 2,902,383
2002 1,963,494 435,668 2,399,162
Thereafter 2,755,673 204,497 2,960,170
----------------------------------------
$14,171,432 $5,228,887 $19,400,319
=========================================
The prime rate, the base interest rate on the above loans, approximated 8.0%
and 8.25% at October 31, 1997 and 1996. Interest paid during the years ended
October 31, 1997, 1996, and 1995 approximated $1,511,000, $632,000 and
$240,000.
The Company's non-cash activities included equipment purchases of approximately
$1,733,000, which were financed by a bank.
5. INCOME TAXES
Income taxes consisted of the following:
Year Ended October 31,
1997 1996 1995
----------------------------------------
Current expense:
Federal $1,783,878 $1,620,319 $1,709,746
State 452,357 394,000 415,000
Deferred expense (benefit) 334,409 237,000 (65,299)
----------------------------------------
$2,570,644 $2,251,319 $2,059,447
========================================
F-11
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Deferred tax assets and liabilities are as follows:
October 31,
1997 1996
------------------------
Assets:
Allowance for doubtful accounts $ 455,940 $ 218,977
Deferred compensation 222,354 184,704
Net operating loss carryforward of acquired companies 307,035 198,663
Accrued vacation 217,980 -
Other accrued liabilities 238,244 156,829
------------------------
Gross deferred tax assets 1,441,553 759,173
Liabilities:
Property and equipment 4,049,824 2,272,554
------------------------
Gross deferred liability 4,049,824 2,272,554
------------------------
Net deferred tax liabilities $2,608,271 $1,513,381
========================
A reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate is as follows:
Year Ended October 31,
1997 1996 1995
-------------------------------
Statutory federal income tax rate 34% 34% 34%
State taxes, net of federal benefit 5 5 6
Other 2 1 1
------------------------------
Effective tax rate 41% 40% 41%
==============================
Income taxes paid during the years ended October 31, 1997, 1996 and 1995
approximated $3,024,000, $1,437,000 and $3,414,000.
The Company has available, for income tax purposes, net operating loss
carryforward from acquired companies of approximately $464,000, of which
$122,000 expires in 2010 and $342,000 expires in 2011.
6. RELATED PARTY TRANSACTIONS AND OPERATING LEASE COMMITMENTS
The Company leases operating facilities from entities controlled by its
President, his family and affiliates. The terms of these leases, which are
accounted for as operating leases, range from five to fifteen years.
The Company also leases vehicles from an entity controlled by its President.
Vehicle leases are for an initial term of twenty-four months, month-to-month
thereafter Lease payments average $350 per month.
F-12
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
A summary of significant related party transactions follows:
<TABLE>
<CAPTION>
Year Ended October 31,
1997 1996 1995
---------------------------------------
<S> <C> <C> <C>
Rent expense paid to affiliated entities for:
Vehicles $ 7,920 $ 13,130 $ 86,559
Operating facilities 363,100 363,100 363,100
Purchases of materials and supplies from
affiliated entities 95,616 181,113 197,963
Sales of office products, office furniture and
printing services to affiliated entities 461,674 840,482 984,132
</TABLE>
When a new vehicle is required, the Company either purchases a new vehicle or
enters into a new vehicle lease with unrelated entities. These leases are on a
month-to-month basis. Other vehicle rent expense to unrelated entities totaled
$334,000, $265,000 and $368,000 for the years ended October 31, 1997, 1996 and
1995.
In addition, the Company leases property and equipment from unrelated entities
under operating leases. Rent expense amounted to $489,000, $321,000 and
$125,000 for the years ended October 31, 1997, 1996, and 1995.
Under the terms and conditions of the above-mentioned leases, the Company pays
all taxes, assessments, maintenance, repairs or replacements, utilities and
insurance.
Future minimum rental commitments for all noncancelable operating leases with
initial terms of one year or more consisted of the following at October 31,
1997:
1997 $738,000
1998 718,000
1999 502,000
2000 379,000
2001 292,000
Thereafter 893,000
----------
$3,522,000
==========
Accounts receivable from affiliated entities resulting from sales transactions
approximated $32,000 and $54,000 at October 31, 1997 and 1996.
In order to minimize premium costs, the Company participates in a
self-insurance program for employee health care benefits with affiliates
controlled by its President. The Company is allocated costs based on its
proportionate share to provide such benefits to its employees. The Company's
expense related to this program for the years ended October 31, 1997, 1996
and 1995 was approximately $1,456,000, $733,000 and $652,000.
F-13
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
7. EMPLOYEE BENEFIT PLANS
The Company has a Profit Sharing Plan (the "Plan") which covers all eligible
employees and qualifies as a Savings Plan under Section 401(k) of the Internal
Revenue Code. The Company may make discretionary contributions to the Plan. In
addition to the Company's contribution, the participants may make voluntary
contributions up to 2% of their salary not to exceed $300. The Company's
expense under the Plan was approximately $158,000, $97,000 and $66,000 for
the years ended October 31, 1997, 1996 and 1995.
The Champion Industries, Inc. 1993 Stock Option Plan provides for the granting
of both incentive stock options and non-qualified stock options to management
personnel for up to up to 610,351 shares of the Company's common stock. The
option price per share for incentive stock options shall not be lower than the
fair market value of the common stock at the date of the grant. The option
price per share for non-qualified stock options shall be at such price as
the Compensation Committee of the Board of Directors may determine at its
sole discretion. All options to date are incentive stock options. Options
vest immediately and may be exercised within five years from the date of
grant. The weighted average remaining contractual life of those options is 2.4
years. A summary of the Company's stock option activity and related
information for the years ended October 31 follows:
Weighted Weighted
Average Average
Exercise Exercise
1997 Price 1996 Price
-------------------------------------------
Outstanding-beginning of year 146,973 $11.12 100,098 $ 9.28
Granted 35,000 17.90 46,875 15.04
Exercises (2,441) 5.63 - -
-------- --------
Outstanding-end of year 179,532 12.52 146,973 11.12
======== ========
Weighted average fair value of
options granted during the year $4.63 $3.62
======== ========
The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related
interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
F-14
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Pro forma information regarding net income and earnings per share has been
determined as if the Company had accounted for its employee stock options
under the fair value method of that Statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions for 1997 and
1996, respectively: risk-free interest rates of 6.04% and 5.63%; dividend
yields of 1.10% and 1.37%; volatility factors of the expected market price
of the Company's common stock of .236 and .230; and a weighted-average
expected life of the option of 4 years.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options
is expensed in the year granted since the options vest immediately. The
Company's pro forma information for the years ended October 31 follows:
1997 1996
--------------------------------------
Pro forma net income $3,605,000 $3,203,000
======================================
Pro forma earnings per share $0.41 $0.38
======================================
The Company has deferred compensation agreements with two employees of Blue
Ridge Printing Co., Inc. providing for payments totaling approximately
$1,000,000 over a ten year period after retirement. The Company had accrued
approximately $556,000 and $474,000 at October 31, 1997 and 1996, relating
to these agreements. The amount expensed for these agreements for the years
ended October 31, 1997, 1996, and 1995 approximated $82,000, $93,000, and
$110,000. To assist in funding the deferred compensation agreements, the
Company has invested in life insurance policies which had cash surrender
values of $404,000 and $359,000 at October 31, 1997 and 1996.
8. DEFERRED GAIN
On August 30, 1991, Stationers, Inc. sold assets of its retail bookstore
consisting primarily of inventory and fixtures. The assets sold represented
a separate area of Stationer's retail location and thus the transaction was
considered to be a disposal of a portion of a product line incident to the
evolution of its overall business. Stationers, Inc. unconditionally guaranteed
a bank loan of the purchaser amounting to $600,000. Accordingly, the gain from
the sale of $591,835 was deferred and recognized as the purchaser made payments
on the purchaser's bank loan and the note receivable. In 1997, Stationer's
was released
F-15
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
from this guarantee, and the remaining gain was recognized. The gain
recognized for the years ended October 31, 1997, 1996, and 1995 amounted to
$330,000, $23,000 and $19,000.
9. COMMITMENTS AND CONTINGENCIES
The Company is subject to the environmental laws and regulations of the
United States and the states in which it operates concerning emissions into
the air, discharges into the waterways and the generation, handling and
disposal of waste materials. The Company's past expenditures relating to
environmental compliance have not had a material effect on the Company.
These laws and regulations are constantly evolving, and it is impossible
to predict accurately the effect they may have upon the capital expenditures,
earnings, and competitive position of the Company in the future. Based upon
information currently available, management believes that expenditures
relating to environmental compliance will not have a material impact on
the financial position of the Company.
10. EARNINGS AND DIVIDENDS PER SHARE
Earnings per share were computed based upon the weighted average shares of
common stock outstanding plus the shares that would be outstanding assuming
the exercise of dilutive stock options. The Company had 8,441,083, 8,356,032,
and 8,176,716 weighted average shares outstanding during the years ended
October 31,1997, 1996 and 1995.
Beginning with the first quarter of 1998, the Company will be required to
report earnings per share in accordance with State of Financial Accounting
Standards No. 128 (SFAS 128). SFAS 128 requires the presentation of basic
and diluted earnings per share on the face of the income statement and
restatement of earnings per share for all prior periods presented. Basic
and diluted earnings per share under SFAS 128 would not be materially
different than earnings per share reported herein.
11. ACQUISITIONS
On December 31, 1996, the Company acquired all of the outstanding common
stock of Interform Corporation in exchange for cash of $2,500,000, obtained
through bank financing. This acquisition was accounted for under the
purchase method. At December 31, 1996, Interform held for sale one its
former facilities which was recorded at its estimated fair value. This
facility was sold in December 1997 for its estimated fair market value.
On August 21, 1996, the Company acquired various assets with a fair value
of approximately $2,500,000 and assumed certain liabilities of approximately
$2,500,000 of The Merten Company. The Company refinanced $2,000,000 of the
assumed liabilities through a loan from a bank.
On July 1, 1996, the Company acquired all of the outstanding common stock of
Smith and Butterfield Co., Inc. in exchange for 66,666 shares of its common
stock with a fair value of $1,200,000.
F-16
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
On February 2, 1996, the Company acquired various assets and assumed certain
liabilities of E.S. Upton Printing Company, Inc. for approximately $750,000
in cash. The Company obtained a loan from a bank of $750,000 to finance
this acquisition.
These acquisitions have been accounted for under the purchase method of
accounting. Accordingly, the purchase prices have been allocated to the
assets acquired and liabilities assumed based upon their fair values at the
respective acquisition date. The operating results of these businesses are
included in the Consolidated Income Statements since their respective
acquisition dates.
The following summarizes the unaudited consolidated pro forma results of
operations for the years ended October 31, 1997 and 1996, assuming all of
the acquisitions, including Interform Corporation, accounted for under the
purchase method had been consummated at the beginning of each year presented.
1997 1996
----------- -----------
Revenues $113,710,000 $104,054,000
Net income $3,661,000 $2,410,000
Net income per share $0.43 $0.29
Common shares outstanding 8,441,083 8,414,548
In April 1997, the Company acquired all of the outstanding common stock of
Blue Ridge Printing Co., Inc. (Blue Ridge) in exchange for 277,775 shares of
the Company's common stock. This combination has been accounted for as a
pooling of interests. Accordingly, all prior period financial information
has been restated as though they had always been combined. Following is an
analysis presenting the results of operations for 1997 and 1996 of the
separate companies.
Net Earnings
Revenues Income Per Share
--------------- --------------- ------------
1997
----
Champion $101,233,702 $3,400,266 $0.42
Blue Ridge 7,150,936 366,515
-----------------------------
Consolidated $108,384,638 $3,766,781 $0.45
============================
1996
----
Champion $ 97,581,264 $2,285,954 $0.26
Blue Ridge 6,472,277 124,141
-----------------------------
Consolidated $104,053,541 $2,410,095 $0.27
============================
F-17
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
12. INDUSTRY SEGMENT INFORMATION
The Company operates principally in two industry segments: the production,
printing and sale, principally to commercial customers, of printed materials
including brochures, pamphlets, reports, tags, continuous and other forms;
and the sale of office products and office furniture. The Company employs
approximately 900 people, approximately 100 of whom are covered by a
collective bargaining agreement which expires on May 31, 2004. The Company
believes its relations with employees is satisfactory.
The Company operates entirely in the United States. Inter-segment sales
are not significant.
Revenues and operating income for the years ended October 31, 1997,
1996, and 1995, and identifiable assets at the end of each of those years,
were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------
Revenues:
<S> <C> <C> <C>
Printing $87,978,709 $49,242,232 $35,370,827
Office products and office furniture 20,405,929 17,114,644 14,532,229
Operating income:
Printing 6,065,034 4,768,676 3,991,652
Office products and office furniture 1,101,596 1,299,049 1,202,238
Depreciation and amortization:
Printing 2,955,739 1,843,309 1,203,135
Office products and office furniture 223,776 159,171 111,802
Capital expenditures:
Printing 1,812,896 2,375,301 3,322,984
Office products and office furniture 350,879 163,158 86,140
Identifiable assets:
Printing 52,577,247 36,498,504 23,863,639
Office products and office furniture 7,768,466 7,564,072 4,779,198
</TABLE>
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount reported in the balance sheet for cash and cash
equivalents approximates its fair value. The fair value of short-term
revolving credit agreements and long-term debt was estimated using discounted
cash flows and it approximates their carrying value.
F-18
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
14. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of the quarterly results of operations for the
years ended October 31, 1997 and 1996.
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------------------------------------------------------
REVENUES
1997 $21,116,000 $29,260,000 $27,867,000 $30,142,000
1996 15,718,000 15,941,000 15,664,000 19,034,000
COST OF SALES
1997 15,111,000 19,331,000 19,129,000 19,568,000
1996 10,904,000 10,412,000 10,177,000 12,599,000
NET INCOME
1997 869,000 971,000 781,000 1,146,000
1996 630,000 895,000 776,000 1,071,000
EARNINGS PER SHARE
1997 .10 .12 .09 .14
1996 .08 .11 .09 .13
F-19
<PAGE>
CHAMPION INDUSTRIES, INC. AND SUBSIDIARIES
Schedule VIII
Valuation and Qualifying Accounts
Years Ended October 31, 1997, 1996, and 1995
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT BALANCES OF CHARGED TO BALANCE
BEGINNING ACQUIRED COSTS AND AT END
DESCRIPTION OF PERIOD COMPANIES EXPENSES DEDUCTIONS(1) OF PERIOD
- - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
- - ----
Allowance for doubtful accounts $548,284 $314,313 $373,165 $(95,777) $1,139,985
1996
- - ----
Allowance for doubtful accounts 422,377 - 191,094 (65,187) 548,284
1995
- - ----
Allowance for doubtful accounts 342,514 - 108,349 (28,486) 422,377
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
F-20
<PAGE>
EXHIBIT INDEX
Number Description Reference
- - -------------------------------------------------------------------------------
(2) Plan of acquisition, Agreement of Merger dated March 24,
reorganization, arrangement, 1997 between Company and Blue Ridge
liquidation or succession Printing Co., Inc., filed as
Exhibit 2.1 to Form 8-K dated
April 3, 1997 filed April 3, 1997
is incorporated herein by
reference.
(3) 3.1 Articles of Incorporation Filed as Exhibit 3.1 to Form 10-Q
dated June 16, 1997, filed on
June 16, 1997, incorporated herein
by reference.
3.2 Bylaws Filed as Exhibit 3.2 to
Registration Statement on Form
S-1, File No. 33-54454, filed on
November 10, 1992, incorporated
herein by reference.
(4) Instruments defining the See Exhibit 3.1 above.
rights of security holders,
including debentures.
(10) Material Contracts Realty Lease dated January 28, 1993
between ADJ Corp. and Company
regarding 2450 1st Avenue,
Huntington, West Virginia, filed as
Exhibit 10.1 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.
-59-
<PAGE>
EXHIBIT INDEX (continued)
Realty Lease dated January 28, 1993
between The Harrah and Reynolds
Corporation and Company regarding
615 4th Avenue, Huntington, West
Virginia, filed as Exhibit 10.2 to
Form 10-K dated January 27, 1994,
filed January 31, 1994, is
incorporated herein by reference.
Realty Lease dated January 28, 1993
between ADJ Corp. and Company
regarding 617-619 4th Avenue,
Huntington, West Virginia, filed as
Exhibit 10.3 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.
Realty Lease dated January 28, 1993
between The Harrah and Reynolds
Corporation and Company regarding
1945 5th Avenue, Huntington, West
Virginia, filed as Exhibit 10.4 to
Form 10-K dated January 27, 1994,
filed January 31, 1994, is
incorporated herein by reference.
Realty Lease dated January 28, 1993
between Printing Property Corp. and
Company regarding 405 Ann Street,
Parkersburg, West Virginia, filed
as Exhibit 10.5 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.
Realty Lease dated January 28, 1993
between Printing Property Corp. and
Company regarding 890 Russell Cave
Road, Lexington, Kentucky, filed as
Exhibit 10.6 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.
Realty Lease dated January 28, 1993
between BCM Company, Ltd. and
Company regarding 1563 Hansford
Street, Charleston, West Virginia,
filed as Exhibit 10.7 to Form 10-K
dated January 27, 1994, filed
January 31, 1994, is incorporated
herein by reference.
-60-
<PAGE>
EXHIBIT INDEX (continued)
Master Vehicle Lease dated January
28, 1993 between Champion Leasing
Corp. and Company, filed as Exhibit
10.8 to Form 10-K dated January 27,
1994, filed January 31, 1994, is
incorporated herein by reference.
Line of credit pursuant to Note of
Stationers, Inc. in principal
amount of $500,000, payable to The
Twentieth Street Bank, filed as
Exhibit 10.5 to Registration
Statement on Form S-1, File No.
33-54454, filed on November 10,
1992, is incorporated herein by
reference.
$2,000,000 line of credit pursuant
to Letter Agreement, Loan
Agreement, Commercial Promissory
Note and Guaranty Agreement dated
September 24, 1993 with Bank One,
West Virginia, Huntington, N.A.,
filed as Exhibit 10.11 to Form 10-K
dated January 27, 1994, filed
January 31, 1994, is incorporated
herein by reference.
Lease dated April 11, 1994 between
Terry and Anis Wyatt and Stationers
Inc. regarding 214 Stone Road,
Belpre, Ohio, filed as Exhibit 10.1
to Form 10-K dated January 26,
1995, filed January 27, 1995, is
incorporated herein by reference.
Form of Indemnification Agreement
between Company and all directors
and executive officers, filed as
Exhibit 10.4 to Registration
Statement on Form S-1, File No.
33-54454, filed on November 10,
1992, is incorporated herein by
reference.
Lease Agreement dated June 1, 1995
between Owl Investors Joint Venture
and U.S. Tag & Ticket Company, Inc.
regarding 2217 Robb Street,
Baltimore, Maryland filed as
Exhibit 10.1 to Form 10-K dated
January 26, 1996, filed January 26,
1996, is incorporated herein by
reference.
-61-
<PAGE>
EXHIBIT INDEX (continued)
Lease Agreement dated November 1,
1991 between Randall M. Schulz,
successor trustee of The
Butterfield Family Trust No. 2 and
Smith & Butterfield Co., Inc.
regarding 2800 Lynch Road,
Evansville, Indiana, filed as
Exhibit 10.2 to Form 10-K dated
January 28, 1997, filed January
28, 1997, is incorporated herein
by reference.
Lease Agreement dated June 1, 1972
between Earl H. and Elaine D.
Seibert and Smith & Butterfield
Co., Inc. regarding 113-117 East
Third Street, Owensboro, Kentucky,
filed as Exhibit 10.3 to Form 10-K
dated January 28, 1997, filed
January 28, 1997, is incorporated
herein by reference.
Agreement of Lease dated August 21,
1996 between Marion B. and Harold
A. Merten, Jr. and CM Acquisition
Corp. (now The Merten Company)
regarding 1515 Central Parkway,
Cincinnati, Ohio, filed as
Exhibit 10.4 to Form 10-K dated
January 28, 1997, filed January
28, 1997, is incorporated herein
by reference.
Agreement of Lease dated October 1,
1988 between Ronald H. Scott and
Frank J. Scott t/d/b/a St. Clair
Leasing Co. and Interform
Corporation, regarding 1901 Mayview
Road, Bridgeville, Pennsylvania, as
amended by Amendment No. 1 dated
November 30, 1989, as amended by
Amendment No. 2 dated April 24,
1992, and as amended by Stipulation
and Order of Court (United States
Bankruptcy Court for the Western
District of Pennsylvania in the
matter of Interform Corporation v.
Ronald H. Scott and Frank J. Scott
t/d/b/a St. Clair Leasing Company,
Bankruptcy No. 94-20094-JLC)
entered August 17, 1994, filed as
Exhibit 10.5 to Form 10-K dated
January 28, 1997, filed January
28, 1997, is incorporated herein
by reference.
-62-
<PAGE>
EXHIBIT INDEX (continued)
(10.1) $12,500,000 Term Loan Credit
Agreement by and among Champion
Industries, Inc. and the Banks
Party Thereto and PNC Bank,
National Association, as Agent,
dated as of March 31, 1997, as
amended by Amendment No. 1 to
Credit Agreement dated August 1,
1997. Page 64
(10.2) Business Loan Agreement between
Stationer's Inc. and First Sentry
Bank dated March 11, 1997 in
original principal amount of
$800,000, with attendant
Promissory Note. Page 145
(10.3) Commercial Gross Lease between M.
Field Gomila et al and Bourque
Printing dba Upton Printing dated
October 29, 1997, regarding 740
and 746 Carondolet Street, New
Orleans, Louisiana. Page 159
Executive Compensation Plans Company's 1993 Stock Option Plan,
and Arrangements effective March 22, 1994, filed as
Exhibit 10.14 to Form 10-K dated
January 27, 1994, filed January 31,
1994, is incorporated herein by
reference.
(10.4) Deferred Compensation Agreement
dated July 1, 1993 between Blue
Ridge Printing Co., Inc. and
Glenn W. Wilcox, Sr. Page 179
(10.5) Split Dollar Life Insurance
Agreement dated July 1, 1993
between Blue Ridge Printing Co.,
Inc. and Glenn W. Wilcox, Sr.
Page 186
(11) Statement re computation of Exhibit 11 Page 191
per share earnings
(21) Subsidiaries of the Registrant Exhibit 21 Page 192
(23) Consent of Ernst & Young LLP Exhibit 23 Page 193
(27) Financial Data Schedule Exhibit 27 Page 194
-63-
<PAGE>
EXHIBIT 10.1
$12,500,000 TERM LOAN
CREDIT AGREEMENT
by and among
CHAMPION INDUSTRIES, INC.
and
THE BANKS PARTY HERETO
and
PNC BANK, NATIONAL ASSOCIATION, As Agent
Dated as of March 31, 1997
-64-
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- - ------- ----
1. CERTAIN DEFINITIONS............................................1
1.1 Certain Definitions........................................1
1.2 Construction..............................................12
1.2.1 Number; Inclusion...................................12
1.2.2 Determination.......................................12
1.2.3 Agent's Discretion and Consent......................12
1.2.4 Documents Taken as a Whole..........................13
1.2.5 Headings............................................13
1.2.6 Implied References to this Agreement................13
1.2.7 Persons.............................................13
1.2.8 Modifications to Documents..........................13
1.3 Accounting Principles.....................................14
2. TERM LOAN.....................................................14
2.1 Term Loan Commitments.....................................14
2.2 Nature of Banks' Obligations with Respect
to the Term Loan........................................14
2.3 Term Notes................................................15
2.4 Use of Proceeds...........................................15
3. INTEREST RATES................................................15
3.1 Euro-Rate.................................................15
3.2 Interest Periods..........................................15
3.2.1 Initial Period......................................15
3.2.2 Subsequent Periods..................................16
3.2.3 Rate Quotations.....................................16
3.2.4 Ending Date and Business Day........................16
3.2.5 Termination Before Expiration Date..................16
3.3 Interest After Default....................................16
3.4 Euro-Rate Unascertainable.................................17
3.4.1 Unascertainable.....................................17
3.4.2 Illegality; Increased Costs; Deposits
Not Available.....................................17
3.4.3 Agent's and Bank's Rights...........................17
4. PAYMENTS......................................................18
4.1 Payments..................................................18
4.2 Pro Rata Treatment of Banks...............................18
-65-
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- - ------- ----
4.3 Interest Payment Dates....................................18
4.4 Prepayments...............................................19
4.4.1 Right to Prepay.....................................19
4.4.2 Change of Lending Office............................20
4.5 Additional Compensation in Certain Circumstances..........20
4.5.1 Increased Costs or Reduced Return Resulting
From Taxes, Reserves, Capital Adequacy
Requirements, Expenses, Etc.......................20
4.5.2 Indemnity and Compensation..........................21
5. REPRESENTATIONS AND WARRANTIES................................21
5.1 Representations and Warranties............................21
5.1.1 Organization and Qualification......................22
5.1.2 Capitalization and Ownership........................22
5.1.3 Subsidiaries........................................22
5.1.4 Power and Authority.................................22
5.1.5 Validity and Binding Effect.........................23
5.1.6 No Conflict.........................................23
5.1.7 Litigation..........................................23
5.1.8 Title to Properties.................................24
5.1.9 Financial Statements................................24
5.1.10 Use of Proceeds; Margin Stock......................25
5.1.11 Full Disclosure....................................25
5.1.12 Taxes..............................................25
5.1.13 Consents and Approvals.............................25
5.1.14 No Event of Default; Compliance with Instruments...26
5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.....26
5.1.16 Insurance..........................................26
5.1.17 Compliance with Laws...............................26
5.1.18 Material Contracts; Burdensome Restrictions........27
5.1.19 Investment Companies; Regulated Entities...........27
5.1.20 Plans and Benefit Arrangements.....................27
5.1.21 Employment Matters.................................28
5.1.22 Environmental Matters..............................29
5.1.23 Senior Debt Status.................................30
5.2 Updates to Schedules......................................30
6. CONDITIONS OF LENDING.........................................30
6.1 Officer's Certificate.....................................31
6.2 Secretary's Certificate...................................31
-66-
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- - ------- ----
6.3 Subsidiaries Guaranty.....................................31
6.4 Opinion of Counsel........................................32
6.5 Legal Details.............................................32
6.6 Payment of Fees...........................................32
6.7 Officer's Certificate Regarding MACs......................32
6.8 No Violation of Laws......................................32
6.9 No Actions or Proceedings.................................33
7. COVENANTS.....................................................33
7.1 Affirmative Covenants.....................................33
7.1.1 Preservation of Existence, Etc......................33
7.1.2 Payment of Liabilities, Including Taxes, Etc........33
7.1.3 Maintenance of Insurance............................34
7.1.4 Maintenance of Properties and Leases................34
7.1.5 Maintenance of Patents, Trademarks, Etc.............34
7.1.6 Visitation Rights...................................34
7.1.7 Keeping of Records and Books of Account.............34
7.1.8 Plans and Benefit Arrangements......................35
7.1.9 Compliance with Laws................................35
7.1.10 Use of Proceeds....................................35
7.2 Negative Covenants........................................36
7.2.1 Indebtedness........................................36
7.2.2 Liens...............................................36
7.2.3 Guaranties..........................................37
7.2.4 Loans and Investments...............................37
7.2.5 Liquidations, Mergers, Consolidations
and Acquisitions..................................37
7.2.6 Dispositions of Assets or Subsidiaries..............38
7.2.7 Affiliate Transactions..............................39
7.2.8 Continuation of or Change in Business...............39
7.2.9 Plans and Benefit Arrangements......................39
7.2.10 Fiscal Year........................................40
7.2.11 Issuance of Stock..................................40
7.2.12 Changes in Organizational Documents................41
7.2.13 Capital Expenditures and Leases....................41
7.2.14 Minimum Fixed Charge Coverage Ratio................41
7.2.15 Maximum Leverage Ratio.............................41
7.2.16 Minimum Tangible Net Worth.........................41
7.3 Reporting Requirements....................................42
7.3.1 Quarterly Financial Statements......................42
-67-
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- - ------- ----
7.3.2 Annual Financial Statements.........................42
7.3.3 Certificate of the Borrower.........................43
7.3.4 Notice of Default...................................43
7.3.5 Notice of Litigation................................43
7.3.6 Certain Events......................................43
7.3.7 Budgets, Forecasts, Other Reports and Information...43
7.3.8 Notices Regarding Plans and Benefit Arrangements....43
8. DEFAULT.......................................................46
8.1 Events of Default.........................................46
8.1.1 Payments Under Loan Documents.......................46
8.1.2 Breach of Warranty..................................46
8.1.3 Breach of Negative Covenants or Visitation Rights...46
8.1.4 Breach of Other Covenants...........................46
8.1.5 Defaults in Other Agreements or Indebtedness........47
8.1.6 Final Judgments or Orders...........................47
8.1.7 Loan Document Unenforceable.........................47
8.1.8 Uninsured Losses; Proceedings Against Assets........47
8.1.9 Notice of Lien or Assessment........................47
8.1.10 Insolvency.........................................48
8.1.11 Events Relating to Plans and Benefit Arrangements..48
8.1.12 Cessation of Business..............................48
8.1.13 Change of Control..................................49
8.1.14 Involuntary Proceedings............................49
8.1.15 Voluntary Proceedings..............................49
8.2 Consequences of Event of Default..........................50
8.2.1 Events of Default Other Than Bankruptcy,
Insolvency or Reorganization Proceedings..........50
8.2.2 Bankruptcy, Insolvency or Reorganization
Proceedings.......................................50
8.2.3 Set-off.............................................50
8.2.4 Suits, Actions, Proceedings.........................51
8.2.5 Application of Proceeds.............................51
9. THE AGENT.....................................................52
9.1 Appointment...............................................52
9.2 Delegation of Duties......................................52
9.3 Nature of Duties; Independent Credit Investigation........53
9.4 Actions in Discretion of Agent; Instructions from
the Banks...............................................53
9.5 Reimbursement and Indemnification of Agent
by the Borrower.........................................54
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<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- - ------- ----
9.6 Exculpatory Provisions; Limitation of Liability...........55
9.7 Reimbursement and Indemnification of Agent by Banks.......56
9.8 Reliance by Agent.........................................56
9.9 Notice of Default.........................................56
9.10 Notices..................................................57
9.11 Banks in Their Individual Capacities.....................57
9.12 Holders of Notes.........................................57
9.13 Equalization of Banks....................................58
9.14 Successor Agent..........................................58
9.15 Agent's Fee..............................................59
9.16 Calculations.............................................59
9.17 Beneficiaries............................................59
10. MISCELLANEOUS................................................59
10.1 Modifications, Amendments or Waivers.....................59
10.1.1 Extension of Payment; Reduction of Principal
Interest or Fees; Modification of Terms
of Payment......................................60
10.1.2 Release of Guarantor..............................60
10.1.3 Miscellaneous.....................................60
10.2 No Implied Waivers; Cumulative Remedies;
Writing Required.......................................60
10.3 Reimbursement and Indemnification of Banks
by the Borrower; Taxes.................................61
10.4 Holidays.................................................62
10.5 Notices..................................................62
10.6 Severability.............................................62
10.7 Governing Law............................................63
10.8 Prior Understanding......................................63
10.9 Duration; Survival.......................................63
10.10 Successors and Assigns..................................63
10.11 Confidentiality.........................................64
10.12 Counterparts............................................64
10.13 Agent's or Bank's Consent...............................64
-69-
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- - ------- ----
10.14 Exceptions..............................................64
10.15 Consent To Forum; Waiver Of Jury Trial..................65
-70-
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
SCHEDULE
SCHEDULE 1.1(B)-COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
SCHEDULE 1.1(P)-PERMITTED LIENS
SCHEDULE 5.1.2-CAPITALIZATION
SCHEDULE 5.1.3-SUBSIDIARIES, PARTNERSHIPS AND LLC INTERESTS
SCHEDULE 5.1.20-EMPLOYEE BENEFIT PLAN DISCLOSURES
SCHEDULE 5.1.22-ENVIRONMENTAL DISCLOSURES
SCHEDULE 7.2.1-PERMITTED INDEBTEDNESS
EXHIBITS
EXHIBIT 1.1(G)-SUBSIDIARIES GUARANTY
EXHIBIT 1.1(T)-TERM NOTE
EXHIBIT 7.3.3-QUARTERLY COMPLIANCE CERTIFICATE
-71-
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is dated as of March 31, 1997, and is
made by and among CHAMPION INDUSTRIES, INC., a West Virginia
corporation, ("Borrower"), the BANKS (as hereinafter defined), and
PNC BANK, NATIONAL ASSOCIATION, in its capacity as agent for the
Banks under this Agreement (hereinafter referred to in such
capacity as the "Agent").
WITNESSETH:
WHEREAS, pursuant to a Time/Term Note dated December 30, 1996,
as amended by an Amended and Restated Time/Term Note dated January
31, 1997 and a Second Amended and Restated Time/Term Note dated
February 28, 1997 (as amended, the "Bridge Note"), PNC Bank
provided $8,500,000.00 in bridge financing to the Borrower (the
"Bridge Loan") to fund the acquisition by the Borrower of all of
the capital stock of Interform Corporation; and
WHEREAS, all principal and interest and any other amounts owed
by the Borrower under the Bridge Note are due and payable on March
31, 1997; and
WHEREAS, the Borrower has requested the Banks to provide a
term loan to the Borrower in an aggregate principal amount of up to
Twelve Million Five Hundred Thousand Dollars ($12,500,000) for the
purpose of refinancing the Bridge Loan and other existing unsecured
indebtedness of the Borrower; and
WHEREAS, the Banks are willing to provide such credit upon the
terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration of their
mutual covenants and agreements hereinafter set forth and intending
to be legally bound hereby, covenant and agree as follows:
1. CERTAIN DEFINITIONS
1.1 Certain Definitions.
In addition to words and terms defined elsewhere in
this Agreement, the following words and terms shall have the
following meanings, respectively, unless the context hereof clearly
requires otherwise:
Affiliate as to any Person shall mean any other Person
(i) which directly or indirectly controls, is controlled by, or is
under common control with such Person, (ii) which beneficially owns
or holds 5% or more of any class of the voting or other equity
-72-
<PAGE>
interests of such Person, or (iii) 5% or more of any class of
voting interests or other equity interests of which is beneficially
owned or held, directly or indirectly, by such Person. Control, as
used in this definition, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership
of voting securities, by contract or otherwise, including the power
to elect a majority of the directors or trustees of a corporation
or trust, as the case may be.
Agent shall mean PNC Bank, National Association, and
its successors and assigns.
Agent's Fee shall have the meaning assigned to that
term in Section 9.15.
Agreement shall mean this Credit Agreement, as the same
may be supplemented or amended from time to time, including all
schedules and exhibits.
Annual Statements shall have the meaning assigned to
that term in Section 5.1.9(i).
Authorized Officer shall mean those individuals,
designated by written notice to the Agent from the Borrower,
authorized to execute notices, reports and other documents on
behalf of the Borrower required hereunder. The Borrower may amend
such list of individuals from time to time by giving written notice
of such amendment to the Agent.
Banks shall mean the financial institutions named on
Schedule 1.1(B) and their respective successors and assigns as
permitted hereunder, each of which is referred to herein as a Bank.
Base Rate shall mean the greater of (i) the interest
rate per annum announced from time to time by PNC Bank at its
Principal Office as its then prime rate, which rate may not be the
lowest rate then being charged commercial borrowers by the Bank, or
(ii) the Federal Funds Effective Rate plus 0.5% per annum.
Benefit Arrangement shall mean at any time an "employee
benefit plan," within the meaning of Section 3(3) of ERISA, which
is neither a Plan nor a Multiemployer Plan and which is maintained,
sponsored or otherwise contributed to by any member of the ERISA
Group.
Borrower shall have the meaning given in the recitals
to this Agreement.
Business Day shall mean any day other than a Saturday
or Sunday or a legal holiday on which commercial banks are
authorized or required to be closed for business in Pittsburgh,
Pennsylvania and on which dealings in dollar deposits are carried
on in the London interbank market.
-73-
<PAGE>
Closing Date shall mean the Business Day on which the
Term Loan shall be made, which shall be March 31, 1997, or such
other time and place as the parties agree.
Consideration shall mean with respect to any Permitted
Acquisition, the aggregate of (i) the net present value paid by any
of the Borrower, directly or indirectly, to the seller in
connection therewith, (ii) the Indebtedness incurred or assumed by
any of the Borrower, whether in favor of the seller or otherwise
and whether fixed or contingent, (iii) any Guaranty given or
incurred by the Borrower in connection therewith, (iv) 50% of the
value of stock transferred, and (v) the net present value of any
other consideration given or obligation incurred by the Borrower in
connection therewith.
Consolidated Cash Flow From Operations for any period
of determination shall mean the sum of net income, depreciation,
amortization, other non-cash charges to net income, interest
expense and cash income tax expense minus non-cash credits to net
income, all measured on a rolling four quarters basis in each case
of the Borrower and its Subsidiaries for such period determined and
consolidated in accordance with GAAP.
Consolidated Tangible Net Worth shall mean as of any
date of determination total stockholders' equity less intangible
assets of the Borrower and its Subsidiaries as of such date
determined and consolidated in accordance with GAAP.
Dollar, Dollars, U.S. Dollars and the symbol $ shall
mean lawful money of the United States of America.
Environmental Complaint shall mean any written
complaint setting forth a cause of action for personal or property
damage or natural resource damage or equitable relief, order,
notice of violation, citation, request for information issued
pursuant to any Environmental Laws by an Official Body, subpoena or
other written notice of any type relating to, arising out of, or
issued pursuant to, any of the Environmental Laws or any
Environmental Conditions, as the case may be.
Environmental Conditions shall mean any conditions of
the environment, including the workplace, the ocean, natural
resources (including flora or fauna), soil, surface water,
groundwater, any actual or potential drinking water supply sources,
substrata or the ambient air, relating to or arising out of, or
caused by, the use, handling, storage, treatment, recycling,
generation, transportation, release, spilling, leaking, pumping,
emptying, discharging, injecting, escaping, leaching, disposal,
dumping, threatened release or other management or mismanagement of
Regulated Substances resulting from the use of, or operations on,
any Property.
Environmental Laws shall mean all federal, state, local
and foreign Laws and regulations, including permits, licenses,
authorizations, bonds, orders, judgments, and consent decrees
issued, or entered into, pursuant thereto, relating to pollution or
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protection of human health or the environment or employee safety in
the workplace.
ERISA shall mean the Employee Retirement Income Security
Act of 1974, as the same may be amended or supplemented from time
to time, and any successor statute of similar import, and the rules
and regulations thereunder, as from time to time in effect.
ERISA Group shall mean, at any time, the Borrower and all members
of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control and all other
entities which, together with the Borrower, are treated as a single
employer under Section 414 of the Internal Revenue Code.
Euro-Rate shall mean with respect to the Term Loan, the
interest rate per annum for any Interest Period determined by the
Agent by dividing (the resulting quotient rounded upward to the
nearest 1/100th of 1% per annum) (i) the rate of interest
determined by the Agent in accordance with its usual procedures
(which determination shall be conclusive and binding upon the
Borrower, absent manifest error on the part of the Agent) to be
equal to the offered rates for deposits in Dollars for the
applicable Euro-Rate Interest Period which appears on Page 3750 of
the TELERATE rate reporting system or other similar system as of
approximately 11:00 a.m. Greenwich Mean Time, two (2) Business Days
prior to the first day of such Euro-Rate Interest Period for an
amount comparable to such Loan and having a borrowing date and a
maturity comparable to such Interest Period by (ii) a number equal
to 1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate may
also be expressed by the following formula:
Euro Rate = Offered rate on TELERATE Page 3750
-----------------------------------
1.00 - Euro-Rate Reserve Percentage
If more than one offered rate appears on Page 3750 of the TELERATE
reporting system or similar system, the rate will be the arithmetic
mean of such offered rates. The Euro-Rate shall be adjusted with
respect to the balance of the Term Loan outstanding on the
effective date of any change in the Euro-Rate Reserve Percentage as
of such effective date. The Agent shall give prompt notice to the
Borrower of the Euro-Rate as determined or adjusted in accordance
herewith, which determination shall be conclusive absent manifest
error.
Euro-Rate Reserve Percentage shall mean the maximum
percentage (expressed as a decimal rounded upward to the nearest
1/100 of 1%) as determined by the Agent which is in effect during
any relevant period, as prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for determining the
reserve requirements (including supplemental, marginal and
emergency reserve requirements) with respect to eurocurrency
funding (currently referred to as "Eurocurrency Liabilities") of a
member bank in such System.
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Event of Default shall mean any of the events described
in Section 8.1 and referred to therein as an "Event of Default."
Federal Funds Effective Rate for any day shall mean the
rate per annum (based on a year of 360 days and actual days elapsed
and rounded upward to the nearest 1/100 of 1%) announced by the
Federal Reserve Bank of New York (or any successor) on such day as
being the weighted average of the rates on overnight federal funds
transactions arranged by federal funds brokers on the previous
trading day, as computed and announced by such Federal Reserve Bank
(or any successor) in substantially the same manner as such Federal
Reserve Bank computes and announces the weighted average it refers
to as the "Federal Funds Effective Rate" as of the date of this
Agreement; provided, if such Federal Reserve Bank (or its
successor) does not announce such rate on any day, the "Federal
Funds Effective Rate" for such day shall be the Federal Funds
Effective Rate for the last day on which such rate was announced.
Financial Projections shall have the meaning assigned
to that term in Section 5.1.9(i).
Fixed Charge Coverage Ratio shall mean the ratio of
Consolidated Cash Flow from Operations to Fixed Charges.
GAAP shall mean generally accepted accounting
principles as are in effect from time to time, subject to the
provisions of Section 1.3, and applied on a consistent basis both
as to classification of items and amounts.
Guaranty of any Person shall mean any obligation of
such Person guaranteeing or in effect guaranteeing any liability or
obligation of any other Person in any manner, whether directly or
indirectly, including any performance bond or other suretyship
arrangement and any other form of assurance against loss, except
endorsement of negotiable or other instruments for deposit or
collection in the ordinary course of business and indemnities.
Indebtedness shall mean, as to any Person at any time,
any and all indebtedness, obligations or liabilities (whether
matured or unmatured, liquidated or unliquidated, direct or
indirect, absolute or contingent, or joint or several) of such
Person for or in respect of: (i) borrowed money, (ii) amounts
raised under or liabilities in respect of any note purchase or
acceptance credit facility, (iii) reimbursement obligations
(contingent or otherwise) under any letter of credit, currency swap
agreement, interest rate swap, cap, collar or floor agreement or
other interest rate management device, (iv) any other transaction
(including forward sale or purchase agreements, capitalized leases
and conditional sales agreements) having the commercial effect of
a borrowing of money entered into by such Person to finance its
operations or capital requirements (but not including trade
payables and accrued expenses incurred in the ordinary course of
business which are not represented by a promissory note or other
evidence of indebtedness and which are not more than thirty (30)
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days past due), or (v) any Guaranty of Indebtedness for borrowed
money.
Ineligible Security shall mean any security which may
not be underwritten or dealt in by member banks of the Federal
Reserve System under Section 16 of the Banking Act of 1933 (12
U.S.C. Section 24, Seventh), as amended.
Insolvency Proceeding shall mean, with respect to any
Person, (a) case, action or proceeding with respect to such Person
(i) before any court or any other Official Body under any
bankruptcy, insolvency, reorganization or other similar Law now or
hereafter in effect, or (ii) for the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator, conservator
(or similar official) of the Borrower or otherwise relating to
liquidation, dissolution, winding-up or relief of such Person, or
(b) any general assignment for the benefit of creditors,
composition, marshaling of assets for creditors, or other, similar
arrangement in respect of such Person's creditors generally or any
substantial portion of its creditors, undertaken under any Law.
Interest Period shall have the meaning assigned to such
term in Section 3.2.
Internal Revenue Code shall mean the Internal Revenue
Code of 1986, as the same may be amended or supplemented from time
to time, and any successor statute of similar import, and the rules
and regulations thereunder, as from time to time in effect.
Labor Contracts shall mean all employment agreements,
employment contracts, collective bargaining agreements and other
agreements among the Borrower or any Subsidiary of the Borrower and
its employees.
Law shall mean any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance,
opinion, release, ruling, order, injunction, writ, decree or award
of any Official Body.
Lien shall mean any mortgage, deed of trust, pledge,
lien, security interest, charge or other encumbrance or security
arrangement of any nature whatsoever, whether voluntarily or
involuntarily given, including any conditional sale or title
retention arrangement, and any assignment, deposit arrangement or
lease intended as, or having the effect of, security and any filed
financing statement or other notice of any of the foregoing
(whether or not a lien or other encumbrance is created or exists at
the time of the filing).
LLC Interests shall have the meaning given to such term
in Section 5.1.3.
Loan Documents shall mean this Agreement, the Term
Notes, and any other instruments, certificates or documents
delivered or contemplated to be delivered hereunder or thereunder
or in connection herewith or therewith, as the same may be
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supplemented or amended from time to time in accordance herewith or
therewith, and Loan Document shall mean any of the Loan Documents.
Material Adverse Change shall mean any set of
circumstances or events which (a) has or could reasonably be
expected to have any material adverse effect whatsoever upon the
validity or enforceability of this Agreement or any other Loan
Document, (b) is or could reasonably be expected to be material and
adverse to the business, properties, assets, financial condition,
results of operations of the Borrower and its Subsidiaries taken as
a whole, (c) impairs materially or could reasonably be expected to
impair materially the ability of the Borrower and its Subsidiaries
taken as a whole to duly and punctually pay or perform their
Indebtedness, or (d) impairs materially or could reasonably be
expected to impair materially the ability of the Agent or any of
the Banks, to the extent permitted, to enforce their legal remedies
pursuant to this Agreement or any other Loan Document.
Maturity Date shall mean April 1, 2004.
Month, with respect to an Interest Period, shall mean
the interval between the days in consecutive calendar months
numerically corresponding to the first day of such Interest Period.
If any Interest Period begins on a day of a calendar month for
which there is no numerically corresponding day in the month in
which such Interest Period is to end, the final month of such
Interest Period shall be deemed to end on the last Business Day of
such final month.
Multiemployer Plan shall mean any employee benefit plan
which is a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA and to which any Borrower or any member
of the ERISA Group is then making or accruing an obligation to make
contributions or, within the preceding five Plan years, has made or
had an obligation to make such contributions.
Multiple Employer Plan shall mean a Plan which has two
or more contributing sponsors (including any Borrower or any member
of the ERISA Group) at least two of whom are not under common
control, as such a plan is described in Sections 4063 and 4064 of
ERISA.
Notices shall have the meaning assigned to that term in
Section 10.5.
Obligation shall mean any obligation or liability of
the Borrower to the Agent or any of the Banks, howsoever created,
arising or evidenced, whether direct or indirect, absolute or
contingent, now or hereafter existing, or due or to become due,
under or in connection with this Agreement, the Term Notes, or any
other Loan Document.
Official Body shall mean any national, federal, state,
local or other government or political subdivision or any agency,
authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or
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arbitrator, in each case whether foreign or domestic.
Partnership Interests shall have the meaning given to
such term in Section 5.1.3.
PBGC shall mean the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV of ERISA
or any successor.
Permitted Acquisition shall have the meaning assigned
to such term in Section 7.2.5.
Permitted Investments shall mean:
(i) direct obligations of the United States of
America or any agency or instrumentality thereof or obligations
backed by the full faith and credit of the United States of America
maturing in twelve (12) months or less from the date of
acquisition;
(ii) commercial paper maturing in 180 days or less
rated not lower than A-1, by Standard & Poor's or P-1 by Moody's
Investors Service, Inc. on the date of acquisition;
(iii) demand deposits, time deposits or certificates of
deposit maturing within one year in commercial banks whose
obligations are rated A-1, A or the equivalent or better by
Standard & Poor's on the date of acquisition; and
(iv) Investments shown on Schedule 1.1(P).
Permitted Liens shall mean:
(i) Liens, security interests and mortgages in favor
of the Agent for the benefit of the Banks party to this Agreement;
(ii) Liens for taxes, assessments, or similar charges,
incurred in the ordinary course of business and which are not yet
due and payable;
(iii) Pledges or deposits made in the ordinary course
of business to secure payment of workmen's compensation, or to
participate in any fund in connection with workmen's compensation,
unemployment insurance, old-age pensions or other social security
programs;
(iv) Liens of mechanics, materialmen, warehousemen,
carriers, or other like Liens, securing obligations incurred in the
ordinary course of business that are not yet due and payable and
Liens of landlords securing obligations to pay lease payments that
are not yet due and payable or in default;
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(v) Good-faith pledges or deposits made in the
ordinary course of business to secure performance of bids, tenders,
contracts (other than for the repayment of borrowed money) or
leases, not in excess of the aggregate amount due thereunder, or to
secure statutory obligations, or surety, appeal, indemnity,
performance or other similar bonds required in the ordinary course
of business;
(vi) Encumbrances consisting of zoning restrictions,
easements or other restrictions on the use of real property, none
of which materially impairs the use of such property or the value
thereof, and none of which is violated in any material respect by
existing or proposed structures or land use;
(vii) Liens on property leased by the Borrower or any
Subsidiary of the Borrower under capital and operating leases
permitted in Section 7.2.13 securing obligations of the Borrower or
any Subsidiary of the Borrower to the lessor under such leases;
(viii) Any Lien existing on the date of this Agreement
and described on Schedule 1.1(P), as the debt underlying such Lien
may be refinanced or replaced (but the principal amount secured
thereby is not hereafter increased, and no additional assets become
subject to such Lien) and a replacement Lien placed thereon;
(ix) Purchase Money Security Interests, provided that
the aggregate amount of loans and deferred payments secured by such
Purchase Money Security Interests shall not exceed $1,500,000 and
any replacement or renewal thereof as long as the principal amount
secured thereby is not increased and no additional assets become
subject to such Lien (excluding for the purpose of this computation
any loans or deferred payments secured by Liens described on
Schedule 1.1(P));
(x) The following, (A) if the validity or amount
thereof is being contested in good faith by appropriate and lawful
proceedings diligently conducted so long as levy and execution
thereon have been stayed and continue to be stayed or (B) if a
final judgment is entered and such judgment is discharged within
thirty (30) days of entry, and in either case they do not, in the
aggregate, materially impair the ability of the Borrower to perform
its Obligations hereunder or under the other Loan Documents:
(1) Claims or Liens for taxes, assessments or
charges due and payable and subject to interest or penalty,
provided that the Borrower maintains such reserves or other
appropriate provisions as shall be required by GAAP and pays all
such taxes, assessments or charges forthwith upon the commencement
of proceedings to foreclose any such Lien;
(2) Claims, Liens or encumbrances upon, and
defects of title to, real or personal property, including any
attachment of personal or real property or other legal process
prior to adjudication of a dispute on the merits; or
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(3) Claims or Liens of mechanics, materialmen,
warehousemen, carriers, or other statutory nonconsensual Liens.
(4) Liens resulting from final judgments or
orders described in Section 8.1.6; and
Person shall mean any individual, corporation,
partnership, limited liability company, association, joint-stock
company, trust, unincorporated organization, joint venture,
government or political subdivision or agency thereof, or any other
entity.
Plan shall mean at any time an employee pension benefit
plan (including a Multiple Employer Plan, but not a Multiemployer
Plan) which is covered by Title IV of ERISA or is subject to the
minimum funding standards under Section 412 of the Internal Revenue
Code and either (i) is maintained by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any
time within the preceding five years been maintained by any entity
which was at such time a member of the ERISA Group for employees of
any entity which was at such time a member of the ERISA Group.
PNC Bank shall mean PNC Bank, National Association, its
successors and assigns.
Potential Default shall mean any event or condition
which with notice, passage of time or a determination by the Agent
or the Required Banks, or any combination of the foregoing, would
constitute an Event of Default.
Principal Office shall mean the main banking office of
the Agent in Pittsburgh, Pennsylvania.
Prohibited Transaction shall mean any prohibited
transaction as defined in Section 4975 of the Internal Revenue Code
or Section 406 of ERISA for which neither an individual nor a class
exemption has been issued by the United States Department of Labor.
Property shall mean all real property, both owned and
leased, of the Borrower or any Subsidiary of the Borrower.
Purchase Money Security Interest shall mean Liens upon
tangible property securing loans to the Borrower or any Subsidiary
of the Borrower or deferred payments by the Borrower or any
Subsidiary of the Borrower for the purchase of such tangible
property.
Ratable Share shall mean the proportion that a Bank's
Commitment bears to the Commitments of all of the Banks.
Ratio shall mean the ratio of the Borrower's Total
Senior Indebtedness to Earnings Before Interest, Taxes,
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Depreciation, and Amortization ("EBITDA"). For purposes of the
Ratio, Total Senior Indebtedness shall be measured as of the end of
each fiscal quarter and EBITDA shall be measured as of the end of
each fiscal quarter for the previous four fiscal quarters.
Regulated Substances shall mean any substance,
including any solid, liquid, semisolid, gaseous, thermal, thoriated
or radioactive material, refuse, garbage, wastes, chemicals,
petroleum products, by-products, coproducts, impurities, dust,
scrap, heavy metals, defined as a "hazardous substance,"
"pollutant," "pollution," "contaminant," "hazardous or toxic
substance," "extremely hazardous substance," "toxic chemical,"
"toxic waste," "hazardous waste," "industrial waste," "residual
waste," "solid waste," "municipal waste," "mixed waste,"
"infectious waste," "chemotherapeutic waste," "medical waste," or
"regulated substance" or any related materials, substances or
wastes as now or hereafter defined pursuant to any Environmental
Laws, ordinances, rules, regulations or other directives of any
Official Body, the generation, manufacture, extraction, processing,
distribution, treatment, storage, disposal, transport, recycling,
reclamation, use, reuse, spilling, leaking, dumping, injection,
pumping, leaching, emptying, discharge, escape, release or other
management or mismanagement of which is regulated by the
Environmental Laws.
Regulation U shall mean Regulation U, T, G or X as
promulgated by the Board of Governors of the Federal Reserve
System, as amended from time to time.
Reportable Event shall mean a reportable event
described in Section 4043 of ERISA and regulations thereunder with
respect to a Plan or Multiemployer Plan.
Required Banks shall mean Banks whose Commitments
aggregate at least 66 2/3% of the Commitments of all of the Banks.
Section 20 Subsidiary shall mean the Subsidiary of the
bank holding company controlling any Bank, which Subsidiary has
been granted authority by the Federal Reserve Board to underwrite
and deal in certain Ineligible Securities.
Shares shall have the meaning assigned to that term in
Section 5.1.2.
Standard & Poor's shall mean Standard & Poor's Ratings
Services.
Subsidiary of any Person at any time shall mean (i) any
corporation or trust of which more than 50% (by number of shares or
number of votes) of the outstanding capital stock or shares of
beneficial interest normally entitled to vote for the election of
one or more directors or trustees (regardless of any contingency
which does or may suspend or dilute the voting rights) is at such
time owned directly or indirectly by such Person or one or more of
such Person's Subsidiaries, (ii) any partnership of which such
Person is a general partner or of which more than 50% or more of
the partnership interests is at the time directly or indirectly
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owned by such Person or one or more of such Person's Subsidiaries,
(iii) any limited liability company of which such Person is a
member or of which more than 50% of the limited liability company
interests is at the time directly or indirectly owned by such
Person or one or more of such Person's Subsidiaries or (iv) any
corporation, trust, partnership, limited liability company or other
entity which is controlled or capable of being controlled by such
Person or one or more of such Person's Subsidiaries.
Subsidiary Shares shall have the meaning assigned to
that term in Section 5.1.3.
Term Loan shall have the meaning assigned to that term
in Section 2.1.
Term Notes shall mean collectively and Term Note shall
mean separately all of the Term Notes of the Borrower in the form
of Exhibit 1.1(T) evidencing the Term loan together with all
amendments, extensions, renewals, replacements refinancings or
refunds thereof in whole or in part.
Total Senior Indebtedness shall mean as to the Borrower
and all of its Subsidiaries, the sum of all borrowed money and all
reimbursement obligations under any letters of credit.
1.2 Construction.
Unless the context of this Agreement otherwise clearly
requires, the following rules of construction shall apply to this
Agreement and each of the other Loan Documents:
1.2.1 Number; Inclusion.
references to the plural include the singular, the plural, the part
and the whole; "or" has the inclusive meaning represented by the
phrase "and/or," and "including" has the meaning represented by the
phrase "including without limitation";
1.2.2 Determination.
references to "determination" of or by the Agent or the Banks shall
be deemed to include good-faith estimates by the Agent or the Banks
(in the case of quantitative determinations) and good-faith beliefs
by the Agent or the Banks (in the case of qualitative
determinations) and such determination shall be conclusive absent
manifest error;
1.2.3 Agent's Discretion and Consent.
whenever the Agent or the Banks are granted the right herein to act
in its or their sole discretion or to grant or withhold consent
such right shall be exercised reasonably and in good faith;
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1.2.4 Documents Taken as a Whole.
the words "hereof," "herein," "hereunder," "hereto" and similar
terms in this Agreement or any other Loan Document refer to this
Agreement or such other Loan Document as a whole and not to any
particular provision of this Agreement or such other Loan Document;
1.2.5 Headings.
the section and other headings contained in this Agreement or such
other Loan Document and the Table of Contents (if any), preceding
this Agreement or such other Loan Document are for reference
purposes only and shall not control or affect the construction of
this Agreement or such other Loan Document or the interpretation
thereof in any respect;
1.2.6 Implied References to this Agreement.
article, section, subsection, clause, schedule and exhibit
references are to this Agreement or other Loan Document, as the
case may be, unless otherwise specified;
1.2.7 Persons.
reference to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are
permitted by this Agreement or such other Loan Document, as the
case may be, and reference to a Person in a particular capacity
excludes such Person in any other capacity; and
1.2.8 Modifications to Documents.
reference to any agreement (including this Agreement and any other
Loan Document together with the schedules and exhibits hereto or
thereto), document or instrument means such agreement, document or
instrument as amended, modified, replaced, substituted for,
superseded or restated.
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1.3 Accounting Principles.
Except as otherwise provided in this Agreement, all
computations and determinations as to accounting or financial
matters and all financial statements to be delivered pursuant to
this Agreement shall be made and prepared in accordance with GAAP
(including principles of consolidation where appropriate), and all
accounting or financial terms shall have the meanings ascribed to
such terms by GAAP; provided, however, that all accounting terms
used in Section 7.2 (and all defined terms used in the definition
of any accounting term used in Section 7.2 shall have the meaning
given to such terms (and defined terms) under GAAP as in effect on
the date hereof applied on a basis consistent with those used in
preparing the Annual Statements referred to in Section 5.1.9). In
the event of any change after the date hereof in GAAP, and if such
change would result in the inability to determine compliance with
the financial covenants set forth in Section 7.2 based upon the
Borrower's regularly prepared financial statements by reason of the
preceding sentence, then the parties hereto agree to endeavor, in
good faith, to agree upon an amendment to this Agreement that would
adjust such financial covenants in a manner that would not affect
the substance thereof, but would allow compliance therewith to be
determined in accordance with the Borrower's financial statements
at that time.
2. TERM LOAN
2.1 Term Loan Commitments.
Subject to the terms and conditions hereof and relying
upon the representations and warranties herein set forth, each Bank
severally agrees to make a term loan (each a "Loan" and the
aggregate of such Loans comprising the "Term Loan") to the Borrower
on the Closing Date in a principal amount equal to such Bank's
Commitment.
2.2 Nature of Banks' Obligations with Respect to the Term
Loan.
The obligations of each Bank to make a Loan to the
Borrower shall be in the proportion that such Bank's Commitment
bears to the Commitments of all Banks to the Borrower, but each
Bank's Loan to the Borrower shall never exceed its Commitment. The
failure of any Bank to perform its obligations hereunder shall not
affect the Obligations of the Borrowers to any other party nor
shall any other party be liable for the failure of such Bank to
perform its obligations hereunder. The Banks shall have no
obligation to make Loans hereunder on or after the Closing Date.
The Commitments are not revolving credit commitments, and the
Borrower shall not have the right to borrow, repay and reborrow
under Section 2.1.
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2.3 Term Notes.
The Obligation of the Borrower to repay the unpaid
principal amount of the Loan made to it by each Bank, together with
interest thereon, shall be evidenced by a Term Note dated the
Closing Date payable to the order of such Bank in a face amount
equal to the Loan extended by such Bank. The principal amount of
the Term Notes shall be payable in 84 monthly installments of
$148,809.53 beginning on May 10, 1997 and ending on April 10, 2004.
2.4 Use of Proceeds.
The proceeds of the Term Loan shall be used to
refinance the Bridge Loan provided to Borrower by PNC Bank for the
acquisition of Interform Corporation and to refinance other
existing unsecured indebtedness.
3. INTEREST RATES
3.1 Euro-Rate.
The Euro-Rate applicable to the Term Loan shall be a
rate per annum (Computed on the basis of a year of 360 days and
actual days elapsed) determined by reference to the Ratio as
follows:
Ratio Euro-Rate +
----- -----------
greater than= 2.00x 150 basis points
greater than= 1.50 - 2.00x 125 basis points
less than= 1.50x 100 basis points
3.2 Interest Periods.
3.2.1 Initial Period.
On the Closing Date, the Borrower shall specify an interest period
during which the initial Euro-Rate shall apply to the Term Loan.
Such initial interest period, and all subsequent interest periods
elected by the Borrower (each being an "Interest Period") shall be
one, two, three or six Months in duration.
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3.2.2 Subsequent Periods.
At least three (3) Business Days prior to the expiration of the
Interest Period then in effect, the Borrower shall submit a written
request (the "Euro-Rate Request") to the Agent specifying the term
of the next Interest Period to which the Euro-Rate shall apply. If
no such Euro-Rate Request is received by the Agent, then the term
of the following Interest Period then in effect shall automatically
be one Month.
3.2.3 Rate Quotations.
The Borrower may call the Agent on or before the date on which a
Euro-Rate Request is to be delivered to receive an indication of
the rates then in effect, but it is acknowledged that such
projection shall not be binding on the Agent or the Banks nor
affect the rate of interest which thereafter is actually in effect
when the election is made.
3.2.4 Ending Date and Business Day.
Any Interest Period which would otherwise end on a date which is
not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in the next calendar
month, in which case such Interest Period shall end on the next
preceding Business Day.
3.2.5 Termination Before Expiration Date.
The Borrower shall not select, convert to or renew an Interest
Period for any portion of the Term Loan that would end after the
Maturity Date.
The entire outstanding balance of the Term Loan shall be subject to
the Euro-Rate for the applicable Interest Period unless otherwise
converted to the Base Rate pursuant to Section 3.4 or unless the
Default Rate (as defined in Section 3.3) shall apply.
3.3 Interest After Default.
To the extent permitted by Law, upon the occurrence of
an Event of Default and until such time such Event of Default shall
have been cured or waived, the rate of interest applicable to the
entire outstanding balance of the Term Loan shall be increased to
a rate of interest equal to the Base Rate plus 2.0% per annum (the
"Default Rate"). The Borrower acknowledges that the increase in
rates referred to in this Section 3.3 reflects, among other things,
the fact that such Term Loan or other amounts have become a
substantially greater risk given their default status and that the
Banks are entitled to additional compensation for such risk; and
all such interest shall be payable by Borrower upon demand by
Agent.
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3.4 Euro-Rate Unascertainable.
3.4.1 Unascertainable.
If on any date on which a Euro-Rate would
otherwise be determined, the Agent shall have determined that:
(i) adequate and reasonable means do not exist
for ascertaining such Euro-Rate, or
(ii) a contingency has occurred which
materially and adversely affects the secondary market for
negotiable certificates of deposit maintained by dealers of
recognized standing relating to the London interbank eurodollar
market relating to the Euro-Rate, the Agent shall have the rights
specified in Section 3.4.3.
3.4.2 Illegality; Increased Costs; Deposits Not
Available.
If at any time any Bank shall have determined
that:
(i) the making, maintenance or funding of any
Loan to which a Euro-Rate would otherwise apply has been made
impracticable or unlawful by compliance by such Bank in good faith
with any Law or any interpretation or application thereof by any
Official Body or with any request or directive of any such Official
Body (whether or not having the force of Law), or
(ii) after making all reasonable efforts,
deposits of the relevant amount in Dollars for the relevant
Interest Period for a Loan to which a Euro-Rate would otherwise
apply, are not available to such Bank at the effective cost of
funding a proposed Loan in the London interbank market, then the
Agent shall have the rights specified in Section 3.4.3.
3.4.3 Agent's and Bank's Rights.
In the case of any event specified in Section
3.4.1 above, the Agent shall promptly so notify the Banks and the
Borrower thereof, and in the case of an event specified in Section
3.4.2 above, such Bank shall promptly so notify the Agent and
endorse a certificate to such notice as to the specific
circumstances of such notice, and the Agent shall promptly send
copies of such notice and certificate to the other Banks and the
Borrower. If any Bank notifies the Agent of a determination under
Section 3.4.2, the Borrower shall, subject to the Borrower's
indemnification Obligations under Section 4.5.2, on the date
specified in such notice either convert the outstanding balance of
the Term Loan to the Base Rate or prepay the Term Loan in
accordance with Section 4.4. Absent due notice from the Borrower
of conversion or prepayment, the then outstanding balance of the
Term Loan shall automatically be converted to the Base Rate upon
such specified date.
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4. PAYMENTS
4.1 Payments.
All payments and prepayments to be made in respect of
principal, interest, Agent's Fee or other fees or amounts due from
the Borrower hereunder shall be payable prior to 1:00 p.m.,
Pittsburgh time, on the date when due without presentment, demand,
protest or notice of any kind, all of which are hereby expressly
waived by the Borrower, and without set-off, counterclaim or other
deduction of any nature, and an action therefor shall immediately
accrue. Such payments shall be made to the Agent at the Principal
Office for the ratable accounts of the Banks with respect to the
Term Loan in U.S. Dollars and in immediately available funds, and
the Agent shall promptly distribute such amounts to the Banks in
immediately available funds, provided that in the event payments
are received by 1:00 p.m., Pittsburgh time, by the Agent with
respect to the Term Loan and such payments are not distributed to
the Banks on the same day received by the Agent, the Agent shall
pay the Banks the Federal Funds Effective Rate with respect to the
amount of such payments for each day held by the Agent and not
distributed to the Banks. The Agent's and each Bank's statement of
account, ledger or other relevant record shall, in the absence of
manifest error, be conclusive as the statement of the amount of
principal of and interest on the Loans and other amounts owing
under this Agreement and shall be deemed an "account stated."
4.2 Pro Rata Treatment of Banks.
A portion of the Term Loan shall be allocated to each Bank
according to its Ratable Share, and each payment or prepayment by
the Borrower with respect to principal, interest or other fees
(except for the Agent's Fee) or amounts due from the Borrower
hereunder to the Banks with respect to the Term Loan, shall (except
as provided in Section 3.4.3 (Illegality; Deposits not Available)
in the case of an event specified in Sections 3.4 (Euro-Rate
Unascertainable), 4.4 (Voluntary Prepayments) or 4.5 (Additional
Compensation in Certain Circumstances)) be made in proportion to
the applicable Loans outstanding from each Bank and, if no such
Loans are then outstanding, in proportion to the Ratable Share of
each Bank.
4.3 Interest Payment Dates.
Interest on the outstanding balance of the Term Loan
shall be due and payable in arrears on the first Business Day of
each month beginning May 1, 1997 and on the Maturity Date or upon
acceleration of the Term Notes. Interest on the principal amount
of the Term Loan or other monetary Obligation shall be due and
payable on demand after such principal amount or other monetary
Obligation becomes due and payable (whether on the stated maturity
date, upon acceleration or otherwise).
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4.4 Prepayments.
4.4.1 Right to Prepay.
The Borrower shall have the right at its option
from time to time to prepay the Term Loan in whole or part without
premium or penalty (except as provided in Section 4.5):
(i) at any time when the Base Rate is then
applicable to the Term Loan; or
(ii) on the last day of the applicable Interest
Period during which the Euro-Rate is applicable to the Term Loan;
or
(iii) on the date specified in a notice by any
Bank pursuant to Section 3.4 (Euro-Rate Unascertainable) with
respect to any Loan to which the Euro-Rate applies.
Whenever the Borrower desires to prepay any part of the
Term Loan, it shall provide a prepayment notice to the Agent at
least one (1) Business Day prior to the date of prepayment of the
Term Loan setting forth the following information:
(x)the date, which shall be a Business Day, on which the proposed
prepayment is to be made; and
(y) the total principal amount of such
prepayment, which shall not be less than $50,000.
All prepayment notices shall be irrevocable. All Term
Loan prepayments permitted pursuant to this Section 4.4.1 shall be
applied to the unpaid installments of principal of the Term Loan in
the inverse order of scheduled maturities. Any prepayment
hereunder shall be subject to the Borrower's Obligation to
indemnify and compensate the Banks under Section 4.5.2.
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4.4.2 Change of Lending Office
Each Bank agrees that upon the occurrence of any
event giving rise to increased costs or other special payments
under Section 3.4.2 (Illegality, etc.) or 4.5.1 (Increased Costs,
etc.) with respect to such Bank, it will if requested by the
Borrower use reasonable efforts (subject to overall policy
considerations of such Bank) to designate another lending office
for any Loans affected by such event, provided that such
designation is made on such terms that such Bank and its lending
office suffer no economic, legal or regulatory disadvantage, with
the object of avoiding the consequence of the event giving rise to
the operation of such Section. Nothing in this Section 4.4.2 shall
affect or postpone any of the Obligations of the Borrower or the
rights of the Agent or any Bank provided in this Agreement.
4.5 Additional Compensation in Certain Circumstances.
4.5.1 Increased Costs or Reduced Return Resulting From
Taxes, Reserves, Capital Adequacy Requirements, Expenses, Etc.
If any Law, guideline or interpretation or application
thereof by any Official Body charged with the interpretation or
administration thereof enacted or made after the date of this
Agreement or compliance with any request or directive (whether or
not having the force of Law) of any central bank or other Official
Body made after the date of this Agreement:
(i) subjects any Bank to any tax or changes the
basis of taxation with respect to this Agreement, the Term Notes,
the Term Loan or payments by the Borrower of principal, interest or
other amounts due from the Borrower hereunder or under the Term
Notes (except for taxes on the overall net income or gross receipts
of such Bank),
(ii) imposes, modifies or deems applicable any
reserve, special deposit or similar requirement against credits or
commitments to extend credit extended by, or assets (funded or
contingent) of, deposits with or for the account of, or other
acquisitions of funds by, any Bank, or
(iii) imposes, modifies or deems applicable any
capital adequacy or similar requirement (A) against assets (funded
or contingent) of, or other credits or commitments to extend credit
extended by, any Bank, or (B) otherwise applicable to the
obligations of any Bank under this Agreement,
and the result of any of the foregoing is to increase
the cost to, reduce the income receivable by, or impose any expense
(including loss of margin) upon any Bank with respect to this
Agreement, the Term Notes or the making, maintenance or funding of
any part of the Term Loan (or, in the case of any capital adequacy
or similar requirement, to have the effect of reducing the rate of
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return on any Bank's capital, taking into consideration such Bank's
customary policies with respect to capital adequacy) by an amount
which such Bank in its sole discretion deems to be material, such
Bank shall from time to time notify the Borrower and the Agent of
the amount determined in good faith (using any averaging and
attribution methods employed in good faith including allocation to
the Borrower of pro rated amounts ) by such Bank to be necessary to
compensate such Bank for such increase in cost, reduction of
income, additional expense or reduced rate of return. The Banks
will use reasonable efforts to avoid such increase in costs,
reduction of income, additional expense or reduced rate of return.
Notice shall set forth in reasonable detail the basis for such
determination. Such amount shall be due and payable by the
Borrower to such Bank thirty (30) Business Days after such notice
is given.
4.5.2 Indemnity and Compensation.
In addition to the compensation required by
Section 4.5.1, the Borrower shall indemnify and compensate each
Bank against all liabilities, losses or expenses (including loss of
margin, any loss or expense incurred in liquidating or employing
deposits from third parties and any loss or expense incurred in
connection with funds acquired by a Bank to fund or maintain any
portion of the Term Loan subject to the Euro-Rate) which such Bank
sustains or incurs as a consequence of any default by the Borrower
in the performance or observance of any covenant or condition
contained in this Agreement or any other Loan Document, including
any failure of the Borrower to pay when due (by acceleration or
otherwise) any principal, interest or any other amount due
hereunder.
If any Bank sustains or incurs any such loss or
expense, it shall from time to time notify the Borrower of the
amount determined in good faith by such Bank (which determination
may include such assumptions, allocations of costs and expenses and
averaging or attribution methods as such Bank shall deem
reasonable) to be necessary to indemnify and compensate such Bank
for such loss or expense. Such notice shall set forth in
reasonable detail the basis for such determination and shall be
binding absent manifest error. Such amount shall be due and
payable by the Borrower to such Bank ten (10) Business Days after
such notice is given.
5. REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties.
The Borrower represents and warrants to the Agent and
each of the Banks on the date of this Agreement as follows:
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5.1.1 Organization and Qualification.
The Borrower is a corporation, duly organized,
validly existing and in good standing under the laws of the State
of West Virginia. The Borrower has the lawful power to own or
lease its properties and to engage in the business it presently
conducts or proposes to conduct. The Borrower is duly licensed or
qualified and in good standing in all other jurisdictions where the
property owned or leased by it or the nature of the business
transacted by it or both makes such licensing or qualification
necessary.
5.1.2 Capitalization and Ownership.
The authorized capital stock of the Borrower
consists of 20,000,000 shares of Common Stock, $1 par value, of
which 8,104,714 shares (referred to herein as the "Shares") are
issued and outstanding. All of the Shares have been validly issued
and are fully paid and nonassessable. There are no options,
warrants or other rights outstanding to purchase any such shares
except as indicated on Schedule 5.1.2.
5.1.3 Subsidiaries.
Schedule 5.1.3 states the name of each of the
Borrower's Subsidiaries, its jurisdiction of incorporation, its
authorized capital stock, the issued and outstanding shares
(referred to herein as the "Subsidiary Shares") and the owners
thereof if it is a corporation, its outstanding partnership
interests (the "Partnership Interests") if it is a partnership and
its outstanding limited liability company interests, interests
assigned to managers thereof and the voting rights associated
therewith (the "LLC Interests") if it is a limited liability
company. The Borrower and each Subsidiary of the Borrower has good
and marketable title to all of the Subsidiary Shares, Partnership
Interests and LLC Interests it purports to own, free and clear in
each case of any Lien. All Subsidiary Shares, Partnership
Interests and LLC Interests have been validly issued, and all
Subsidiary Shares are fully paid and nonassessable. All capital
contributions and other consideration required to be made or paid
in connection with the issuance of the Partnership Interests and
LLC Interests have been made or paid, as the case may be. There
are no options, warrants or other rights outstanding to purchase
any such Subsidiary Shares, Partnership Interests or LLC Interests
except as indicated on Schedule 5.1.3.
5.1.4 Power and Authority.
The Borrower has full power to enter into,
execute, deliver and carry out this Agreement and the other Loan
Documents to which it is a party, to incur the Indebtedness
contemplated by the Loan Documents and to perform its Obligations
under the Loan Documents to which it is a party, and all such
actions have been duly authorized by all necessary proceedings on
its part.
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5.1.5 Validity and Binding Effect.
This Agreement has been duly and validly
executed and delivered by the Borrower, and each other Loan
Document which the Borrower is required to execute and deliver on
or after the date hereof will have been duly executed and delivered
by the Borrower on the required date of delivery of such Loan
Document. This Agreement and each other Loan Document constitutes,
or will constitute, legal, valid and binding obligations of the
Borrower which is or will be a party thereto on and after its date
of delivery thereof, enforceable against the Borrower in accordance
with its terms, except to the extent that enforceability of any of
such Loan Document may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
enforceability of creditors' rights generally or general equitable
principles.
5.1.6 No Conflict.
Neither the execution and delivery of this
Agreement or the other Loan Documents by the Borrower nor the
consummation of the transactions herein or therein contemplated or
compliance with the terms and provisions hereof or thereof by any
of them will conflict with, constitute a default under or result in
any breach of (i) the terms and conditions of the certificate of
incorporation, bylaws, certificate of limited partnership,
partnership agreement, certificate of formation, limited liability
company agreement or other organizational documents of the Borrower
or (ii) any Law or any material agreement or instrument or order,
writ, judgment, injunction or decree to which the Borrower or any
of its Subsidiaries is a party or by which the Borrower or any of
its Subsidiaries is bound or to which it is subject, or result in
the creation or enforcement of any Lien, charge or encumbrance
whatsoever upon any property (now or hereafter acquired) of the
Borrower or any of its Subsidiaries.
5.1.7 Litigation.
There are no actions, suits, proceedings or
investigations pending or, to the knowledge of the Borrower,
threatened against the Borrower or any Subsidiary of the Borrower
at law or equity before any Official Body which individually or in
the aggregate may result in any Material Adverse Change. Neither
the Borrower nor any of its Subsidiaries is in material violation
of any order, writ, injunction or any decree of any Official Body
which may result in any Material Adverse Change.
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5.1.8 Title to Properties.
The Borrower and each of its Subsidiaries has
good and marketable title to or valid leasehold interest in all
properties, assets and other rights which it purports to own or
lease or which are reflected as owned or leased on its books and
records, free and clear of all Liens and encumbrances except
Permitted Liens, and subject to the terms and conditions of the
applicable leases. All leases of property are in full force and
effect without the necessity for any consent which has not
previously been obtained upon consummation of the transactions
contemplated hereby.
5.1.9 Financial Statements.
(i) Annual Statements. The Borrower has
delivered to the Bank copies of its audited consolidated year-end
financial statements for and as of the end of the three fiscal
years ended October 31, 1996 (the "Annual Statements"). The Annual
Statements were compiled from the books and records maintained by
the Borrower's management, are correct and complete and fairly
represent the consolidated financial condition of the Borrower and
its Subsidiaries as of their dates and the results of operations
for the fiscal periods then ended and have been prepared in
accordance with GAAP consistently applied, subject to normal
year-end audit adjustments.
(ii) Financial Projections. The Borrower has
delivered to the Agent financial projections of the Borrower and
its Subsidiaries for the period through October 31, 1997 derived
from various assumptions of the Borrower's management (the
"Financial Projections"). The Financial Projections represent a
reasonable range of possible results in light of the history
of the business, present and foreseeable conditions and the
intentions of the Borrower's management. The Financial
Projections accurately reflect the liabilities of the Borrower
and its Subsidiaries upon consummation of the transactions
contemplated hereby as of the Closing Date.
(iii) Accuracy of Financial Statements. Neither
the Borrower nor any Subsidiary of the Borrower has any material
liabilities, contingent or otherwise, or forward or long-term
commitments that are not disclosed in the Annual Statements or in
the notes thereto and which under GAAP were required to be
disclosed therein, and except as disclosed therein there are no
unrealized or anticipated losses from any commitments of the
Borrower or any of its Subsidiaries which are reasonably likely to
cause a Material Adverse Change. Since October 31, 1996, no
Material Adverse Change has occurred.
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5.1.10 Use of Proceeds; Margin Stock.
The Borrower intends to use the proceeds of the
Loans in accordance with Section 2.4 hereof. Neither the Borrower
nor any of its Subsidiaries engages or intends to engage
principally, or as one of its important activities, in the business
of extending credit for the purpose, immediately, incidentally or
ultimately, of purchasing or carrying margin stock (within the
meaning of Regulation U). No part of the proceeds of the Term Loan
has been or will be used, immediately, incidentally or ultimately,
to purchase or carry any margin stock or to extend credit to others
for the purpose of purchasing or carrying any margin stock or to
refund Indebtedness originally incurred for such purpose, or for
any purpose which entails a violation of or which is inconsistent
with the provisions of the regulations of the Board of Governors of
the Federal Reserve System. Neither the Borrower nor any of its
Subsidiaries holds or intends to hold margin stock in such amounts
that more than 25% of the reasonable value of the assets of the
Borrower or Subsidiary of the Borrower are or will be represented
by margin stock.
5.1.11 Full Disclosure.
Neither this Agreement nor any other Loan
Document, nor any certificate, statement, agreement or other
documents furnished to the Agent or any Bank in connection herewith
or therewith, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements contained herein and therein, in light of the
circumstances under which they were made, not misleading.
5.1.12 Taxes.
All federal, state, local and other tax returns
required to have been filed with respect to the Borrower and each
Subsidiary of the Borrower have been filed, and payment or adequate
provision has been made for the payment of all taxes, fees,
assessments and other governmental charges which have or may become
due pursuant to said returns or to assessments received, except to
the extent that such taxes, fees, assessments and other charges are
not material and are being contested in good faith by appropriate
proceedings diligently conducted and for which such reserves or
other appropriate provisions, if any, as shall be required by GAAP
shall have been made. There are no agreements or waivers extending
the statutory period of limitations applicable to any federal
income tax return of the Borrower or any Subsidiary of the Borrower
for any period.
5.1.13 Consents and Approvals.
No consent, approval, exemption, order or
authorization of, or a registration or filing with, any Official
Body or any other Person is required by any Law or any agreement in
connection with the execution, delivery and carrying out of this
Agreement and the other Loan Documents by the Borrower.
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5.1.14 No Event of Default; Compliance with
Instruments.
No event has occurred and is continuing and no
condition exists or will exist after giving effect to the
borrowings or other extensions of credit to be made on the Closing
Date under or pursuant to the Loan Documents which constitutes an
Event of Default or Potential Default. Neither the Borrower nor
any Subsidiaries of the Borrower is in material violation of
(i) any term of its certificate of incorporation, bylaws,
certificate of limited partnership, partnership agreement,
certificate of formation, limited liability company agreement or
other organizational documents or (ii) any material agreement or
instrument to which it is a party or by which it or any of its
properties may be subject or bound.
5.1.15 Patents, Trademarks, Copyrights, Licenses, Etc.
The Borrower and each Subsidiary of the Borrower
owns or possesses all the material patents, trademarks, service
marks, trade names, copyrights, licenses, registrations,
franchises, permits and rights necessary to own and operate its
properties and to carry on its business as presently conducted and
planned to be conducted by such Borrower or Subsidiary, without
known possible, alleged or actual conflict with the rights of
others.
5.1.16 Insurance.
The Borrower maintains policies and bonds
provide adequate coverage from reputable and financially sound
insurers in amounts sufficient to insure the assets and risks of
the Borrower and each Subsidiary of the Borrower in accordance with
prudent business practice in the industries of the Borrower and its
Subsidiaries. No notice has been given or claim made and no
grounds exist to cancel or avoid any such policy or bonds or to
reduce the coverage provided hereby.
5.1.17 Compliance with Laws.
The Borrower and its Subsidiaries are in
compliance in all material respects with all applicable Laws (other
than Environmental Laws which are specifically addressed in
Section 5.1.22) in all jurisdictions in which the Borrower or any
of its Subsidiaries is presently or will be doing business.
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5.1.18 Material Contracts; Burdensome Restrictions.
All material agreements relating to the business
operations of the Borrower and its Subsidiaries, including all
employee benefit plans and Labor Contracts are valid, binding and
enforceable upon such Borrower or Subsidiary and each of the other
parties thereto in accordance with their respective terms, and
there is no default thereunder, to the Borrower's knowledge, with
respect to parties other than such Borrower or Subsidiary. Neither
the Borrower nor any of its Subsidiaries is bound by any
contractual obligation, or subject to any restriction in any
organization document, or any requirement of Law which is
reasonably likely to result in a Material Adverse Change.
5.1.19 Investment Companies; Regulated Entities.
Neither the Borrower nor any of its Subsidiaries
is an "investment company" registered or required to be registered
under the Investment Company Act of 1940 or under the "control" of
an "investment company" as such terms are defined in the Investment
Company Act of 1940 and shall not become such an "investment
company" or under such "control." Neither the Borrower nor any of
its Subsidiaries is subject to any other Federal or state statute
or regulation limiting its ability to incur Indebtedness for
borrowed money.
5.1.20 Plans and Benefit Arrangements.
Except as set forth on Schedule 5.1.20:
(i) The Borrower and each other member of the
ERISA Group are in compliance in all material respects with any
applicable provisions of ERISA with respect to all Benefit
Arrangements, Plans and Multiemployer Plans. There has been no
Prohibited Transaction with respect to any Benefit Arrangement or
any Plan or, to the best knowledge of the Borrower, with respect to
any Multiemployer Plan or Multiple Employer Plan, which is
material. The Borrower and all other members of the ERISA Group
have made when due any and all payments required to be made under
any agreement relating to a Multiemployer Plan or a Multiple
Employer Plan or any Law pertaining thereto. With respect to each
Plan and Multiemployer Plan, the Borrower and each other member of
the ERISA Group (i) have fulfilled in all material respects their
obligations under the minimum funding standards of ERISA, (ii) have
not incurred any liability to the PBGC, and (iii) have not had
asserted against them any penalty for failure to fulfill the
minimum funding requirements of ERISA.
(ii) To the best of the Borrower's knowledge,
each Multiemployer Plan and Multiple Employer Plan is able to pay
benefits thereunder when due.
(iii) Neither the Borrower nor or any other
member of the ERISA Group has instituted or intends to institute
proceedings to terminate any Plan.
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(iv) No event requiring notice to the PBGC
under Section 302(f)(4)(A) of ERISA has occurred or is reasonably
expected to occur with respect to any Plan, and no amendment with
respect to which security is required under Section 307 of ERISA
has been made or is reasonably expected to be made to any Plan.
(v) The aggregate actuarial present value of
all benefit liabilities (whether or not vested) under each Plan,
determined on a plan termination basis, as disclosed in, and as of
the date of, the most recent actuarial report for such Plan, does
not exceed the aggregate fair market value of the assets of such
Plan.
(vi) Neither the Borrower nor any other member
of the ERISA Group has incurred or reasonably expects to incur any
material withdrawal liability under ERISA to any Multiemployer Plan
or Multiple Employer Plan. Neither the Borrower nor any other
member of the ERISA Group has been notified by any Multiemployer
Plan or Multiple Employer Plan that such Multiemployer Plan or
Multiple Employer Plan has been terminated within the meaning of
Title IV of ERISA and, to the best knowledge of the Borrower, no
Multiemployer Plan or Multiple Employer Plan is reasonably expected
to be reorganized or terminated, within the meaning of Title IV of
ERISA.
(vii) To the extent that any Benefit Arrangement
is insured, the Borrowers and all other members of the ERISA Group
have paid when due all premiums required to be paid for all periods
through the Closing Date. To the extent that any Benefit
Arrangement is funded other than with insurance, the Borrower and
all other members of the ERISA Group have made when due all
contributions required to be paid for all periods through the
Closing Date.
(viii)All Plans, Benefit Arrangements and
Multiemployer Plans have been administered in accordance with their
terms and applicable Law.
5.1.21 Employment Matters.
The Borrower and each of its Subsidiaries is in
compliance with the Labor Contracts and all applicable federal,
state and local labor and employment Laws including those related
to equal employment opportunity and affirmative action, labor
relations, minimum wage, overtime, child labor, medical insurance
continuation, worker adjustment and relocation notices, immigration
controls and worker and unemployment compensation, where the
failure to comply would constitute a Material Adverse Change.
There are no outstanding grievances, arbitration awards or appeals
therefrom arising out of the Labor Contracts or current or
threatened strikes, picketing, handbilling or other work stoppages
or slowdowns at facilities of the Borrower or any of its
Subsidiaries which in any case would constitute a Material Adverse
Change. The Borrower has delivered to the Agent true and correct
copies of each of the Labor Contracts (if any).
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5.1.22 Environmental Matters.
Except as disclosed on Schedule 5.1.22:
(i) Neither the Borrower nor any of its
Subsidiaries has received any material Environmental Complaint from
any Official Body or private Person alleging that such Borrower or
Subsidiary or any prior or subsequent owner of any of the Property
is a potentially responsible party under the Comprehensive
Environmental Response, Cleanup and Liability Act, 42 U.S.C.
9601, et seq., and the Borrower has no reason to believe that
such an Environmental Complaint might be received. There are no
pending or, to the Borrower's knowledge, threatened Environmental
Complaints relating to the Borrower or Subsidiary of the Borrower
or, to the Borrower's knowledge, any prior or subsequent owner of
any of the Property pertaining to, or arising out of, any material
Environmental Conditions.
(ii) There are no circumstances at, on or under
any of the Property that constitute a breach of or non-compliance
with any of the Environmental Laws, and there are no past or
present Environmental Conditions at, on or under any of the
Property or, to the Borrower's knowledge, at, on or under adjacent
property, that prevent compliance with the Environmental Laws at
any of the Property.
(iii) Neither any of the Property nor any
structures, improvements, equipment, fixtures, activities or
facilities thereon or thereunder contain or use Regulated
Substances except in substantial compliance with Environmental
Laws. There are no processes, facilities, operations, equipment or
other activities at, on or under any of the Property, or, to the
Borrower's knowledge, at, on or under adjacent property, that
currently result in the release or threatened release of Regulated
Substances onto any of the Property, except to the extent that such
releases or threatened releases are not a substantial breach of or
otherwise not a violation of the Environmental Laws.
(iv) There are no aboveground storage tanks,
underground storage tanks or underground piping associated with
such tanks, used for the management of Regulated Substances at, on
or under any of the Property that (a) do not have, to the extent
required by Environmental Laws, a full operational secondary
containment system in place, and (b) are not otherwise in
compliance with all Environmental Laws. There are no abandoned
underground storage tanks or underground piping associated with
such tanks, previously used for the management of Regulated
Substances at, on or under any of the Property that have not either
been closed in place in accordance with Environmental Laws or
removed in compliance with all applicable Environmental Laws and no
contamination associated with the use of such tanks exists on any
of the Property that is not in compliance with Environmental Laws.
(v) The Borrower and each of its Subsidiaries
has all material permits, licenses, authorizations, plans and
approvals necessary under the Environmental Laws for the conduct of
the business of such Borrower or Subsidiary as presently conducted.
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The Borrower and each of its Subsidiaries has submitted all
material notices, reports and other filings required by the
Environmental Laws to be submitted to an Official Body which
pertain to past and current operations on any of the Property.
(vi) All past and present on-site generation,
storage, processing, treatment, recycling, reclamation, disposal or
other use or management of Regulated Substances at, on, or under
any of the Property and all off-site transportation, storage,
processing, treatment, recycling, reclamation, disposal or other
use or management of Regulated Substances have been done materially
in accordance with the Environmental Laws.
5.1.23 Senior Debt Status.
(i) The Obligations of the Borrower under this
Agreement, the Term Notes and each of the other Loan Documents to
which it is a party do rank and will rank at least pari passu in
priority of payment with all other Indebtedness of the Borrower
except Indebtedness of the Borrower to the extent secured by
Permitted Liens. There is no Lien upon or with respect to any of
the properties or income of the Borrower or any of its Subsidiaries
which secures indebtedness or other obligations of any Person
except for Permitted Liens.
5.2 Updates to Schedules.
Should any of the information or disclosures provided
on any of the Schedules attached hereto become outdated or
incorrect in any material respect, the Borrower shall promptly
provide the Agent in writing with such revisions or updates to such
Schedule as may be necessary or appropriate to update or correct
same; provided, however, that no Schedule shall be deemed to have
been amended, modified or superseded by any such correction or
update, nor shall any breach of warranty or representation
resulting from the inaccuracy or incompleteness of any such
Schedule be deemed to have been cured thereby, unless and until the
Required Banks, in their reasonable discretion, shall have accepted
in writing such revisions or updates to such Schedule.
6. CONDITIONS OF LENDING
The obligation of the Banks to make the Term Loan hereunder is
subject to the performance by each of the Borrower of its
Obligations to be performed hereunder at or prior to the making of
such Term Loan and to the satisfaction of the following further
conditions:
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6.1 Officer's Certificate.
The representations and warranties of the Borrower
contained in Section 5 and in each of the other Loan Documents
shall be true and accurate on and as of the Closing Date with the
same effect as though such representations and warranties had been
made on and as of such date (except representations and warranties
which relate solely to an earlier date or time, which
representations and warranties shall be true and correct on and as
of the specific dates or times referred to therein and except
changes in representations and warranties that, in the
determination of the Required Banks are reasonably likely to result
in a Material Adverse Change), and the Borrower shall have
performed and complied with all covenants and conditions hereof and
thereof, no Event of Default or Potential Default shall have
occurred and be continuing or shall exist; and there shall be
delivered to the Agent for the benefit of each Bank a certificate
of the Borrower, dated the Closing Date to each such effect and
signed by two of the following officers: the Chief Executive
Officer, President, Chief Financial Officer, Secretary or Assistant
Secretary of the Borrower.
6.2 Secretary's Certificate.
There shall be delivered to the Agent for the benefit
of each Bank a certificate dated the Closing Date and signed by the
Secretary or an Assistant Secretary of the Borrower, certifying as
appropriate as to:
(i) all action taken by the Borrower in connection
with this Agreement and the other Loan Documents;
(ii) the names of the officer or officers authorized
to sign this Agreement and the other Loan Documents and the true
signatures of such officer or officers and specifying the
Authorized Officers permitted to act on behalf of the Borrower for
purposes of this Agreement and the true signatures of such
officers, on which the Agent and each Bank may conclusively rely;
and
(iii) copies of its organizational documents,
including its certificate of incorporation, bylaws, certificate of
limited partnership, partnership agreement, certificate of
formation, and limited liability company agreement as in effect on
the Closing Date certified by the appropriate state official where
such documents are filed in a state office together with
certificates from the appropriate state officials as to the
continued existence and good standing (or subsistence) of the
Borrower in each state where organized or qualified to do business
and a bring-down certificate by facsimile dated the Closing Date.
6.3 Subsidiaries Guaranty.
There shall be delivered to the Agent for the benefit
of the Banks, a Subsidiaries Guaranty in the form attached hereto
as Exhibit 6.3.
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6.4 Opinion of Counsel.
There shall be delivered to the Agent for the benefit
of each Bank a written opinion of Huddleston, Bolen, Beatty, Porter
& Copen, counsel for the Borrower, dated the Closing Date and in
form and substance satisfactory to the Agent and its counsel as to
such other matters incident to the transactions contemplated herein
as the Agent may reasonably request.
6.5 Legal Details.
All legal details and proceedings in connection with
the transactions contemplated by this Agreement and the other Loan
Documents shall be in form and substance satisfactory to the Agent
and counsel for the Agent, and the Agent shall have received all
such other counterpart originals or certified or other copies of
such documents and proceedings in connection with such
transactions, in form and substance satisfactory to the Agent and
said counsel, as the Agent or said counsel may reasonably request.
6.6 Payment of Fees.
The Borrower shall have paid or caused to be paid to
the Agent, counsel fees, and all other fees, costs and expenses
accrued through the Closing Date for which the Agent and the Banks
are entitled to be reimbursed.
6.7 Officer's Certificate Regarding MACs.
Since October 31, 1996, no Material Adverse Change
shall have occurred; prior to the Closing Date, there shall have
been no material change in the management of the Borrower or any
Subsidiary of the Borrower, and there shall have been delivered to
the Agent for the benefit of each Bank a certificate of the
Borrower dated the Closing Date and signed on behalf of the
Borrower by any two of the Chief Executive Officer, President,
Chief Financial Officer, Secretary or Assistant Secretary of the
Borrower to each such effect.
6.8 No Violation of Laws.
The making of the Term Loan shall not contravene any
Law applicable to the Borrower or to the Agent or any of the Banks.
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6.9 No Actions or Proceedings.
No action, proceeding, investigation, 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 damages in respect of,
this Agreement, the other Loan Documents or the consummation of
the transactions contemplated hereby or thereby or which, in the
Agent's reasonable judgment, would make it inadvisable to
consummate the transactions contemplated by this Agreement or any
of the other Loan Documents.
7. COVENANTS
7.1 Affirmative Covenants.
The Borrower, covenants and agrees that until payment
in full of the Term Loan, and interest thereon, and satisfaction of
all of the Borrower's other Obligations under the Loan Documents,
the Borrower shall comply at all times with the following
affirmative covenants:
7.1.1 Preservation of Existence, Etc.
The Borrower shall, and shall cause each of its
Subsidiaries to, maintain its legal existence as a corporation,
limited partnership or limited liability company and its license or
qualification and good standing in each jurisdiction in which its
ownership or lease of property or the nature of its business makes
such license or qualification necessary, except as otherwise
expressly permitted in Section 7.2.5.
7.1.2 Payment of Liabilities, Including Taxes, Etc.
The Borrower shall, and shall cause each of its
Subsidiaries to, duly pay and discharge all liabilities to which it
is subject or which are asserted against it, promptly as and when
the same shall become due and payable, including all taxes,
assessments and governmental charges upon it or any of its
properties, assets, income or profits, prior to the date on which
penalties attach thereto, except to the extent that such
liabilities, including taxes, assessments or charges, are being
contested in good faith and by appropriate and lawful proceedings
diligently conducted and for which such reserve or other
appropriate provisions, if any, as shall be required by GAAP shall
have been made, but only to the extent that failure to discharge
any such liabilities would not result in any additional liability
which would adversely affect to a material extent the financial
condition of the Borrower or Subsidiary of the Borrower.
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7.1.3 Maintenance of Insurance.
The Borrower shall, and shall cause each of its
Subsidiaries to, insure its properties and assets against loss or
damage by fire and such other insurable hazards as such assets are
commonly insured (including fire, extended coverage, property
damage, workers' compensation, public liability and business
interruption insurance) and against other risks (including errors
and omissions) in such amounts as similar properties and assets are
insured by prudent companies in similar circumstances carrying on
similar businesses, and with reputable and financially sound
insurers, including self-insurance to the extent customary, all as
reasonably determined by the Agent.
7.1.4 Maintenance of Properties and Leases.
The Borrower shall, and shall cause each of its
Subsidiaries to, maintain in good repair, working order and
condition (ordinary wear and tear excepted) in accordance with the
general practice of other businesses of similar character and size,
all of those properties useful or necessary to its business, and
from time to time, the Borrower will make or cause to be made all
appropriate repairs, renewals or replacements thereof.
7.1.5 Maintenance of Patents, Trademarks, Etc.
The Borrower shall, and shall cause each of its
Subsidiaries to, maintain in full force and effect all patents,
trademarks, service marks, trade names, copyrights, licenses,
franchises, permits and other authorizations necessary for the
ownership and operation of its properties and business if the
failure so to maintain the same would constitute a Material Adverse
Change.
7.1.6 Visitation Rights.
The Borrower shall, and shall cause each of its
Subsidiaries to, permit any of the officers or authorized employees
or representatives of the Agent to visit and inspect any of its
properties and to examine and make excerpts from its books and
records and discuss its business affairs, finances and accounts
with its officers, all in such detail and at such times and as
often as the Agent may reasonably request, provided that the Agent
shall provide the Borrower with reasonable notice prior to any
visit or inspection.
7.1.7 Keeping of Records and Books of Account.
The Borrower shall, and shall cause each
Subsidiary of the Borrower to, maintain and keep proper books of
record and account which enable the Borrowers and their
Subsidiaries to issue financial statements in accordance with GAAP
and as otherwise required by applicable Laws of any Official Body
having jurisdiction over the Borrower or any Subsidiary of the
Borrower, and in which full, true and correct entries shall be made
in all material respects of all its dealings and business and
financial affairs.
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7.1.8 Plans and Benefit Arrangements.
The Borrower shall, and shall cause each member
of the ERISA Group to, comply with ERISA, the Internal Revenue Code
and other applicable Laws applicable to Plans and Benefit
Arrangements except where any such failure would not result in a
Material Adverse Change. Without limiting the generality of the
foregoing, the Borrower shall cause all of its Plans and all Plans
maintained by any member of the ERISA Group to be funded in
accordance with the minimum funding requirements of ERISA and shall
make, and cause each member of the ERISA Group to make, in a timely
manner, all contributions due to Plans, Benefit Arrangements and
Multiemployer Plans except where such failure would not result in
a Material Adverse Change.
7.1.9 Compliance with Laws.
The Borrower shall, and shall cause each of its
Subsidiaries to, comply with all applicable Laws, including all
Environmental Laws, in all respects, provided that it shall not be
deemed to be a violation of this Section 7.1.9 if any failure to
comply with any Law would not result in fines, penalties,
remediation costs, other similar liabilities or injunctive relief
any of which would constitute a Material Adverse Change.
7.1.10 Use of Proceeds.
7.1.10.1 General
The Loan Parties will use the proceeds
of the Term Loan only to refinance the Bridge Loan provided to
Borrower by PNC Bank for the acquisition of Interform Corporation
and to refinance other existing unsecured indebtedness..
7.1.10.2 Margin Stock.
The Borrower shall not use the
proceeds of the Term Loan to purchase or carry margin stock as more
fully provided in Section 5.1.10.
7.1.10.3 Section 20 Subsidiaries.
The Borrower will not, directly or
indirectly, use any portion of the proceeds of the Term Loan
(i) knowingly to purchase any Ineligible Securities from a
Section 20 Subsidiary during any period in which such Section 20
Subsidiary makes a market in such Ineligible Securities,
(ii) knowingly to purchase during the underwriting or placement
period Ineligible Securities being underwritten or privately placed
by a Section 20 Subsidiary, or (iii) to make payments of principal
or interest on Ineligible Securities underwritten or privately
placed by as Section 20 Subsidiary and issued by or for the benefit
of Borrower or any Affiliate of the Borrower.
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7.2 Negative Covenants.
The Borrower covenants and agrees that until payment in
full of the Term Loan, and interest thereon and satisfaction of all
of the Borrower's other Obligations hereunder, the Borrower shall
comply with the following negative covenants:
7.2.1 Indebtedness.
The Borrower shall not, and shall not permit any
of its Subsidiaries to, at any time create, incur, assume or suffer
to exist any Indebtedness, except:
(i) Indebtedness under the Loan Documents;
(ii) Existing Indebtedness as set forth on
Schedule 7.2.1. (including any extensions, renewals or refinancings
thereof), provided there is no increase in the amount thereof or
other significant change in the terms thereof unless otherwise
specified on Schedule 7.2.1;
(iii) Capitalized and operating leases as and to
the extent permitted under Section 7.2.13;
(iv) Indebtedness secured by Purchase Money
Security Interests not exceeding $1,500,000; and
(v) the existing $2,000,000 unsecured
revolving credit facility with Banc One, West Virginia, and
(vi) the Existing $800,000 unsecured revolving
credit facility with First Century Bank, Huntington, West Virginia,
which is personally guaranteed by Marshall T. Reynolds.
7.2.2 Liens.
The Borrower shall not, and shall not permit any
of its Subsidiaries to, at any time create, incur, assume or suffer
to exist any Lien on any of its property or assets, tangible or
intangible, now owned or hereafter acquired, or agree or become
liable to do so, except Permitted Liens.
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7.2.3 Guaranties.
The Borrower shall not, and shall not permit any
of its Subsidiaries to, at any time, directly or indirectly, become
or be liable in respect of any Guaranty, or assume, guarantee,
become surety for, endorse or otherwise agree, become or remain
directly or contingently liable upon or with respect to any
obligation or liability of any other Person, except for the
Guaranty of the Obligations of the Borrower provided by each
Subsidiary of the Borrower pursuant to the Subsidiaries Guaranty.
7.2.4 Loans and Investments.
The Borrower shall not, and shall not permit any
of its Subsidiaries to, at any time make or suffer to remain
outstanding any loan or advance to, or purchase, acquire or own any
stock, bonds, notes or securities of, or any partnership interest
(whether general or limited) or limited liability company interest
in, or any other investment or interest in, or make any capital
contribution to, any other Person, or agree, become or remain
liable to do any of the foregoing, except:
(i) trade credit extended on usual and
customary terms in the ordinary course of business;
(ii) advances to employees to meet expenses
incurred by such employees in the ordinary course of business;
(iii) Permitted Investments;
(iv) loans, advances and investments in
Affiliates of the Borrower.
7.2.5 Liquidations, Mergers, Consolidations and
Acquisitions.
The Borrower shall not, and shall not permit any
of its Subsidiaries to, dissolve, liquidate or wind-up its affairs,
or become a party to any merger or consolidation, or acquire by
purchase, lease or otherwise all or substantially all of the assets
or capital stock of any other Person, provided that
(1) any Affiliate of the Borrower may
consolidate or merge into another Affiliate of the Borrower which
is wholly-owned by the Borrower, and
(2) the Borrower may acquire, whether by
purchase or by merger, (A) all of the ownership interests and
voting rights of another Person or (B) substantially all of assets
of another Person or of a business or division of another Person
(each an "Permitted Acquisition"), provided that each of the
following requirements is met:
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(i) the board of directors or other
equivalent governing body of such Person shall have approved such
Permitted Acquisition and the Loan Parties shall have delivered to
the Banks written evidence of such approval prior to such Permitted
Acquisition,
(ii) the Borrower is acquiring the
ownership interests in such Person, such Person shall execute a
Subsidiaries Guaranty in favor of the Agent and the Banks in the
form attached hereto as Exhibit 1.1(G) on or before the date of
such Permitted Acquisition,
(iii) the business acquired, or the
business conducted by the Person whose ownership interests are
being acquired, as applicable, shall be substantially the same as
one or more line or lines of business conducted by the Borrower and
shall comply with Section 7.2.8,
(iv) immediately prior to and after
giving effect to such Permitted Acquisition, (A) no payment default
exists, (B) no violation of Section 7.2 exists, (C) the Agent has
not sent a notice of a violation of Section 7.1 which has not been
cured and (D) no Event of Default exits,
(v) the Borrower shall demonstrate on a
pro forma basis that it shall be in compliance with all the
covenants contained in this Agreement after giving effect to such
Permitted Acquisition by delivering at least five (5) Business Days
prior to such Permitted Acquisition a certificate evidencing such
compliance,
Subject to the above limitations, Permitted Acquisitions may
include any merger or acquisition, whether accounted for under GAAP
as a purchase or a pooling of interests and regardless of whether
the value of the Consideration paid or received is comprised of
cash, common stock, preferred stock, assets or partnership
interests, estimated value of earn-outs or other means.
7.2.6 Dispositions of Assets or Subsidiaries.
The Borrower shall not, and shall not permit any
of its Subsidiaries to, sell, convey, assign, sell and leaseback,
abandon or otherwise transfer or dispose of, voluntarily or
involuntarily, any of its properties or assets, tangible or
intangible (including sale, assignment, discount or other
disposition of accounts, contract rights, chattel paper, equipment
or general intangibles with or without recourse or of capital
stock, shares of beneficial interest, partnership interests or
limited liability company interests of a Subsidiary of the
Borrower), except:
(i) transactions involving the sale of
inventory in the ordinary course of business;
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(ii) any sale, transfer or lease of assets in
the ordinary course of business which are no longer necessary or
required in the conduct of the Borrower's or such Subsidiary's
business;
(iii) any sale, transfer or lease of assets by
any Subsidiary of the Borrower to the Borrower; or
(iv) any sale, transfer or lease of assets in
the ordinary course of business which are replaced by substitute
assets acquired or leased within the parameters of Section 7.2.13.
7.2.7 Affiliate Transactions.
The Borrower shall not, and shall not permit any
of its Subsidiaries to, enter into or carry out any transaction
(including purchasing property or services from or selling property
or services to any Affiliate of the Borrower or other Person)
unless such transaction is not otherwise prohibited by this
Agreement, is entered into in the ordinary course of business upon
fair and reasonable arm's-length terms and conditions which are
fully disclosed to the Agent and is in accordance with all
applicable Law.
7.2.8 Continuation of or Change in Business.
The Borrower shall not, and shall not permit any
of its Subsidiaries to, engage in any business other than
commercial printing, and certain leasing businesses in support
thereof, and the supplying of office products and office furniture,
substantially as conducted and operated by such Borrower or
Subsidiary during the present fiscal year, and such Borrower or
Subsidiary shall not permit any material change in such business.
7.2.9 Plans and Benefit Arrangements.
The Borrower shall not, and shall not permit any
of its Subsidiaries to:
(i) fail to satisfy the minimum funding
requirements of ERISA and the Internal Revenue Code with respect to
any Plan where such failure is likely to result in a Material
Adverse Change;
(ii) request a minimum funding waiver from the
Internal Revenue Service with respect to any Plan;
(iii) engage in a Prohibited Transaction with
any Plan, Benefit Arrangement or Multiemployer Plan which would
constitute a Material Adverse Change;
(iv) permit the aggregate actuarial present
value of all benefit liabilities (whether or not vested) under each
Plan, determined on a plan termination basis, as disclosed in the
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most recent actuarial report completed with respect to such Plan,
to exceed, as of any actuarial valuation date, the fair market
value of the assets of such Plan;
(v) fail to make when due any contribution to
any Multiemployer Plan that any Borrower or any member of the ERISA
Group may be required to make under any agreement relating to such
Multiemployer Plan, or any Law pertaining thereto, where such
failure is likely to result in a Material Adverse Change;
(vi) withdraw (completely or partially) from
any Multiemployer Plan or withdraw (or be deemed under
Section 4062(e) of ERISA to withdraw) from any Multiple Employer
Plan, where any such withdrawal is likely to result in a Material
Adverse Change;
(vii) terminate, or institute proceedings to
terminate, any Plan, where such termination is likely to result in
a Material Adverse Change;
(viii) make any amendment to any Plan with
respect to which security is required under Section 307 of ERISA;
or
(ix) fail to give any and all notices and make
all disclosures and governmental filings required under ERISA or
the Internal Revenue Code, where such failure is likely to result
in a Material Adverse Change.
7.2.10 Fiscal Year.
The Borrower shall not, and shall not permit any
of its Subsidiaries to, change its fiscal year from the twelve-month
period beginning November 1 and ending October 31.
7.2.11 Issuance of Stock.
The Borrower shall not, and shall not permit any
of its Subsidiaries to, issue any additional shares of its capital
stock or any options, warrants or other rights in respect thereof
except that the Borrower may issue stock: (a) as all or part of the
Consideration for a Permitted Acquisition; (b) pursuant to the
provisions of Borrower's 1993 Stock Option Plan or any successor
plan providing for employee stock options; or ( c) incident to any
stock split or dividend.
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7.2.12 Changes in Organizational Documents.
The Borrower shall not, and shall not permit any
of its Subsidiaries to, amend in any respect its certificate of
incorporation (including any provisions or resolutions relating to
capital stock), by-laws, certificate of limited partnership,
partnership agreement, certificate of formation, limited liability
company agreement or other organizational documents in the event
such change would be adverse to the Banks as determined by the
Agent in its sole discretion, without obtaining the prior written
consent of the Required Banks. The Borrower will provide true and
correct copies of all amendments to organizational documents to the
Agent at the time annual financial statements are delivered.
7.2.13 Capital Expenditures and Leases.
The Borrower shall not, and shall not permit any
of its Subsidiaries to, make any payments in any fiscal year on
account of the lease of any asset which if leased would constitute
a capitalized lease, other than (i) those capitalized leases
reflected on the Borrower's balance sheet as of October 31, 1996
and (ii) payments in the aggregate not to exceed $1,500,000 in any
fiscal year, and all such capital expenditures and leases shall be
made under usual and customary terms and in the ordinary course of
business.
7.2.14 Minimum Fixed Charge Coverage Ratio.
The Borrower shall not permit the ratio of
Consolidated Cash Flow from Operations divided by Fixed Charges,
calculated as of the end of each fiscal quarter for the previous
four fiscal quarters then ended, to be less than 1.10 to 1.0.
7.2.15 Maximum Leverage Ratio.
The Borrower shall not at any time permit the
ratio of Total Senior Indebtedness divided by EBITDA to be greater
than:
2.75 to 1.0 as of October 31, 1997
2.50 to 1.0 as of October 31, 1998
2.50 to 1.0 as of October 31, 1999
2.25 to 1.0 as of October 31, 2000 and
2.0 to 1.0 as of October 31 of each
year thereafter.
7.2.16 Minimum Tangible Net Worth.
The Borrower shall not at any time permit
Consolidated Tangible Net Worth to be less than the sum of (i) 90%
of Tangible Net Worth on the Closing Date, (ii) an amount equal to
50% of the Consolidated Net Income and (iii) 100% of the proceeds
of all stock issued by the Borrower or any of its Subsidiaries.
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7.3 Reporting Requirements.
The Borrower covenants and agrees that until payment in
full of the Term Loan and interest thereon and satisfaction of all
of the Borrower's other Obligations hereunder and under the other
Loan Documents the Borrower will furnish or cause to be furnished
to the Agent:
7.3.1 Quarterly Financial Statements.
As soon as available and in any event within
forty-five (45) calendar days after the end of each of the first
three fiscal quarters in each fiscal year, financial statements of
the Borrower, consisting of a consolidated balance sheet as of the
end of such fiscal quarter and related consolidated statements of
income, retained earnings and cash flows for the fiscal quarter
then ended and the fiscal year through that date, all in reasonable
detail and certified (subject to normal year-end audit adjustments)
by the Chief Executive Officer, President or Chief Financial
Officer of the Borrower as having been prepared in accordance with
GAAP, consistently applied, and setting forth in comparative form
the respective financial statements for the corresponding date and
period in the previous fiscal year.
7.3.2 Annual Financial Statements.
As soon as available and in any event within
ninety (90) days after the end of each fiscal year of the Borrower,
financial statements of the Borrower consisting of a consolidated
balance sheet as of the end of such fiscal year, and related
consolidated statements of income, retained earnings and cash flows
for the fiscal year then ended, all in reasonable detail and
setting forth in comparative form the financial statements as of
the end of and for the preceding fiscal year, and certified by
independent certified public accountants of nationally recognized
standing. The certificate or report of accountants shall be free
of qualifications (other than any consistency qualification that
may result from a change in the method used to prepare the
financial statements as to which such accountants concur).
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7.3.3 Certificate of the Borrower
Concurrently with the financial statements of
the Borrower. furnished to the Agent pursuant to Sections 7.3.1 and
7.3.3, a certificate of the Borrower signed by the Chief Executive
Officer, President or Chief Financial Officer of the Borrower, in
the form of Exhibit 7.3.3, to the effect that, except as described
pursuant to Section 7.3.4, (i) the representations and warranties
of the Borrower contained in Section 5 and in the other Loan
Documents are true on and as of the date of such certificate with
the same effect as though such representations and warranties had
been made on and as of such date (except representations and
warranties which expressly relate solely to an earlier date or
time) and the Borrower has performed and complied with all
covenants and conditions hereof, (ii) no Event of Default or
Potential Default exists and is continuing on the date of such
certificate and (iii) containing calculations in sufficient detail
to demonstrate compliance as of the date of such financial
statements with all financial covenants contained in Section 7.2.
7.3.4 Notice of Default.
Promptly after any executive officer of the
Borrower has learned of the occurrence of an Event of Default or
Potential Default, a certificate signed on behalf of the Loan
parties by an executive officer of the Borrower setting forth the
details of such Event of Default or Potential Default and the
action which the Borrower proposes to take with respect thereto.
7.3.5 Notice of Litigation.
Promptly after the commencement thereof, notice
of all actions, suits, proceedings or investigations before or by
any Official Body or any other Person against the Borrower or any
of its Subsidiaries which involve a claim or series of claims in
excess of $500,000 or which if adversely determined would
constitute a Material Adverse Change.
7.3.6 Certain Events.
Written notice to the Agent:
(i) at least ten (10) calendar days after
closing, with respect to any proposed sale or transfer of assets
pursuant to Section 7.2.6(iv), and
(ii) within the restrictions set forth in
Section 7.2.12, any amendments to the organizational documents of
the Borrower.
7.3.7 Budgets, Forecasts, Other Reports and
Information.
Promptly upon their becoming available to the
Borrower:
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(i) the annual budget and any forecasts of the
Borrower, to be supplied not later than thirty (30) days prior to
commencement of the fiscal year to which any of the foregoing may
be applicable,
(ii) any reports including reports on the
internal control structure the Borrower based upon any audit of the
Borrower,
(iii) any reports, notices or proxy statements
generally distributed by the Borrower to its stockholders on a date
no later than the date supplied to such stockholders,
(iv) regular or periodic reports, including
Forms 10-K, 10-Q and 8-K, registration statements and prospectuses,
filed the Borrower with the Securities and Exchange Commission,
(v) upon the Agent's reasonable request, a
copy of any order in any proceeding to which the Borrower or any of
its Subsidiaries is a party issued by any Official Body, and
(vi) such other reports and information as any
of the Agent may from time to time reasonably request. The
Borrower shall also notify the Agent promptly of the enactment or
adoption of any Law which may result in a Material Adverse Change.
7.3.8 Notices Regarding Plans and Benefit
Arrangements.
7.3.8.1 Certain Events.
Promptly upon becoming aware of the
occurrence thereof, notice (including the nature of the event and,
when known, any action taken or threatened by the Internal Revenue
Service or the PBGC with respect thereto) of:
(i) any Reportable Event with
respect to the Borrower or any other member of the ERISA Group
(regardless of whether the obligation to report said Reportable
Event to the PBGC has been waived),
(ii) any Prohibited Transaction
which could subject the Borrower or any other member of the ERISA
Group to a civil penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by Section 4975 of the Internal Revenue Code
in connection with any Plan, any Benefit Arrangement or any trust
created thereunder where such civil penalty or tax is likely to
result in a Material Adverse Change,
(iii) any assertion of material
withdrawal liability with respect to any Multiemployer Plan,
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(iv) any partial or complete
withdrawal from a Multiemployer Plan by the Borrower or any other
member of the ERISA Group under Title IV of ERISA (or assertion
thereof), where such withdrawal is likely to result in material
withdrawal liability,
(v) any cessation of operations
(by the Borrower or any other member of the ERISA Group) at a
facility in the circumstances described in Section 4062(e) of
ERISA,
(vi) withdrawal by the Borrower or
any other member of the ERISA Group from a Multiple Employer Plan,
(vii) a failure by the Borrower or
any other member of the ERISA Group to make a payment to a Plan
required to avoid imposition of a Lien under Section 302(f) of
ERISA,
(viii) the adoption of an amendment
to a Plan requiring the provision of security to such Plan pursuant
to Section 307 of ERISA, or
(ix) any change in the actuarial
assumptions or funding methods used for any Plan, where the effect
of such change is to materially increase or materially reduce the
unfounded benefit liability or obligation to make periodic
contributions.
7.3.8.2 Notices of Involuntary Termination
and Annual Reports.
Promptly after receipt thereof,
copies of (a) all notices received by the Borrower or any other
member of the ERISA Group of the PBGC's intent to terminate any
Plan administered or maintained by the Borrower or any member of
the ERISA Group, or to have a trustee appointed to administer any
such Plan; and (b) at the request of the Agent each annual report
(IRS Form 5500 series) and all accompanying schedules, the most
recent actuarial reports, the most recent financial information
concerning the financial status of each Plan administered or
maintained by the Borrower or any other member of the ERISA Group,
and schedules showing the amounts contributed to each such Plan by
or on behalf of the Borrower or any other member of the ERISA Group
in which any of their personnel participate or from which such
personnel may derive a benefit, and each Schedule B (Actuarial
Information) to the annual report filed by the Borrower or any
other member of the ERISA Group with the Internal Revenue Service
with respect to each such Plan.
7.3.8.3 Notice of Voluntary Termination.
Promptly upon the filing thereof,
copies of any Form 5310, or any successor or equivalent form to
Form 5310, filed with the PBGC in connection with the termination
of any Plan.
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8. DEFAULT
8.1 Events of Default.
An Event of Default shall mean the occurrence or
existence of any one or more of the following events or conditions
(whatever the reason therefor and whether voluntary, involuntary or
effected by operation of Law):
8.1.1 Payments Under Loan Documents.
The Borrower shall fail to pay any principal of
the Term Loan (including scheduled installments, mandatory
prepayments or the payment due at maturity), or shall fail to pay
any interest on the Term Loan after such principal or interest
becomes due in accordance with the terms hereof or thereof, or the
Borrower fails to pay any other amount owing hereunder or under the
other Loan Documents after the date provided in an invoice or other
notice of payment due;
8.1.2 Breach of Warranty.
Any representation or warranty made at any time
by any of the Borrower herein or in any other Loan Document, or in
any certificate, other instrument or statement furnished pursuant
to the provisions hereof or thereof, shall prove to have been false
or misleading in any material respect as of the time it was made or
furnished;
8.1.3 Breach of Negative Covenants or Visitation
Rights.
A default shall occur in the observance or
performance of any covenant contained in Section 7.1.6 or Section
7.2;
8.1.4 Breach of Other Covenants.
Any of the Loan Parties shall default in the
observance or performance of any other covenant, condition or
provision hereof or of any other Loan Document and such default
shall continue unremedied for a period of thirty (30) Business Days
after the Chief Executive Officer, President, Chief Financial
Officer or Corporate Secretary of the Borrower becomes aware of the
occurrence thereof (such grace period to be applicable only in the
event such default can be remedied by corrective action of the
Borrower as determined by the Agent in its sole discretion);
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8.1.5 Defaults in Other Agreements or Indebtedness.
A default or event of default shall occur at any
time under the terms of any other agreement involving borrowed
money or the extension of credit or any other Indebtedness under
which the Borrower or Subsidiary of the Borrower may be obligated
as a borrower or guarantor in excess of $750,000 in the aggregate,
and such breach, default or event of default consists of the
failure to pay (beyond any period of grace permitted with respect
thereto, whether waived or not) any indebtedness when due (whether
at stated maturity, by acceleration or otherwise) or if such breach
or default permits (because of nonpayment) or causes the
acceleration of any indebtedness (whether or not such right shall
have been waived) or the termination of any commitment to lend;
8.1.6 Final Judgments or Orders.
Any final judgments or orders for the payment of
money in excess of $50,000 in the aggregate shall be entered
against the Borrower or any of its Subsidiaries by a court having
jurisdiction in the premises, which judgment is not discharged,
vacated, bonded or stayed pending appeal within a period of thirty
(30) days from the date of entry;
8.1.7 Loan Document Unenforceable.
Any of the Loan Documents shall cease to be
legal, valid and binding agreements enforceable against the party
executing the same or such party's successors and assigns (as
permitted under the Loan Documents) in accordance with the
respective terms thereof or shall in any way be terminated (except
in accordance with its terms) or become or be declared ineffective
or inoperative or shall in any way be challenged or contested or
cease to give or provide the respective Liens, security interests,
rights, titles, interests, remedies, powers or privileges intended
to be created thereby;
8.1.8 Uninsured Losses; Proceedings Against Assets.
Any assets of the Borrower or its Subsidiaries
are attached, seized, levied upon or subjected to a writ or
distress warrant; or such come within the possession of any
receiver, trustee, custodian or assignee for the benefit of
creditors and the same is not cured within thirty (30) days
thereafter;
8.1.9 Notice of Lien or Assessment.
A notice of Lien or assessment, other than a
Permitted Lien, is filed of record with respect to all or any part
of the assets of the Borrower or any of its Subsidiaries by the
United States, or any department, agency or instrumentality
thereof, or by any state, county, municipal or other governmental
agency, including the PBGC, or any taxes or debts owing at any time
or times hereafter to any one of these becomes payable and the same
is not paid within thirty (30) days after the same becomes payable;
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8.1.10 Insolvency.
The Borrower or any Subsidiary of the Borrower
ceases to be solvent or admits in writing its inability to pay its
debts as they mature;
8.1.11 Events Relating to Plans and Benefit
Arrangements.
Any of the following occurs: (i) any Reportable
Event, which the Agent determines in good faith constitutes grounds
for the termination of any Plan by the PBGC or the appointment of
a trustee to administer or liquidate any Plan, shall have occurred
and be continuing; (ii) proceedings shall have been instituted or
other action taken to terminate any Plan, or a termination notice
shall have been filed with respect to any Plan; (iii) a trustee
shall be appointed to administer or liquidate any Plan; (iv) the
PBGC shall give notice of its intent to institute proceedings to
terminate any Plan or Plans or to appoint a trustee to administer
or liquidate any Plan; and, in the case of the occurrence of (i),
(ii), (iii) or (iv) above, the Agent determines in good faith that
the amount of the Borrower's liability is likely to exceed 10% of
its Consolidated Net Worth; (v) the Borrower or any member of the
ERISA Group shall fail to make any contributions when due to a Plan
or a Multiemployer Plan; (vi) the Borrower or any other member of
the ERISA Group shall make any amendment to a Plan with respect to
which security is required under Section 307 of ERISA; (vii) the
Borrower or any other member of the ERISA Group shall withdraw
completely or partially from a Multiemployer Plan; (viii) the
Borrower or any other member of the ERISA Group shall withdraw (or
shall be deemed under Section 4062(e) of ERISA to withdraw) from a
Multiple Employer Plan; or (ix) any applicable Law is adopted,
changed or interpreted by any Official Body with respect to or
otherwise affecting one or more Plans, Multiemployer Plans or
Benefit Arrangements and, with respect to any of the events
specified in (v), (vi), (vii), (viii) or (ix), the Agent determines
in good faith that any such occurrence would be reasonably likely
to materially and adversely affect the total enterprise represented
by the Borrower and the other members of the ERISA Group;
8.1.12 Cessation of Business.
The Borrower or Subsidiary of the Borrower
ceases to conduct its business as contemplated, except as expressly
permitted under Section 7.2.5 or 7.2.6, or the Borrower or
Subsidiary of the Borrower is enjoined, restrained or in any way
prevented by court order from conducting all or any material part
of its business and such injunction, restraint or other preventive
order is not dismissed within thirty (30) days after the entry
thereof;
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8.1.13 Change of Control.
(i) Any person or group of persons (within the
meaning of Sections 13(a) or 14(a) of the Securities Exchange Act
of 1934, as amended) shall have acquired beneficial ownership of
(within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act) 33% or more of the voting
capital stock of the Borrower; or (ii) Marshall T. Reynolds shall
cease to have beneficial ownership of at least 40% of the voting
capital stock of the Borrower.
8.1.14 Involuntary Proceedings.
A proceeding shall have been instituted in a
court having jurisdiction in the premises seeking a decree or order
for relief in respect of the Borrower or Subsidiary of a the
Borrower in an involuntary case under any applicable bankruptcy,
insolvency, reorganization or other similar law now or hereafter in
effect, or for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator, conservator (or similar official)
of the Borrower or Subsidiary of the Borrower for any substantial
part of its property, or for the winding-up or liquidation of its
affairs, and such proceeding shall remain undismissed or unstayed
and in effect for a period of thirty (30) consecutive days or such
court shall enter a decree or order granting any of the relief
sought in such proceeding; or
8.1.15 Voluntary Proceedings.
The Borrower or Subsidiary of the Borrower shall
commence a voluntary case under any applicable bankruptcy,
insolvency, reorganization or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an
involuntary case under any such law, or shall consent to the
appointment or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator, conservator (or other
similar official) of itself or for any substantial part of its
property or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become
due, or shall take any action in furtherance of any of the
foregoing.
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8.2 Consequences of Event of Default.
8.2.1 Events of Default Other Than Bankruptcy,
Insolvency or Reorganization Proceedings.
If an Event of Default specified under Sections
8.1.1 through 8.1.13 shall occur and be continuing, the Banks and
the Agent shall be, if determined by the Required Banks, under no
further obligation to make Loans hereunder and the Agent, upon the
request of the Required Banks, shall by written notice to the
Borrowers, declare the unpaid principal amount of the Term Notes
then outstanding and all interest accrued thereon, any unpaid fees
and all other Indebtedness of the Borrower to the Banks hereunder
and thereunder to be forthwith due and payable, and the same shall
thereupon become and be immediately due and payable to the Agent
for the benefit of each Bank without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly
waived, and
8.2.2 Bankruptcy, Insolvency or Reorganization
Proceedings.
If an Event of Default specified under
Section 8.1.14 or 8.1.15 shall occur, the Banks shall be under no
further obligations to make Loans hereunder and the unpaid
principal amount of the Term Notes then outstanding and all
interest accrued thereon, any unpaid fees and all other
Indebtedness of the Borrower to the Banks hereunder and thereunder
shall be immediately due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby expressly
waived; and
8.2.3 Set-off.
If an Event of Default shall occur and be
continuing, any Bank to whom any Obligation is owed by the Borrower
hereunder or under any other Loan Document or any participant of
such Bank which has agreed in writing to be bound by the provisions
of Section 9.13 and any branch, Subsidiary or Affiliate of such
Bank or participant anywhere in the world shall have the right, in
addition to all other rights and remedies available to it, without
notice to such Loan Party, to set-off against and apply to the then
unpaid balance of all the Loans and all other Obligations of the
Borrower hereunder or under any other Loan Document any debt owing
to, and any other funds held in any manner for the account of, the
Borrower by such Bank or participant or by such branch, Subsidiary
or Affiliate, including all funds in all deposit accounts (whether
time or demand, general or special, provisionally credited or
finally credited, or otherwise) now or hereafter maintained by the
Borrower for its own respective account (but not including funds
held in custodian or trust accounts) with such Bank or participant
or such branch, Subsidiary or Affiliate. Such right shall exist
whether or not any Bank or the Agent shall have made any demand
under this Agreement or any other Loan Document, whether or not
such debt owing to or funds held for the account of such Loan Party
is or are matured or unmatured and regardless of the existence or
adequacy of any Guaranty or any other security, right or remedy
available to any Bank or the Agent; and
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8.2.4 Suits, Actions, Proceedings.
If an Event of Default shall occur and be
continuing, and if the Required Bank have elected to accelerate the
maturity of Loans pursuant to any of the foregoing provisions of
this Section 8.2, the Agent or any Bank, if owed any amount with
respect to the Term Notes, may proceed to protect and enforce its
rights by suit in equity, action at law and/or other appropriate
proceeding, whether for the specific performance of any covenant or
agreement contained in this Agreement or the Term Notes, including
as permitted by applicable Law the obtaining of the ex parte
appointment of a receiver, and, if such amount shall have become
due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right of the Agent or such
Bank; and
8.2.5 Application of Proceeds.
From and after the date on which the Agent has
taken any action pursuant to this Section 8.2 and until all
Obligations of the Borrower have been paid in full, any and all
proceeds received by the Agent from the exercise of any other
remedy by the Agent, shall be applied as follows:
(i) first, to reimburse the Agent and the
Banks for out-of-pocket costs, expenses and disbursements,
including reasonable attorneys' and paralegals' fees and legal
expenses, incurred by the Agent or the Banks in connection with
realizing on the Collateral or collection of any Obligations of any
of the Borrower under any of the Loan Documents;
(ii) second, to the repayment of all
Indebtedness then due and unpaid of the Borrower to the Banks
incurred under this Agreement or any of the other Loan Documents,
whether of principal, interest, fees, expenses or otherwise, in
such manner as the Agent may determine in its discretion; and
(iii) the balance, if any, as required by Law.
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9. THE AGENT
9.1 Appointment.
Each Bank hereby irrevocably designates, appoints and
authorizes PNC Bank to act as Agent for such Bank under this
Agreement and to execute and deliver or accept on behalf of each of
the Banks the other Loan Documents. Each Bank hereby irrevocably
authorizes, and each holder of any Term Note by the acceptance of
a Term Note shall be deemed irrevocably to authorize, the Agent to
take such action on its behalf under the provisions of this
Agreement and the other Loan Documents and any other instruments
and agreements referred to herein, and to exercise such powers and
to perform such duties hereunder as are specifically delegated to
or required of the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. PNC Bank agrees to
act as the Agent on behalf of the Banks to the extent provided in
this Agreement.
9.2 Delegation of Duties.
The Agent may perform any of its duties hereunder by or
through agents or employees (provided such delegation does not
constitute a relinquishment of its duties as Agent) and, subject to
Sections 9.5 and 9.6, shall be entitled to engage and pay for the
advice or services of any attorneys, accountants or other experts
concerning all matters pertaining to its duties hereunder and to
rely upon any advice so obtained.
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9.3 Nature of Duties; Independent Credit Investigation.
The Agent shall have no duties or responsibilities
except those expressly set forth in this Agreement and no implied
covenants, functions, responsibilities, duties, obligations, or
liabilities shall be read into this Agreement or otherwise exist.
The duties of the Agent shall be mechanical and administrative in
nature; the Agent shall not have by reason of this Agreement a
fiduciary or trust relationship in respect of any Bank; and nothing
in this Agreement, expressed or implied, is intended to or shall be
so construed as to impose upon the Agent any obligations in respect
of this Agreement except as expressly set forth herein. Without
limiting the generality of the foregoing, the use of the term
"agent" in this Agreement with reference to the Agent is not
intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine of any applicable Law.
Instead, such term is used merely as a matter of market custom, and
is intended to create or reflect only an administrative
relationship between independent contracting parties. Each Bank
expressly acknowledges (i) that the Agent has not made any
representations or warranties to it and that no act by the Agent
hereafter taken, including any review of the affairs of the
Borrower, shall be deemed to constitute any representation or
warranty by the Agent to any Bank; (ii) that it has made and will
continue to make, without reliance upon the Agent, its own
independent investigation of the financial condition and affairs
and its own appraisal of the creditworthiness of the Borrower in
connection with this Agreement and the making and continuance of
the Loans hereunder; and (iii) except as expressly provided herein,
that the Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Bank with any
credit or other information with respect thereto, whether coming
into its possession before the making of any Loan or at any time or
times thereafter.
9.4 Actions in Discretion of Agent; Instructions from the
Banks.
The Agent agrees, upon the written request of the
Required Banks, to take or refrain from taking any action of the
type specified as being within the Agent's rights, powers or
discretion herein, provided that the Agent shall not be required to
take any action which exposes the Agent to personal liability or
which is contrary to this Agreement or any other Loan Document or
applicable Law. In the absence of a request by the Required Banks,
the Agent shall have authority, in its sole discretion, to take or
not to take any such action, unless this Agreement specifically
requires the consent of the Required Banks or all of the Banks.
Any action taken or failure to act pursuant to such instructions or
discretion shall be binding on the Banks, subject to Section 9.6.
Subject to the provisions of Section 9.6, no Bank shall have any
right of action whatsoever against the Agent as a result of the
Agent acting or refraining from acting hereunder in accordance with
the instructions of the Required Banks, or in the absence of such
instructions, in the absolute discretion of the Agent.
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9.5 Reimbursement and Indemnification of Agent by the
Borrower.
The Borrower unconditionally agrees to pay or reimburse
the Agent and hold the Agent harmless against (a) liability for the
payment of all reasonable out-of-pocket costs, expenses and
disbursements, including fees and expenses of counsel (including
the allocated costs of staff counsel), appraisers and environmental
consultants, incurred by the Agent (i) in connection with the
development, negotiation, preparation, printing, execution,
syndication, interpretation and performance of this Agreement and
the other Loan Documents, (ii) relating to any requested
amendments, waivers or consents pursuant to the provisions hereof,
(iii) in connection with the enforcement of this Agreement or any
other Loan Document or collection of amounts due hereunder or
thereunder or the proof and allowability of any claim arising under
this Agreement or any other Loan Document, whether in bankruptcy or
receivership proceedings or otherwise, and (iv) in any workout or
restructuring or in connection with the protection, preservation,
exercise or enforcement of any of the terms hereof or of any rights
hereunder or under any other Loan Document or in connection with
any foreclosure, collection or bankruptcy proceedings, and (b) all
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted
against the Agent, in its capacity as such, in any way relating to
or arising out of this Agreement or any other Loan Documents or any
action taken or omitted by the Agent hereunder or thereunder,
provided that the Borrower shall not be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements if the same
results from the Agent's gross negligence or willful misconduct, or
if the Borrower was not given notice of the subject claim and the
opportunity to participate in the defense thereof, at its expense
(except that the Borrower shall remain liable to the extent such
failure to give notice does not result in a loss to the Borrower),
or if the same results from a compromise or settlement agreement
entered into without the consent of the Borrower, which shall not
be unreasonably withheld. At the Borrower's reasonable request, an
officer of the Borrower may discuss initial budgets developed by
counsel for the Agent (as long as such counsel determines that no
privilege will be waived as a result of such discussions). Nothing
in this Section 9.5 prevents the Borrower from obtaining its own
counsel and controlling its own defense in any action.
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9.6 Exculpatory Provisions; Limitation of Liability.
Neither the Agent nor any of its directors, officers,
employees, agents, attorneys or Affiliates shall (a) be liable to
any Bank for any action taken or omitted to be taken by it or them
hereunder, or in connection herewith including pursuant to any Loan
Document, unless caused by its or their own gross negligence or
willful misconduct, (b) be responsible in any manner to any of the
Banks for the effectiveness, enforceability, genuineness, validity
or the due execution of this Agreement or any other Loan Documents
or for any recital, representation, warranty, document,
certificate, report or statement herein or made or furnished under
or in connection with this Agreement or any other Loan Documents,
or (c) be under any obligation to any of the Banks to ascertain or
to inquire as to the performance or observance of any of the terms,
covenants or conditions hereof or thereof on the part of the
Borrower, or the financial condition of the Loan Parties, or the
existence or possible existence of any Event of Default or
Potential Default. No claim may be made by the Borrower, any Bank,
the Agent or any of their respective Subsidiaries against the
Agent, any Bank or any of their respective directors, officers,
employees, agents, attorneys or Affiliates, or any of them, for any
special, indirect or consequential damages or, to the fullest
extent permitted by Law, for any punitive damages in respect of any
claim or cause of action (whether based on contract, tort,
statutory liability, or any other ground) based on, arising out of
or related to any Loan Document or the transactions contemplated
hereby or any act, omission or event occurring in connection
therewith, including the negotiation, documentation, administration
or collection of the Loans, and the Borrower, (for itself and on
behalf of each of its Subsidiaries), the Agent and each Bank hereby
waive, releases and agree never to sue upon any claim for any such
damages, whether such claim now exists or hereafter arises and
whether or not it is now known or suspected to exist in its favor.
Each Bank agrees that, except for notices, reports and other
documents expressly required to be furnished to the Banks by the
Agent hereunder or given to the Agent for the account of or with
copies for the Banks, the Agent and each of its directors,
officers, employees, agents, attorneys or Affiliates shall not have
any duty or responsibility to provide any Bank with an credit or
other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness
of the Borrower which may come into the possession of the Agent or
any of its directors, officers, employees, agents, attorneys or
Affiliates.
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9.7 Reimbursement and Indemnification of Agent by Banks.
Each Bank agrees to reimburse and indemnify the Agent
(to the extent not reimbursed by the Borrower and without limiting
the Obligation of the Borrower to do so) in proportion to its
Ratable Share from and against all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements, including attorneys' fees and
disbursements (including the allocated costs of staff counsel), and
costs of appraisers and environmental consultants, of any kind or
nature whatsoever which may be imposed on, incurred by or asserted
against the Agent, in its capacity as such, in any way relating to
or arising out of this Agreement or any other Loan Documents or any
action taken or omitted by the Agent hereunder or thereunder,
provided that no Bank shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements (a) if the same
results from the Agent's gross negligence or willful misconduct, or
(b) if such Bank was not given notice of the subject claim and the
opportunity to participate in the defense thereof, at its expense
(except that such Bank shall remain liable to the extent such
failure to give notice does not result in a loss to the Bank), or
(c) if the same results from a compromise and settlement agreement
entered into without the consent of such Bank, which shall not be
unreasonably withheld. In addition, each Bank agrees promptly upon
demand to reimburse the Agent (to the extent not reimbursed by the
Borrower and without limiting the Obligation of the Borrower to do
so) in proportion to its Ratable Share for all amounts due and
payable by the Borrower to the Agent in connection with the Agent's
periodic audit of the Borrower's books, records and business
properties.
9.8 Reliance by Agent.
The Agent shall be entitled to rely upon any writing,
telegram, telex or teletype message, resolution, notice, consent,
certificate, letter, cablegram, statement, order or other document
or conversation by telephone or otherwise believed by it to be
genuine and correct and to have been signed, sent or made by the
proper Person or Persons, and upon the advice and opinions of
counsel and other professional advisers selected by the Agent. The
Agent shall be fully justified in failing or refusing to take any
action hereunder unless it shall first be indemnified to its
satisfaction by the Banks against any and all liability and expense
which may be incurred by it by reason of taking or continuing to
take any such action.
9.9 Notice of Default.
The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Potential Default or Event of
Default unless the Agent has received written notice from a Bank or
the Borrower referring to this Agreement, describing such Potential
Default or Event of Default and stating that such notice is a
"notice of default."
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9.10 Notices.
The Agent shall promptly send to each Bank a copy of
all notices received from the Borrowers pursuant to the provisions
of this Agreement or the other Loan Documents promptly upon receipt
thereof. The Agent shall promptly notify the Borrower and the
other Banks of each change in the Base Rate and the effective date
thereof.
9.11 Banks in Their Individual Capacities.
With respect to the Loans made by it, and any other
rights and powers given to it as a Bank hereunder or under any of
the other Loan Documents, the Agent shall have the same rights and
powers hereunder as any other Bank and may exercise the same as
though it were not the Agent, and the term "Banks" shall, unless
the context otherwise indicates, include the Agent in its
individual capacity. PNC Bank and its Affiliates and each of the
Banks and their respective Affiliates may, without liability to
account, except as prohibited herein, make loans to, accept
deposits from, discount drafts for, act as trustee under indentures
of, and generally engage in any kind of banking or trust business
with, the Borrower and its Affiliates, in the case of the Agent, as
though it were not acting as Agent hereunder and in the case of
each Bank, as though such Bank were not a Bank hereunder. The
Banks acknowledge that, pursuant to such activities, the Agent or
its Affiliates may (i) receive information regarding the Borrower
(including information that may be subject to confidentiality
obligations in favor of the Borrower) and acknowledge that the
Agent shall be under no obligation to provide such information to
them, and (ii) accept fees and other consideration from the
Borrower for services in connection with this Agreement and
otherwise without having to account for the same to the Banks.
9.12 Holders of Notes.
The Agent may deem and treat any payee of any Term Note
as the owner thereof for all purposes hereof unless and until
written notice of the assignment or transfer thereof shall have
been filed with the Agent. Any request, authority or consent of
any Person who at the time of making such request or giving such
authority or consent is the holder of any Term Note shall be
conclusive and binding on any subsequent holder, transferee or
assignee of such Term Note or of any Term Note or Term Notes issued
in exchange therefor.
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9.13 Equalization of Banks.
The Banks agree among themselves that, with respect to
all amounts received by any Bank for application on any Obligation
hereunder or under any Term Note, whether received by voluntary
payment, by realization upon security, by the exercise of the right
of set-off or banker's lien, by counterclaim or by any other non-pro
rata source, equitable adjustment will be made in the manner
stated in the following sentence so that, in effect, all such
excess amounts will be shared ratably among the Banks and such
holders in proportion to their interests in payments under the Term
Notes, except as otherwise provided in Section 3.4.3 or 4.5. The
Banks receiving any such amount shall purchase for cash from each
of the other Banks an interest in such Bank's Loans in such amount
as shall result in a ratable participation by the Banks in the
aggregate unpaid amount under the Term Notes, provided that if all
or any portion of such excess amount is thereafter recovered from
the Bank making such purchase, such purchase shall be rescinded and
the purchase price restored to the extent of such recovery,
together with interest or other amounts, if any, required by law
(including court order) to be paid by the Bank making such
purchase.
9.14 Successor Agent.
The Agent (i) may resign as Agent or (ii) shall resign
if such resignation is requested by the Required Banks (if the
Agent is a Bank, the Agent's Commitment shall be considered in
determining whether the Required Banks have requested such
resignation), in either case of (i) or (ii) by giving not less than
thirty (30) days' prior written notice to the Borrowers. If the
Agent shall resign under this Agreement, then either (a) the
Required Banks shall appoint from among the Banks a successor agent
for the Banks, subject to the consent of the Borrower, such consent
not to be unreasonably withheld, or (b) if a successor agent shall
not be so appointed and approved within the thirty (30) day period
following the Agent's notice to the Banks of its resignation, then
the Agent shall appoint, with the consent of the Borrowers, such
consent not to be unreasonably withheld, a successor agent who
shall serve as Agent until such time as the Required Banks appoint
and the Borrower consent to the appointment of a successor agent.
Upon its appointment pursuant to either clause (a) or (b) above,
such successor agent shall succeed to the rights, powers and duties
of the Agent, and the term "Agent" shall mean such successor agent,
effective upon its appointment, and the former Agent's rights,
powers and duties as Agent shall be terminated without any other or
further act or deed on the part of such former Agent or any of the
parties to this Agreement. After the resignation of any Agent
hereunder, the provisions of this Section 9 shall inure to the
benefit of such former Agent and such former Agent shall not by
reason of such resignation be deemed to be released from liability
for any actions taken or not taken by it while it was an Agent
under this Agreement.
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9.15 Agent's Fee.
The Borrower shall pay to the Agent a nonrefundable fee
(the "Agent's Fee"), payable quarterly in arrears, equal to .25%
per annum of the average outstanding principal balance of the Term
Loan for each year that any such balance remains outstanding..
9.16 Calculations.
In the absence of gross negligence or willful
misconduct, the Agent shall not be liable for any error in
computing the amount payable to any Bank whether in respect of the
Loans, fees or any other amounts due to the Banks under this
Agreement. In the event an error in computing any amount payable
to any Bank is made, the Agent, the Borrower and each affected Bank
shall, forthwith upon discovery of such error, make such
adjustments as shall be required to correct such error, and any
compensation therefor will be calculated at the Federal Funds
Effective Rate.
9.17 Beneficiaries.
Except as expressly provided herein, the provisions of
this Section 9 are solely for the benefit of the Agent and the
Banks, and the Borrower shall not have any rights to rely on or
enforce any of the provisions hereof. In performing its functions
and duties under this Agreement, the Agent shall act solely as
agent of the Banks and does not assume and shall not be deemed to
have assumed any obligation toward or relationship of agency or
trust with or for the Borrower.
10. MISCELLANEOUS
10.1 Modifications, Amendments or Waivers.
With the written consent of the Required Banks, the
Agent, acting on behalf of all the Banks and the Borrower, may from
time to time enter into written agreements amending or changing any
provision of this Agreement or any other Loan Document or the
rights of the Banks or the Borrower hereunder or thereunder, or may
grant written waivers or consents to a departure from the due
performance of the Obligations of the Borrower hereunder or
thereunder. Any such agreement, waiver or consent made with such
written consent shall be effective to bind all the Banks and the
Borrower; provided, that, without the written consent of all the
Banks, no such agreement, waiver or consent may be made which will:
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10.1.1 Extension of Payment; Reduction of Principal
Interest or Fees; Modification of Terms of Payment.
Whether or not any portion of the Term Loan is
outstanding, extend the time for payment of principal or interest
of the Term Loan or any other fee payable to any Bank, or reduce
the principal amount of or the rate of interest borne by the Term
Loan, or otherwise affect the terms of payment of the principal of
or interest of the Term Loan or any other fee payable to any Bank;
10.1.2 Release of Guarantor.
Release any Guarantor from its Obligations under
the Subsidiaries Guaranty; or
10.1.3 Miscellaneous
Amend Section 4.2 (Pro Rata Treatment of Banks),
9.6 (Exculpatory Provisions, etc.) or 9.13 (Equalization of Banks)
or this Section 10.1, alter any provision regarding the pro rata
treatment of the Banks, change the definition of Required Banks, or
change any requirement providing for the Banks or the Required
Banks to authorize the taking of any action hereunder;
provided, further, that no agreement, waiver or consent which would
modify the interests, rights or obligations of the Agent in its
capacity as Agent shall be effective without the written consent of
the Agent.
10.2 No Implied Waivers; Cumulative Remedies; Writing
Required.
No course of dealing and no delay or failure of the
Agent or any Bank or the Borrower in exercising any right, power,
remedy or privilege under this Agreement or any other Loan Document
shall affect any other or future exercise thereof or operate as a
waiver thereof, nor shall any single or partial exercise thereof or
any abandonment or discontinuance of steps to enforce such a right,
power, remedy or privilege preclude any further exercise thereof or
of any other right, power, remedy or privilege. The rights and
remedies of the Agent and the Banks under this Agreement and any
other Loan Documents are cumulative and not exclusive of any rights
or remedies which they would otherwise have. Any waiver, permit,
consent or approval of any kind or character on the part of any
Bank of any breach or default under this Agreement or any such
waiver of any provision or condition of this Agreement must be in
writing and shall be effective only to the extent specifically set
forth in such writing.
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<PAGE>
10.3 Reimbursement and Indemnification of Banks by the
Borrower; Taxes.
The Borrower agrees within thirty (30) calendar days
after demand to pay or reimburse to each Bank (other than the
Agent, as to which the Borrower's Obligations are set forth in
Section 9.5) and to save such Bank harmless against (i) liability
for the payment of all reasonable out-of-pocket costs, expenses and
disbursements (including fees and expenses of counsel for each Bank
except with respect to (a) and (b) below), incurred by such Bank
(a) in connection with the interpretation of this Agreement, and
other instruments and documents to be delivered hereunder,
(b) relating to any amendments, waivers or consents pursuant to the
provisions hereof, (c) in connection with the enforcement of this
Agreement or any other Loan Document, or collection of amounts due
hereunder or thereunder or the proof and allowability of any claim
arising under this Agreement or any other Loan Document, whether in
bankruptcy or receivership proceedings or otherwise, and (d) in any
workout or restructuring or in connection with the protection,
preservation, exercise or enforcement of any of the terms hereof or
of any rights hereunder or under any other Loan Document or in
connection with any foreclosure, collection or bankruptcy
proceedings, or (ii) all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed
on, incurred by or asserted against such Bank, in its capacity as
such, in any way relating to or arising out of this Agreement or
any other Loan Documents or any action taken or omitted by such
Bank hereunder or thereunder, provided that the Borrower shall not
be liable for any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements (A) if the same results from such Bank's gross
negligence or willful misconduct, or (B) if the Borrower was not
given notice of the subject claim and the opportunity to
participate in the defense thereof, at its expense (except that the
Borrower shall remain liable to the extent such failure to give
notice does not result in a loss to the Borrower), or (C) if the
same results from a compromise or settlement agreement entered into
without the consent of the Borrower, which shall not be
unreasonably withheld. The Banks will attempt to minimize the fees
and expenses of legal counsel for the Banks which are subject to
reimbursement by the Borrower hereunder by considering the usage of
one law firm to represent the Banks and the Agent if appropriate
under the circumstances. The Borrower agrees unconditionally to
pay all stamp, document, transfer, recording or filing taxes or
fees and similar impositions now or hereafter determined by the
Agent or any Bank to be payable in connection with this Agreement
or any other Loan Document, and the Borrower agree unconditionally
to save the Agent and the Banks harmless from and against any and
all present or future claims, liabilities or losses with respect to
or resulting from any omission to pay or delay in paying any such
taxes, fees or impositions.
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10.4 Holidays.
Whenever payment of the Term Loan to be made or taken
hereunder shall be due on a day which is not a Business Day such
payment shall be due on the next Business Day and such extension of
time shall be included in computing interest and fee, except that
the Term Loan shall be due on the Business Day preceding the
Maturity Date if the Maturity Date is not a Business Day. Whenever
any payment or action to be made or taken hereunder (other than
payment of the Loans) shall be stated to be due on a day which is
not a Business Day, such payment or action shall be made or taken
on the next following Business Day (except as provided in Section
3.2 with respect to Interest Periods), and such extension of time
shall not be included in computing interest or fees, if any, in
connection with such payment or action.
10.5 Notices.
All notices, requests, demands, directions and other
communications (as used in this Section 10.5, collectively referred
to as "notices") given to or made upon any party hereto under the
provisions of this Agreement shall be by telephone or in writing
(including telex or facsimile communication) unless otherwise
expressly permitted hereunder and shall be delivered or sent by
telex or facsimile to the respective parties at the addresses and
numbers set forth under their respective names on Schedule 1.1(B)
hereof or in accordance with any subsequent unrevoked written
direction from any party to the others. All notices shall, except
as otherwise expressly herein provided, be effective (a) in the
case of telex or facsimile, when received, (b) in the case of
hand-delivered notice, when hand-delivered, (c) in the case of
telephone, when telephoned, provided, however, that in order to be
effective, telephonic notices must be confirmed in writing no later
than the next day by letter, facsimile or telex, (d) if given by
mail, four (4) days after such communication is deposited in the
mail with first-class postage prepaid, return receipt requested,
and (e) if given by any other means (including by air courier),
when delivered; provided, that notices to the Agent shall not be
effective until received and provided, further, that any notices of
a Potential Default or an Event of Default shall be sent by
facsimile or overnight delivery service. Any Bank giving any
notice to the Borrower shall simultaneously send a copy thereof to
the Agent, and the Agent shall promptly notify the other Banks of
the receipt by it of any such notice.
10.6 Severability.
The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to
the extent of such invalidity or unenforceability without in any
manner affecting the validity or enforceability thereof in any
other jurisdiction or the remaining provisions hereof in any
jurisdiction.
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<PAGE>
10.7 Governing Law.
This Agreement shall be deemed to be a contract under
the Laws of the Commonwealth of Pennsylvania and for all purposes
shall be governed by and construed and enforced in accordance with
the internal laws of the Commonwealth of Pennsylvania without
regard to its conflict of laws principles.
10.8 Prior Understanding.
This Agreement and the other Loan Documents supersede
all prior understandings and agreements, whether written or oral,
between the parties hereto and thereto relating to the transactions
provided for herein and therein, including any prior
confidentiality agreements and commitments.
10.9 Duration; Survival.
All representations and warranties of the Borrower
contained herein or made in connection herewith shall survive the
making of the Term Loan and shall not be waived by the execution
and delivery of this Agreement, any investigation by the Agent or
the Banks, the making of the Term Loan, or payment in full of the
Term Loan. All covenants and agreements of the Borrower contained
in Sections 7.1, 7.2 and 7.3 herein shall continue in full force
and effect from and after the date hereof until payment in full of
the Term Loan. All covenants and agreements of the Borrower
contained herein relating to the payment of principal, interest,
premiums, additional compensation or expenses and indemnification,
including those set forth in the Term Notes, Section 4 and Sections
9.5, 9.7 and 10.3, shall survive payment in full of the Term Loan.
10.10 Successors and Assigns.
This Agreement shall be binding upon and shall inure to
the benefit of the Banks, the Agent, the Borrower and their
respective successors and assigns, except that (i) the Borrower may
not assign or transfer any of its rights and Obligations hereunder
or any interest herein and (ii) no Bank may assign or transfer its
interest hereunder without the prior written consent of the Agent,
which consent may be granted in the Agent's sole discretion.
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<PAGE>
10.11 Confidentiality.
The Agent and the Banks each agree to keep confidential
all information obtained from the Borrower or its Subsidiaries
which is nonpublic and confidential or proprietary in nature
(including any information the Borrower specifically designate as
confidential), except as provided below, and to use such
information only in connection with their respective capacities
under this Agreement and for the purposes contemplated hereby. The
Agent and the Banks shall be permitted to disclose such information
(i) to outside legal counsel, accountants and other professional
advisors who need to know such information in connection with the
administration and enforcement of this Agreement, subject to
agreement of such Persons to maintain the confidentiality, (ii) to
assignees and participants as contemplated by Section 10.10
provided that they shall execute an agreement in favor of the
Borrower covering the matters set forth in this Section 10.12,
(iii) to the extent requested by any bank regulatory authority or,
with notice to the Borrower, as otherwise required by applicable
Law or by any subpoena or similar legal process, or in connection
with any investigation or proceeding arising out of the
transactions contemplated by this Agreement, (iv) if it becomes
publicly available other than as a result of a breach of this
Agreement or becomes available from a source not bound by
confidentiality restrictions, or (v) if the Borrower shall have
consented to such disclosure.
10.12 Counterparts.
This Agreement may be executed by different parties
hereto on any number of separate counterparts, each of which, when
so executed and delivered, shall be an original, and all such
counterparts shall together constitute one and the same instrument.
10.13 Agent's or Bank's Consent.
Except as otherwise provided in the Loan Documents,
whenever the Agent's or any Bank's consent is required to be
obtained under this Agreement or any of the other Loan Documents as
a condition to any action, inaction, condition or event, the Agent
and each Bank shall be authorized to give or withhold such consent
in its reasonable discretion.
10.14 Exceptions.
The representations, warranties and covenants contained
herein shall be independent of each other, and no exception to any
representation, warranty or covenant shall be deemed to be an
exception to any other representation, warranty or covenant
contained herein unless expressly provided, nor shall any such
exceptions be deemed to permit any action or omission that would be
in contravention of applicable Law.
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10.15 CONSENT TO FORUM; WAIVER OF JURY TRIAL.
THE BORROWER HEREBY IRREVOCABLY CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF THE COURT OF COMMON PLEAS OF ALLEGHENY
COUNTY AND THE UNITED STATES DISTRICT COURT FOR THE WESTERN
DISTRICT OF PENNSYLVANIA, AND WAIVES PERSONAL SERVICE OF ANY AND
ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS
BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO THE BORROWER AT
THE ADDRESSE PROVIDED FOR IN SECTION 10.5 AND SERVICE SO MADE SHALL
BE DEEMED TO BE COMPLETED UPON ACTUAL RECEIPT THEREOF. THE BORROWER
WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION
INSTITUTED AGAINST IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT
ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE. THE BORROWER,
THE AGENT AND THE BANKS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
SUIT, PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR
RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE
COLLATERAL TO THE FULL EXTENT PERMITTED BY LAW.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, by their officers
thereunto duly authorized, have executed this Agreement as of the
day and year first above written.
ATTEST: CHAMPION INDUSTRIES, INC.,
a West Virginia corporation
By: /s/ Joseph C. Worth, III
- - ------------------------------ ---------------------------------------------
Joseph C. Worth, III
Chief Financial Officer
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<PAGE>
PNC BANK, NATIONAL ASSOCIATION,
individually and as Agent
By: /s/ Greg Schorr
---------------------------------------------
Greg Schorr
Vice President
BANC ONE, WEST VIRGINIA
By: /s/ Geoffrey Sheilds
---------------------------------------------
Geoffrey Sheilds
Vice President
NATIONAL CITY BANK OF COLUMBUS
By: /s/ David B. Yeats
---------------------------------------------
David B. Yeats
Vice President
STAR BANK
By: /s/ Doug Adams
---------------------------------------------
Doug Adams
Vice President
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<PAGE>
SCHEDULE 1.1(B)REVOLVING CREDIT COMMITMENTS OF BANKS AND
ADDRESSES FOR NOTICES
Part 1 - Commitments of Banks and Addresses for Notices to Banks
- - ----------------------------------------------------------------
Amount of Commitment
Bank for Term Loan Ratable Share
- - ---- -------------------- --------------
PNC Bank, National Association
Two PNC Plaza
31st Floor
Pittsburgh, PA 15222
Attention: Greg Schorr
Telephone: (412) 762-5286 $5,000,000.00 40%
Telecopy: (412) 762-7353
Banc One, West Virginia
1000 5th Avenue
Huntington, WV 25706
Attention: Geoff Shiels
Telephone: (304) 526-4225 $3,000,000.00 24%
Telecopy: (304) 526-4369
National City Bank of Columbus
155 E. Broad Street
3rd Floor
Columbus, OH 43251-0030
Attention: Dick Murphy
Telephone: (614) 463-7589 $2,500,000.00 20%
Telecopy: (614) 463-7959
SCHEDULE 1.1(B) - 1
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<PAGE>
Star Bank
425 Walnut Street
P.O. Box 1038 (ML8160) $2,000,000.00 16%
Cincinnati, OH 45201-1038
Total $12,500,000.00 100%
============== ====
SCHEDULE 1.1(B) - 2
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<PAGE>
SCHEDULE 1.1(B)
COMMITMENTS OF BANKS AND ADDRESSES FOR NOTICES
Part 2 - Addresses for Notices to Borrower:
AGENT
PNC Bank, National Association
One PNC Plaza
249 5th Avenue
Pittsburgh, PA 15222-2707
Attention: Greg Schorr
Telephone: (412) 762-8358
Telecopy: (412) 762-2784
With a copy to:
Multi-Bank Loan Administration
One PNC Plaza
4th Floor
249 5th Avenue
Pittsburgh, PA 15222-2707
Attention: Arlene Ohler
Telephone: (412) 762-3627
Telecopy: (412) 762-8672
BORROWER:
Champion Industries, Inc.
2450-90 First Avenue
Huntington, West Virginia
Attention: Joseph Worth, Chief Financial Officer
Telephone: (310) 823-1700
Telecopy: (310) 823-7318
SCHEDULE 1.1(B) - 3
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<PAGE>
AMENDMENT NO. 1 TO CREDIT AGREEMENT
THIS AMENDMENT NO. 1, made as of this 1st day of August,
1997 (Amendment No. 1), among CHAMPION INDUSTRIES, INC. (the
Borrower), BANC ONE, WEST VIRGINIA (a Bank), NATIONAL CITY BANK OF
COLUMBUS (a Bank), STAR BANK, NATIONAL ASSOCIATION (a Bank) and PNC
Bank, National Association, as Agent (a Bank and the Agent).
WHEREAS, the Borrower, the Banks and the Agent are parties to
a Credit Agreement dated as of March 31, 1997 (the Credit
Agreement); and
WHEREAS, the Borrower, the Banks and the Agent wish to amend
the Credit Agreement as to the payment dates for installments due
under the Term Notes.
NOW, THEREFORE, in consideration of the premises and covenants
contained herein and intending to be legally bound hereby, the
Agent, the Banks and the Borrower agree as follows:
1. Definitions. Capitalized terms used herein but not
defined herein shall have the meanings set forth in the Credit
Agreement.
2. Payment Dates. Section 2.3 is amended to restate the
second sentence in its entirety as follows:
The principal amount of the Term Notes shall be
payable in 84 monthly installments of $148,809.53
beginning on May 10, 1997 and ending on April 10, 2004.
3. Representations and Warranties. The Borrower hereby
represents and warrants to the Banks and the Agent as follows:
(a) all representations, warranties and covenants made
by the Borrower to the Banks and the Agent that are contained in
the Loan Documents are true and correct on and as of the date
hereof with the same effect as though such representations,
warranties and covenants had been made on and as of the date
hereof;
(b) to the Borrower's knowledge, no event or condition
has occurred or exists which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default
under any of the Loan Documents;
(c) the copies of the Articles of Incorporation and
Bylaws of the Borrower delivered by the Borrower to the Agent on
March 31, 1997 have not been amended, revised, supplemented,
restated or changed in any way and are still in full force and
effect; and
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<PAGE>
(d) The execution and delivery of this Amendment No. 1
and the consummation of the transactions contemplated hereby and by
any other documents executed by the Borrower required to be
delivered to the Agent in connection with this Amendment No. 1 have
been duly and validly authorized by the Borrower and all such
documents together constitute the legal, valid and binding
agreement of the Borrowers, enforceable against the Borrower in
accordance with their respective terms, except to the extent that
enforceability of any of such document may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforceability of creditors' rights generally or
general equitable principles.
4. Counterparts. This Amendment No. 1 may be executed in one
or more counterparts by any party hereto in separate counterparts,
each of which when so executed and delivered to the other party
shall be deemed an original. All such counterparts together shall
constitute one and the same instrument.
5. Waivers. This Amendment No. 1 shall not, except as
expressly set forth above, serve to waive, supplement or amend the
Credit Agreement, which Credit Agreement shall remain in full force
and effect as amended hereby.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Amendment No. 1 as of the date and year first above
written.
ATTEST: CHAMPION INDUSTRIES, INC.,
a Delaware corporation
- - --------------------------- By:-------------------------------
- - --------------------------- Title:----------------------------
[Seal]
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<PAGE>
BANC ONE, WEST VIRGINIA
- - --------------------------- By:-------------------------------
- - --------------------------- Title:----------------------------
NATIONAL CITY BANK OF COLUMBUS
- - --------------------------- By:-------------------------------
- - --------------------------- Title:----------------------------
STAR BANK, NATIONAL ASSOCIATION
- - --------------------------- By:-------------------------------
- - --------------------------- Title:----------------------------
PNC BANK, NATIONAL ASSOCIATION,
individually and as Agent
- - --------------------------- By:-------------------------------
- - --------------------------- Title:----------------------------
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<PAGE>
EXHIBIT 10.2
BUSINESS LOAN AGREEMENT
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
- - ----------- --------- ---------- ------- ---- ---------- ------- ----------------
$800,000.00 03-11-1997 03-11-1998 1670145 4 1 JDH
</TABLE>
References in the shaded area are for Lender's use only and
do not limit the applicability of this document to any particular
loan or item.
Borrower: STATIONERS INC Lender: FIRST SENTRY BANK
2540-90 1ST AVENUE 823 EIGHTH STREET
HUNTINGTON, WV P O B0X 2107
HUNTINGTON, WV 25721-2107
THIS BUSINESS LOAN AGREEMENT between STATIONERS
INC ("Borrower") and FIRST SENTRY BANK ("Lender") is made
and executed on the following terms and conditions.
Borrower has received prior commercial loans from
Lender or has applied to Lender for a commercial loan
or loans and other financial accommodations, including
those which may be described on any exhibit or schedule
attached to this Agreement. All such loans and financial
accommodations, together with all future loans and
financial accommodations from Lender to Borrower, are
referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands
and agrees that: (a) in granting, renewing, or extending any
Loan, Lender is relying upon Borrower's representations,
warranties, and agreements, as set forth in this Agreement;
(b) the granting, renewing, or extending of any Loan by
Lender at all times shall be subject to Lender's sole judgment
and discretion; and (c) all such Loans shall be and shall
remain subject to the following terms and conditions of
this Agreement.
TERM. This Agreement shall be effective as of March 11, 1997,
and shall continue thereafter until all Indebtedness of
Borrower to Lender has been performed in full and the parties
terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following
meanings when used in this Agreement. Terms not otherwise
defined in this Agreement shall have the meanings attributed
to such terms in the Uniform Commercial Code. All references
to dollar amounts shall mean amounts in lawful money of the
United States of America.
Agreement. The word "Agreement" means this Business Loan
Agreement, as this Business Loan Agreement may be amended
or modified from time to time, together with all exhibits
and schedules attached to this Business Loan Agreement from
time to time.
Borrower. The word "Borrower" means STATIONERS INC. The
word "Borrower" also includes, as applicable, all subsidiaries
and affiliates of Borrower as provided below in the paragraph
titled "Subsidiaries and Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive
Environmental Response, Compensation, and Liability Act
of 1980, as amended.
Collateral. The word "Collateral" means and includes
without limitation all property and assets granted as
collateral security for a Loan, whether real or personal
property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form
of a security interest, mortgage, deed of trust, assignment,
pledge, chattel mortgage, chattel trust, factor's lien,
equipment trust, conditional sale, trust receipt, lien,
charge, lien or title retention contract, lease or
consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by
law, contract, or otherwise.
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ERISA. The word "ERISA" means the Employee Retirement
Income Security Act of 1974, as amended.
Event of Default. The words "Event of Default" mean
and include without limitation any of the Events of
Default set forth below in the section titled "EVENTS
OF DEFAULT."
Grantor. The word "Grantor" means and includes without
limitation each and all of the persons or entities granting
a Security Interest in any Collateral for the Indebtedness,
including without limitation all Borrowers granting such
a Security Interest.
Guarantor. The word "Guarantor" means and includes
without limitation each and all of the guarantors, sureties,
and accommodation parties in connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes
without limitation all Loans, together with all other
obligations, debts and liabilities of Borrower to Lender,
or any one or more of them, as well as all claims by Lender
against Borrower, or any one or more of them; whether now
or hereafter existing, voluntary or involuntary, due or not
due, absolute or contingent, liquidated or unliquidated;
whether Borrower may be liable individually or jointly
with others; whether Borrower may be obligated as a guarantor,
surety, or otherwise; whether recovery upon such Indebtedness
may be or hereafter may become barred by any statute of
limitations; and whether such Indebtedness may be or
hereafter may become otherwise unenforceable.
Lender. The word "Lender" means FIRST SENTRY BANK, its
successors and assigns.
Loan. The word "Loan" or "Loans" means and includes
without limitation any and all commercial loans and
financial accommodations from Lender to Borrower, whether
now or hereafter existing, and however evidenced, including
without limitation those loans and financial accommodations
described herein or described on any exhibit or schedule
attached to this Agreement from time to time.
Note. The word "Note" means and includes without
limitation Borrower's promissory note or notes, if any,
evidencing Borrower's Loan obligations in favor of Lender,
as well as any substitute, replacement or refinancing note
or notes therefor.
Permitted Liens . The words "Permitted Liens" mean: (a)
liens and security interests securing Indebtedness owed
by Borrower to Lender; (b) liens for taxes, assessments,
or similar charges either not yet due or being contested
in good faith; (c) liens of material men, mechanics,
warehousemen, or carriers, or other like liens arising in
the ordinary course of business and securing obligations
which are not yet delinquent; (d) purchase money liens or
purchase money security interests upon or in any property
acquired or held by Borrower in the ordinary course of
business to secure indebtedness outstanding on the date
of this Agreement or permitted to be incurred under the
paragraph of this Agreement titled "Indebtedness and Liens";
(e) liens and security interests which, as of the date of
this Agreement, have been disclosed to and approved by
the Lender in writing; and (f) those liens and security
interests which in the aggregate constitute an immaterial
and insignificant monetary amount with respect to the net
value of Borrower's assets.
Related Documents. The words "Related Documents" mean and
include without limitation all promissory notes, credit
agreements, loan agreements, environmental agreements,
guaranties, security agreements, mortgages, deeds of trust,
and all other instruments, agreements and documents,
whether now or hereafter existing, executed in connection
with the Indebtedness.
Security Agreement. The words "Security Agreement" mean
and include without limitation any agreements, promises,
covenants, arrangements, understandings or other agreements,
whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest.
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Security Interest. The words "Security Interest" mean and
include without limitation any type of collateral security,
whether in the form of a lien, charge, mortgage, deed of trust,
assignment, pledge, chattel mortgage, chattel trust, factor's
lien, equipment trust, conditional sale, trust receipt, lien
or title retention contract, lease or consignment intended
as a security device, or any other security or lien interest
whatsoever, whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and
Reauthorization Act of 1986 as now or hereafter amended.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation
to make the initial Loan Advance and each subsequent Loan
Advance under this Agreement shall be subject to the
fulfillment to Lender's satisfaction of all of the conditions
set forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form
satisfactory to Lender the following documents for the Loan:
(a) the Note, (b) Security Agreements granting to Lender
security interests in the Collateral, (c) Financing Statements
perfecting Lender's Security Interests; (d) evidence of
insurance as required below; and (e) any other documents
required under this Agreement or by Lender or its counsel.
Borrower's Authorization. Borrower shall have provided
in form and substance satisfactory to Lender properly
certified resolutions, duly authorizing the execution
and delivery of this Agreement, the Note and the Related
Documents, and such other authorizations and other
documents and instruments as Lender or its counsel, in
their sole discretion, may require.
Payment of Fees and Expenses. Borrower shall have paid
to Lender all fees, charges, and other expenses which
are then due and payable as specified in this Agreement
or any Related Document.
Representations and Warranties. The representations and
warranties set forth in this Agreement, in the Related
Documents, and in any document or certificate delivered
to Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time
of any advance a condition which would constitute an
Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents
and warrants to Lender, as of the date of this Agreement,
as of the date of each disbursement of Loan proceeds, as
of the date of any renewal, extension or modification of
any Loan, and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly
organized, validly existing, and in good standing under
the laws of the State of West Virginia and is validly
existing and in good standing in all states in which
Borrower is doing business. Borrower has the full power
and authority to own its properties and to transact the
businesses in which it is presently engaged or presently
proposes to engage. Borrower also is duly qualified as
a foreign corporation and is in good standing in all
states in which the failure to so qualify would have
a material adverse effect on its businesses or financial
condition.
Authorization. The execution, delivery, and performance
of this Agreement and all Related Documents by Borrower,
to the extent to be executed, delivered or performed by
Borrower, have been duly authorized by all necessary
action by Borrower; do not require the consent or approval
of any other person, regulatory authority or governmental
body; and do not conflict with, result in a violation
of, or constitute a default under (a) any provision of
its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon
Borrower or (b) any law, governmental regulation, court
decree, or order applicable to Borrower.
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Financial Information. Each financial statement of
Borrower supplied to Lender truly and completely
disclosed Borrower's financial condition as of the
date of the statement, and there has been no material
adverse change in Borrower's financial condition
subsequent to the date of the most recent financial
statement supplied to Lender. Borrower has no material
contingent obligations except as disclosed in such
financial statements.
Legal Effect. This Agreement constitutes, and any
instrument or agreement required hereunder to be given
by Borrower when delivered will constitute, legal,
valid and binding obligations of Borrower enforceable
against Borrower in accordance with their respective
terms.
Properties. Except as contemplated by this Agreement
or as previously disclosed in Borrower's financial
statements or in writing to Lender and as accepted
by Lender, and except for property tax liens for taxes
not presently due and payable, Borrower owns and has
good title to all of Borrower's properties free and
clear of all Security Interests, and has not executed
any security documents or financing statements relating
to such properties. All of Borrower's properties are
titled in Borrower's legal name, and Borrower has not
used, or filed a financing statement under, any other
name for at least the last five (5) years.
Hazardous Substances. The terms "hazardous waste,"
"hazardous substance," "disposal," "release," and
"threatened release," as used in this Agreement, shall
have the same meanings as set forth in the "CERCLA,"
"SARA," the Hazardous Materials Transportation Act,
49 U.S.C. Section 1801, et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq., or
other applicable state or Federal laws, rules, or
regulations adopted pursuant to any of the foregoing.
Except as disclosed to and acknowledged by Lender in
writing, Borrower represents and warrants that: (a)
During the period of Borrower's ownership of the properties,
there has been no use, generation, manufacture, storage,
treatment, disposal, release or threatened release of
any hazardous waste or substance by any person on, under,
about or from any of the properties. (b) Borrower has
no knowledge of, or reason to believe that there has
been (i) any use, generation, manufacture, storage,
treatment, disposal, release, or threatened release of
any hazardous waste or substance on, under, about or
from the properties by any prior owners or occupants of
any of the properties, or (ii) any actual or threatened
litigation or claims of any kind by any person relating
to such matters. (c) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of
the properties shall use, generate, manufacture, store,
treat, dispose of, or release any hazardous waste or
substance on, under, about or from any of the properties;
and any such activity shall be conducted in compliance
with all applicable federal, state, and local laws,
regulations, and ordinances, including without limitation
those laws, regulations and ordinances described above.
Borrower authorizes Lender and its agents to enter upon
the properties to make such inspections and tests as
Lender may deem appropriate to determine compliance of
the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's
expense and for Lender's purposes only and shall not be
construed to create any responsibility or liability on
the part of Lender to Borrower or to any other person.
The representations and warranties contained herein are
based on Borrower's due diligence in investigating the
properties for hazardous waste and hazardous substances.
Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event
Borrower becomes liable for cleanup or other costs under
any such laws, and (b) agrees to indemnify and hold
harmless Lender against any and all claims, losses,
liabilities, damages, penalties, and expenses which
Lender may directly or indirectly sustain or suffer
resulting from a breach of this section of the Agreement
or as a consequence of any use, generation, manufacture,
storage, disposal, release or threatened release occurring
prior to Borrower's ownership or interest in the properties,
whether or not the same was or should have been known
to Borrower. The provisions of this section of the
Agreement, including the obligation to indemnify, shall
survive the payment of the Indebtedness and the termination
or expiration of this Agreement and shall not be affected
by Lender's acquisition of any interest in any of the
properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim,
investigation, administrative proceeding or similar
action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event
has occurred which may materially adversely affect
Borrower's financial condition or properties, other
than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.
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Taxes. To the best of Borrower's knowledge, all tax
returns and reports of Borrower that are or were required
to be filed, have been filed, and all taxes, assessments
and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower
in good faith in the ordinary course of business and
for which adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed
to Lender in writing, Borrower has not entered into
or granted any Security Agreements, or permitted the
filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly
securing repayment of Borrower's Loan and Note, that
would be prior or that may in any way be superior to
Lender's Security Interests and rights in and to such
Collateral.
Binding Effect. This Agreement, the Note, all Security
Agreements directly or indirectly securing repayment of
Borrower's Loan and Note and all of the Related Documents
are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally
enforceable in accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan
proceeds solely for business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as
to which Borrower may have any liability complies in all
material respects with all applicable requirements of law
and regulations, and (i) no Reportable Event nor Prohibited
Transaction (as defined in ERISA) has occurred with respect
to any such plan, (ii) Borrower has not withdrawn from any
such plan or initiated steps to do so, (iii) no steps have
been taken to terminate any such plan, and (iv) there are
no unfunded liabilities other than those previously disclosed
to Lender in writing.
Location of Borrower's Offices and Records. Borrower's
place of business, or Borrower's Chief executive office,
if Borrower has more than one place of business, is
located at 2540-90 1ST AVENUE, HUNTINGTON, WV. Unless
Borrower has designated otherwise in writing this location
is also the office or offices where Borrower keeps its
records concerning the Collateral.
Information. All information heretofore or contemporaneously
herewith furnished by Borrower to Lender for the purposes
of or in connection with this Agreement or any transaction
contemplated hereby is, and all information hereafter
furnished by or on behalf of Borrower to Lender will be,
true and accurate in every material respect on the date
as of which such information is dated or certified; and
none of such information is or will be incomplete by
omitting to state any material fact necessary to make such
information not misleading.
Survival of Representations and Warranties. Borrower
understands and agrees that Lender, without independent
investigation, is relying upon the above representations
and warranties in extending Loan Advances to Borrower.
Borrower further agrees that the foregoing representations
and warranties shall be continuing in nature and shall
remain in full force and effect until such time as Borrower's
Indebtedness shall be paid in full, or until this Agreement
shall be terminated in the manner provided above, whichever
is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees
with Lender that, while this Agreement is in effect,
Borrower will:
Litigation. Promptly inform Lender in writing of (a) all
material adverse changes in Borrower's financial condition,
and (b) all existing and all threatened litigation, claims,
investigations, administrative proceedings or similar
actions affecting Borrower or any Guarantor which could
materially affect the financial condition of Borrower or
the financial condition of any Guarantor.
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Financial Records. Maintain its books and records in
accordance with generally accepted accounting principles,
applied on a consistent basis, and permit Lender to examine
and audit Borrower's books and records at all reasonable times.
Financial Statements. Furnish Lender with, as soon as
available, but in no event later than sixty (60) days after
the end of each fiscal year, Borrower's balance sheet and
income statement for the year ended, prepared by Borrower,
and, as soon as available, but in no event later than
thirty (30) days after the end of each fiscal quarter,
Borrower's balance sheet and profit and loss statement
for the period ended, prepared and certified as correct
to the best knowledge and belief by Borrower's chief
financial officer or other officer or person acceptable
to Lender. All financial reports required to be provided
under this Agreement shall be prepared in accordance with
generally accepted accounting principles, applied on a
consistent basis, and certified by Borrower as being true
and correct.
Additional Information. Furnish such additional information and
statements, lists of assets and liabilities, agings of
receivables and payables, inventory schedules, budgets, forecasts,
tax returns, and other reports with respect to Borrower's
financial condition and business operations as Lender may
request from time to time.
Insurance. Maintain fire and other risk insurance, public
liability insurance, and such other insurance as Lender may
require with respect to Borrower's properties and operations,
in form, amounts, coverages and with insurance companies
reasonably acceptable to Lender. Borrower, upon request of
Lender, will deliver to Lender from time to time the policies
or certificates of insurance in form satisfactory to Lender,
including stipulations that coverages will not be cancelled
or diminished without at least ten (10) days' prior written
notice to Lender. Each insurance policy also shall include
an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default
of Borrower or any other person. in connection with all
policies covering assets in which Lender holds or is offered
a security interest for the Loans, Borrower will provide
Lender with such loss payable or other endorsements as Lender
may require.
Insurance Reports. Furnish to Lender, upon request of Lender,
reports on each existing insurance policy showing such
information as Lender may reasonably request, including
without limitation the following: (a) the name of the insurer;
(b) the risks insured; (c) the amount of the policy; (d) the
properties insured; (e) the then current property values on the
basis of which insurance has been obtained, and the manner
of determining those values; and (f) the expiration date of
the policy. In addition, upon request of Lender (however not
more often than annually), Borrower will have an independent
appraiser satisfactory to Lender determine, as applicable,
the actual cash value or replacement cost of any Collateral.
The cost of such appraisal shall be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all
other agreements, whether now or hereafter existing, between
Borrower and any other party and notify Lender immediately
in writing of any default in connection with any other such
agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's
business operations, unless specifically consented to the
contrary by Lender in writing.
Taxes, Charges and Liens. Pay and discharge when due all of
its indebtedness and obligations, including without limitation
all assessments, taxes, governmental charges, levies and liens,
of every kind and nature, imposed upon Borrower or its
properties, income, or profits, prior to the date on which
penalties would attach, and all lawful claims that, if unpaid,
might become a lien or charge upon any of Borrower's properties,
income, or profits. Provided however, Borrower will not be required
to pay and discharge any such assessment, tax, charge, levy, lien
or claim so long as (a) the legality of the same shall be contested
in good faith by appropriate proceedings, and (b) Borrower shall
have established on its books adequate reserves with respect to
such contested assessment, tax, charge, levy, lien, or claim in
accordance with generally accepted accounting practices. Borrower,
upon demand of Lender, will furnish to Lender evidence of payment
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of the assessments, taxes, charges, levies, liens and claims and
will authorize the appropriate governmental official to deliver to
Lender at any time a written statement of any assessments, taxes,
charges, levies, liens and claims against Borrower's properties,
income, or profits.
Performance. Perform and comply with all terms, conditions, and
provisions set forth in this Agreement and in the Related Documents
in a timely manner, and promptly notify Lender if Borrower learns
of the occurrence of any event which constitutes an Event of
Default under this Agreement or under any of the Related Documents.
Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the present
executive and management personnel; provide written notice to
Lender of any change in executive and management personnel; conduct
its business affairs in a reasonable and prudent manner and in
compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties,
charters, businesses and operations, including without limitation,
compliance with the Americans With Disabilities Act and with all
minimum funding standards and other requirements of ERISA and other
laws applicable to Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable
time to inspect any and all Collateral for the Loan or Loans and
Borrower's other properties and to examine or audit Borrower's
books, accounts, and records and to make copies and memoranda of
Borrower's books, accounts, and records. If Borrower now or at any
time hereafter maintains any records (including without limitation
computer generated records and computer software programs for the
generation of such records) in the possession of a third party,
Borrower, upon request of Lender, shall notify such party to permit
Lender free access to such records at all reasonable times and to
provide Lender with copies of any records it may request, all at
Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide
Lender at least annually and at the time of each disbursement of
Loan proceeds with a certificate executed by Borrower's chief
financial officer, or other officer or person acceptable to Lender,
certifying that the representations and warranties set forth in
this Agreement are true and correct as of the date of the
certificate and further certifying that, as of the date of the
certificate, no Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all
respects with all environmental protection federal, state and local
laws, statutes, regulations and ordinances; not cause or permit to
exist, as a result of an intentional or unintentional action or
omission on its part or on the part of any third party, on property
owned and/or occupied by Borrower, any environmental activity where
damage may result to the environment, unless such environmental
activity is pursuant to and in compliance with the conditions of a
permit issued by the appropriate federal, state or local
governmental authorities; shall furnish to Lender promptly and in
any event within thirty (30) days after receipt thereof a copy of
any notice, summons, lien, citation, directive, letter or other
communication from any governmental agency or instrumentality
concerning any intentional or unintentional action or omission on
Borrower's part in connection with any environmental activity
whether or not there is damage to the environment and/or other
natural resources.
Additional Assurances. Make, execute and deliver to Lender such
promissory notes, mortgages, deeds of trust, security agreements,
financing statements, instruments, documents and other agreements
as Lender or its attorneys may reasonably request to evidence and
secure the Loans and to perfect all Security interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that
while this Agreement is in effect, Borrower shall not, without the
prior written consent of Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the
normal course of business and indebtedness to Lender contemplated
by this Agreement, create, incur or assume indebtedness for
borrowed money, including capital leases, (b) except as allowed as
a Permitted Lien, sell, transfer, mortgage, assign, pledge, lease,
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grant a security interest in, or encumber any of Borrower's assets,
or (c) sell with recourse any of Borrower's accounts, except to
Lender.
Continuity of Operations. (a) Engage in any business activities
substantially different than those in which Borrower is presently
engaged, (b) cease operations, liquidate, merge, transfer, acquire
or consolidate with any other entity, change ownership, change its
name, dissolve or transfer or sell Collateral out of the ordinary
course of business, (c) pay any dividends on Borrower's stock
(other than dividends payable in its stock), provided, however that
notwithstanding the foregoing, but only so long as no Event of
Default has occurred and is continuing or would result from the
payment of dividends, if Borrower is a "Subchapter S Corporation"
(as defined in the Internal Revenue Code of 1986, as amended),
Borrower may pay cash dividends on its stock to its shareholders
from time to time in amounts necessary to enable the shareholders
to pay income taxes and make estimated income tax payments to
satisfy their liabilities under federal and state law which arise
solely from their status as Shareholders of a Subchapter S
Corporation because of their ownership of shares of stock of
Borrower, or (d) purchase or retire any of Borrower's outstanding
shares or alter or amend Borrower's capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in
any other enterprise or entity, or (c) incur any obligation as
surety or guarantor other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make
any Loan to Borrower, whether under this Agreement or under any
other agreement, Lender shall have no obligation to make Loan
Advances or to disburse Loan proceeds if: (a) Borrower or any
Guarantor is in default under the terms of this Agreement or any of
the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes
insolvent, files a petition in bankruptcy or similar proceedings,
or is adjudged a bankrupt; (c) there occurs a material adverse
change in Borrower's financial condition, in the financial
condition of any Guarantor, or in the value of any Collateral
securing any Loan; (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of
the Loan or any other loan with Lender; or (e) Lender in good faith
deems itself insecure, even though no Event of Default shall have
occurred.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory
security interest in, and hereby assigns, conveys, delivers,
pledges, and transfers to Lender all Borrower's right, title and
interest in and to, Borrower's accounts with Lender (whether
checking, savings, or some other account), including without
limitation all accounts held jointly with someone else and all
accounts Borrower may open in the future, excluding however all IRA
and Keogh accounts, and all trust accounts for which the grant of
a security interest would be prohibited by law. Borrower authorizes
Lender, to the extent permitted by applicable law, to charge or
setoff all sums owing on the Indebtedness against any and all such
accounts, and, at Lender's option, to administratively freeze all
such accounts to allow Lender to protect Lender's charge and setoff
rights provided on this paragraph.
EVENTS OF DEFAULT. Each of the following shall constitute an Event
of Default under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment
when due on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with
or to perform when due any other term, obligation, covenant or
condition contained in this Agreement or in any of the Related
Documents, or failure of Borrower to comply with or to perform any
other term, obligation, covenant or condition contained in any
other agreement between Lender and Borrower.
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Default in Favor of Third Parties. Should Borrower or any Grantor
default under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of
any other creditor or person that may materially affect any of
Borrower's property or Borrower's or any Grantor's ability to repay
the Loans or perform their respective obligations under this
Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor
under this Agreement or the Related Documents is false or
misleading in any material respect at the time made or furnished,
or becomes false or misleading at any time thereafter.
Defective Collateralization. This Agreement or any of the Related
Documents ceases to be in full force and effect (including failure
of any Security Agreement to create a valid and perfected Security
interest) at any time and for any reason.
Insolvency. The dissolution or termination of Borrower's existence
as a going business, the insolvency of Borrower, the appointment of
a receiver for any part of Borrower's property, any assignment for
the benefit of creditors, any type of creditor workout, or the
commencement of any proceeding under any bankruptcy or insolvency
laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any
creditor of any Grantor against any collateral securing the
Indebtedness, or by any governmental agency. This includes a
garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or any
Guarantor dies or becomes incompetent, or revokes or disputes the
validity of, or liability under, any Guaranty of the Indebtedness.
Change In Ownership. Any change in ownership of twenty-five percent
(25%) or more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or
performance of the Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur,
except where otherwise provided in this Agreement or the Related
Documents, all commitments and obligations of Lender under this
Agreement or the Related Documents or any other agreement
immediately will terminate (including any obligation to make Loan
Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without
notice of any kind to Borrower, except that in the case of an Event
of Default of the type described in the "Insolvency" subsection
above, such acceleration shall be automatic and not optional. In
addition, Lender shall have all the rights and remedies provided in
the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender's
rights and remedies shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy
shall not exclude pursuit of any other remedy, and an election to
make expenditures or to take action to perform an obligation of
Borrower or of any Grantor shall not affect Lender's right to
declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions
are a part of this Agreement:
Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties
as to the matters set forth in this Agreement. No alteration of or
amendment to this Agreement shall be effective unless given in
writing and signed by the party or parties sought to be charged or
bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and
accepted by Lender in the State of West Virginia. If there is a
lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of CABELL County, the State of West
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Virginia. Lender and Borrower hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by either
Lender or Borrower against the other. This Agreement shall be
governed by and construed in accordance with the laws of the State
of West Virginia.
Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or
define the provisions of this Agreement.
Consent to Loan Participation. Borrower agrees and consents to
Lender's sale or transfer, whether now or later, of one or more
participation interests in the Loans to one or more purchasers,
whether related or unrelated to Lender. Lender may provide, without
any limitation whatsoever, to any one or more purchasers, or
potential purchasers, any information or knowledge Lender may have
about Borrower or about any other matter relating to the Loan, and
Borrower hereby waives any rights to privacy it may have with
respect to such matters. Borrower additionally waives any and all
notices of sale of participation interests, as well as all notices
of any repurchase of such participation interests. Borrower also
agrees that the purchasers of any such participation interests will
be considered as the absolute owners of such interests in the Loans
and will have all the rights granted under the participation
agreement or agreements governing the sale of such participation
interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or
against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may
enforce Borrower's obligation under the Loans irrespective of the
failure or insolvency of any holder of any interest in the Loans.
Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of
any personal claims or defenses that Borrower may have against
Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of
Lender's expenses, including without limitation attorneys' fees,
incurred in connection with the preparation, execution,
enforcement, modification and collection of this Agreement or in
connection with the Loans made pursuant to this Agreement. Lender
may pay someone else to help collect the Loans and to enforce this
Agreement, and Borrower will pay that amount. This includes,
subject to any limits under applicable law, Lender's attorneys'
fees and Lender's legal expenses, whether or not there is a
lawsuit, including attorneys' fees for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection
services. Borrower also will pay any court costs, in addition to
all other sums provided by law.
Notices. All notices required to be given under this Agreement
shall be given in writing, may be sent by telefacsimile (unless
otherwise required by law), and shall be effective when actually
delivered or when deposited with a nationally recognized overnight
courier or deposited in the United States mail, first class,
postage prepaid, addressed to the party to whom the notice is to be
given at the address shown above. Any party may change its address
for notices under this Agreement by giving formal written notice to
the other parties, specifying that the purpose of the notice is to
change the party's address. To the extent permitted by applicable
law, if there is more than one Borrower, notice to any Borrower
will constitute notice to all Borrowers. For notice purposes,
Borrower will keep Lender informed at all times of Borrower's
current address(es).
Severability. If a court of competent jurisdiction finds any
provision of this Agreement to be invalid or unenforceable as to
any person or circumstance, such finding shall not render that
provision invalid or unenforceable as to any other persons or
circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or
validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this
Agreement in all other respects shall remain valid and enforceable.
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Subsidiaries and Affiliates of Borrower. To the extent the context
of any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the
word "Borrower" as used herein shall include all subsidiaries and
affiliates of Borrower. Notwithstanding the foregoing however,
under no circumstances shall this Agreement be construed to require
Lender to make any Loan or other financial accommodation to any
subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by
or on behalf of Borrower shall bind its successors and assigns and
shall inure to the benefit of Lender, its successors and assigns.
Borrower shall not, however, have the right to assign its rights
under this Agreement or any interest therein, without the prior
written consent of Lender.
Survival. All warranties, representations, and covenants made by
Borrower in this Agreement or in any certificate or other
instrument delivered by Borrower to Lender under this Agreement
shall be considered to have been relied upon by Lender and will
survive the making of the Loan and delivery to Lender of the
Related Documents, regardless of any investigation made by Lender
or on Lender's behalf.
Time Is of the Essence. Time is of the essence in the performance
of this Agreement.
Waiver. Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by
Lender. No delay or omission on the part of Lender in exercising
any right shall operate as a waiver of such right or any other
right. A waiver by Lender of a provision of this Agreement shall
not prejudice or constitute a waiver of Lender's right otherwise to
demand strict compliance with that provision or any other provision
of this Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Borrower, or between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights or of
any obligations of Borrower or of any Grantor as to any future
transactions. Whenever the consent of Lender is required under this
Agreement, the granting of such consent by Lender in any instance
shall not constitute continuing consent in subsequent instances
where such consent is required, and in all cases such consent may
be granted or withheld in the sole discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
BUSINESS LOAN AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS
AGREEMENT IS DATED AS OF MARCH 11,1997.
BORROWER:
STATIONERS INC
By:
J. Mac Alderidge, President
LENDER:
FIRST SENTRY BANK
By:
Authorized Officer
LASER PRO, Reg. U.S. Pat. & T.M. Off., ver. 3.24(c) 1997 CFI
ProServices, Inc. All rights reserved. [WV-C40 STATIONE.LN C1.OVL]
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<PAGE>
PROMISSORY NOTE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
- - ----------- --------- ---------- ------- ---- ---------- ------- ----------------
$800,000.00 03-11-1997 03-11-1998 1670145 4 1 JDH
</TABLE>
References in the shaded area are for Lender's use only and do not
limit the applicability of this document to any particular loan or
item.
Borrower: STATIONERS INC Lender: FIRST SENTRY BANK
2540-90 1ST AVENUE 823 EIGHTH STREET
HUNTINGTON, WV P O B0X 2107
HUNTINGTON, WV 25721-2107
Principal Amount: $800,000.00 Initial Rate: 8.250% Date of Note:
March 11,1997
PROMISE TO PAY. STATIONERS INC. ("Borrower") promises to pay to
FIRST SENTRY BANK ("Lender"), or order, in lawful money of the
United States of America, the principal amount of Eight Hundred
Thousand & 00/100 Dollars ($800,000.00) or so much as may be
outstanding, together with interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated
from the date of each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all
outstanding principal plus all accrued unpaid interest on March 11,
1998. In addition, Borrower will pay regular monthly payments of
accrued unpaid interest beginning April 11, 1997, and all
subsequent interest payments are due on the same day of each month
after that. Interest on this Note is computed on a 365/365 simple
interest basis; that is, by applying the ratio of the annual
interest rate over the number of days in a year (366 during leap
years), multiplied by the outstanding principal balance, multiplied
by the actual number of days the principal balance is outstanding.
Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing. Unless otherwise
agreed or required by applicable law, payments will be applied
first to accrued unpaid interest, then to principal, and any
remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject
to change from time to time based on changes in an independent
index which is the prime rate as published in the Money Rate
Section of the Wall Street Journal. If more than one rate is
published, then the highest of the rates will be used (the
"Index"). The Index is not necessarily the lowest rate charged by
Lender on its loans. If the Index becomes unavailable during the
term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current index
rate upon Borrower's request. Borrower understands that Lender may
make loans based on other rates as well. The interest rate change
will not occur more often than each day. The Index currently Is
8.500% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate equal to the
Index, resulting in an initial rate of 8.250% per annum. NOTICE:
Under no circumstances will the interest rate on this Note be more
than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of
the amount owed earlier than it is due. Early payments will not,
unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued
unpaid interest. Rather, they will reduce the principal balance
due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be
charged 5.000% of the regularly scheduled payment or $5.00,
whichever is less.
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<PAGE>
DEFAULT. Borrower will be in default if any of the following
happens: (a) Borrower fails to make any payment when due. (b)
Borrower breaks any promise Borrower has made to Lender, or
Borrower fails to comply with or to perform when due any other
term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or
loan Borrower has with Lender. (c) Borrower defaults under any
loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor
or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrower's
obligations under this Note or any 9f the Related Documents. (d)
Any representation or statement made or furnished to Lender by
Borrower or on Borrower's behalf is false or misleading in any
material respect either now or at the time made or furnished. (e)
Borrower becomes insolvent, a receiver is appointed for any part of
Borrower's property, Borrower makes an assignment for the benefit
of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any,
creditor tries to take any of Borrower's property on or in which
Lender has a lien or security interest. This includes a garnishment
of any of Borrower's accounts with Lender. (g) Any guarantor dies
or any of the other events described in this default section occurs
with respect to any guarantor of this Note. (h) A material adverse
change occurs in Borrower's financial condition, or Lender believes
the prospect of payment or performance of the Indebtedness is
impaired. (i) Lender in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest
immediately due, without notice, and then Borrower will pay that
amount. Lender may hire or pay someone else to help collect this
Note if Borrower does not pay.
Borrower also will pay Lender that amount. This includes, subject
to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit,
including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment
collection services. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums
provided by law. This Note has been delivered to Lender and
accepted by Lender in the State of West Virginia. If there is a
lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of CABELL County, the State of West
Virginia. Lender and Borrower hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by either
Lender or Borrower against the other. This Note shall be governed
by and construed in accordance with the laws of the State of West
Virginia.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory
security interest in, and hereby assigns, conveys, delivers,
pledges, and transfers to Lender all Borrower's right, title and
interest in and to, Borrower's accounts with Lender (whether
checking, savings, or some other account), including without
limitation all accounts held jointly with someone else and all
accounts Borrower may open in the future, excluding however all IRA
and Keogh accounts, and all trust accounts for which the grant of
a security interest would be prohibited by law. Borrower authorizes
Lender, to the extent permitted by applicable law, to charge or
setoff all sums owing on this Note against any and all such
accounts, and, at Lender's option, to administratively freeze all
such accounts to allow Lender to protect Lender's charge and setoff
rights provided on this paragraph.
LINE OF CREDIT. This Note evidences a revolving line of credit.
Advances under this Note may be requested either orally or in
writing by Borrower or by an authorized person. Lender may, but
need not, require that all oral requests be confirmed in writing.
All communications, instructions, or directions by telephone or
otherwise to Lender are to be directed to Lender's office shown
above. The following party or parties are authorized to request
advances under the line of credit until Lender receives from
Borrower at Lender's address shown above written notice of
revocation of their authority: J. Mac Alderidge, President;
Marshall T. Reynolds, Chairman; and Gregory Adkins, Vice President.
Borrower agrees to be liable for all sums either: (a) advanced in
accordance with the instructions of an authorized person or (b)
credited to any of Borrower's accounts with Lender. The unpaid
principal balance owing on this Note at any time may be evidenced
by endorsements on this Note or by Lender's internal records,
including daily computer print-outs. Lender will have no obligation
to advance funds under this Note if: (a) Borrower or any guarantor
is in default under the terms of this Note or any agreement that
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Borrower or any guarantor has with Lender, including any agreement
made in connection with the signing of this Note; (b) Borrower or
any guarantor ceases doing business or is insolvent; (c) any
guarantor seeks, claims or otherwise attempts to limit, modify or
revoke such guarantor's guarantee of this Note or any other loan
with Lender; (d) Borrower has applied funds provided pursuant to
this Note for purposes other than those authorized by Lender; or
(e) Lender in good faith deems itself insecure under this Note or
any other agreement between Lender and Borrower.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its
rights or remedies under this Note without losing them. Borrower
and any other person who signs, guarantees or endorses this Note,
to the extent allowed by law, waive presentment, demand for
payment, protest and notice of dishonor. Upon any change in the
terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor,
accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly
and for any length of time) this loan, or release any party or
guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other
action deemed necessary by Lender without the consent of or notice
to anyone. *All such parties also agree that Lender may modify this
loan without the consent of or notice to anyone other than the
party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL
THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST
RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
STATIONERS INC
By:
J. Mac Alderidge, President
Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M.
Off., Ver. 3.24(c) 1997 OFI ProServices, Inc. All rights reserved.
[WV-D20 STATIONE.LN C1.OVL]
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EXHIBIT 10.3
COMMERCIAL GROSS LEASE
Standard Form of Leo Fellman & Co.
1. PARTIES. M. Feild Gomila, et al. (hereinafter referred to,
whether one or more, as "Lessor") hereby leases to Bourque Printing
DBA Upton Printing (hereinafter referred to, whether one or more,
as "Lessee"), the following described property:
LEASED PREMISES. The two, one-story buildings known
as Nos. 740 and 746 Carondelet Street between Girod
and Julia Streets, New Orleans, Louisiana 70130
2. IN SOLIDO LIABILITY. If the above described property is
leased to more than one party, the obligations of all such parties
hereunder, as Lessee, shall be in solido.
3. TERM. This lease is for a term of Thirty-six (36) months
commencing on October 1, 1997 and ending on September 30, 2000.
4. RENTAL AND PLACE OF PAYMENT. The monthly rental under this
lease shall be $5,580.00 a month for the period of October 1, 1997
thru September 30, 1998 and then adjusted annually in accordance
with the Consumer Price Index for October 1, 1997 thru September
30, 2000 ($5,580.00) payable in advance. Rent for the first full
calendar month of the term of this lease, plus the rent for any
fractional month preceding such first calendar month, shall be
payable on the signing of this Lease by Lessee and rent for
subsequent months shall be payable on the first day of October,
1997 and on the first day of each calendar month thereafter; except
that if this is a renewal lease, rent shall be payable on the date
of the beginning of this lease on the same day of each month
thereafter. All payments of rent shall be made to Leo Fellman &
Co. at 720 Carondelet Street, New Orleans, Louisiana 70130, but
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Lessor may from time to time, with the written consent of Leo
Fellman & Co. designate other persons and places for payment of
rent by notice to Lessee. If Lessee fails to pay the monthly rent
provided above within seven (7) days after it is due, Lessee shall
pay to Leo Fellman & Co. a late charge equal to 2% of such monthly
rent, which shall be retained by Leo Fellman & Co. as part of its
compensation and shall be considered a form of rent.
5. UTILITY CHARGES. Lessee shall promptly pay all charges for
gas, electricity, water and other utilities consumed on or
furnished to the leased premises, including those used for air
conditioning and heating purposes, and shall pay for water
sprinkler service charge, if any. If Lessee fails to pay any
charges contemplated in this section, Lessor may, at its sole
option, pay same, which shall be considered a form of rent.
6. USE OF PREMISES. The leased premises shall be used only for
the following purposes: Printing. The leased premises shall not
be used for any unlawful purpose or in any manner that may damage
or depreciate the same.
7. REPAIRS. The leased premises and all appurtenances
contained therein, including, but not limited to, locks, keys,
glass, elevator (if any), plumbing, automatic sprinkler system (if
any), heating equipment and air conditioning equipment (if any),
are accepted by Lessee in their present condition, including any
vices or defects, latent or otherwise, that may now exist or
hereafter arise in the leased premises, except as to such repairs
or improvements as this lease requires Lessor to make. Lessor
shall maintain the roof of the leased premises in good order and
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<PAGE>
repair, but shall not be required to make any other repairs or
replacements whatsoever to the leased premises, except those
rendered necessary by fire or other perils which would be covered
by fire and extended coverage insurance. Lessee shall, at Lessee's
expense and within a reasonable period of time, make any and all
repairs and replacements of whatsoever nature or character that may
become necessary to the leased premises during the term of this
lease other than those hereinabove required to be made by Lessor.
At the termination of this lease, Lessee shall return the leased
premises to Lessor, in like order and condition as received, broom
clean and free from trash, ordinary decay, wear and tear excepted,
and shall deliver the keys to the leased premises to Lessor or Leo
Fellman & Co.
8. RESPONSIBILITY FOR DAMAGES, INJURIES OR LOSSES. Lessor
shall not be responsible for damage to property or injury to person
or other losses or damages caused by or resulting from leaks in the
roof of the leased premises, unless Lessor fails to take steps
toward repairing such leaks within a reasonable period of time
after being notified thereof by Lessee. Should Lessee fail to so
notify Lessor promptly, Lessee shall be responsible for damages or
losses resulting to Lessor or third parties. Nor shall Lessor be
responsible for damage to property or injury to person or other
losses or damages caused by or resulting from vices or defects,
latent or otherwise, that may now exist or hereafter arise in the
leased premises, or caused by or resulting from disrepair damage or
conditions necessitating repairs or replacements required herein to
be made by Lessee.
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<PAGE>
9. DELAYED POSSESSION. Should Lessor be delayed in delivering
possession of the leased premises to Lessee on the commencement
date of this lease, because of any delay of existing occupants to
vacate or because of the construction of improvements or the making
of repairs required by this lease to be made by Lessor not having
been completed or because of any other reason, not due to the
design of Lessor, this lease shall not be affected thereby and
Lessee shall not be entitled to any damages for such delay, except
that Lessee shall be allowed a remission of rent for the period
prior to delivery of possession, in which case the termination date
of this lease shall remain unchanged.
10. DELAY IN MAKING REPAIRS. If this lease requires Lessor to
make improvements or repairs to the leased premises and Lessor
deems it impracticable to do so prior to the commencement date of
this lease, Lessee agrees that Lessor may make such improvements or
repairs after possession is delivered to Lessee, in a manner such
as not to unreasonably interfere with the operation of Lessee's
business, in which case there shall be no reduction or remission of
rent.
11. ALTERATIONS OR ADDITIONS BY LESSEE. Lessee shall not make
any alterations or additions to the leased premises without
obtaining Lessor's prior written consent, but any and all
alterations, additions or other improvements made by Lessee, with
or without the consent of Lessor, regardless of how attached
(except movable trade fixtures), shall immediately become and
remain the property of Lessor, without compensation therefore to
Lessee, provided Lessor shall have the right to require that
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Lessee, prior to the termination of this lease, remove any or all
such alteration, additions or improvements and restore the leased
premises to their condition at the time of the commencement of this
lease.
12. SWITCH TRACKS. If any switchtracks serve the leased
premises, any and all costs for the care, repair and maintenance
thereof and franchise charges therefore shall be paid by N/A.
13. Lessee shall comply with all requirements of State,
Municipal, Federal and other public authorities, relating to the
leased premises and the use and occupancy thereof.
14. Lessee assumes full responsibility for the condition of the
leased premises and agrees to hold Lessor harmless from any and all
liability for injury to persons or damage to property or other
losses or damages caused by or resulting from any accident or other
occurrence in, on or about the leased premises.
15. LIABILITY AND PLATE GLASS INSURANCE. Lessee shall provide
and maintain, for the mutual benefit of Lessee and Lessor,
liability insurance against claims (1) for bodily injury, or death
resulting therefrom, occurring on the leased premises, in the
amount of $300,000.00 as to any one occurrence, and (2) for
property damage in the amount of $50,000.00 as to any one
occurrence on the leased premises. Leo Fellman & Co. promptly
shall be named as an insured in the policies evidencing such
insurance and a certificate of insurance shall be delivered to Leo
Fellman & Co. promptly upon the execution of this lease. Lessee
shall also provide and maintain plate glass insurance in an amount
adequate to cover any and all plate glass forming a part of the
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leased premises. All of said insurance shall be carried with
responsible insurance companies authorized to transact business in
the State of Louisiana and Lessee shall deliver to Lessor evidence
of such insurance, upon request. Said insurance shall not be
canceled or materially altered by Lessee, without thirty (30) days'
prior written notice to Lessor and Leo Fellman & Co.
16. ACTS OF LESSEE AFFECTING INSURANCE. If the rate of fire or
other casualty insurance covering the leased premises is increased
due to acts of Lessee, Lessee shall pay to Lessor the increased
cost of such insurance. Lessee will not do or cause or suffer to
be done any act or thing whereby the policy or policies of fire or
other casualty insurance covering the leased premises shall become
void or suspended. Should Lessee's occupancy cause Lessor to be
unable to obtain fire or other casualty insurance covering the
leased premises, Lessor shall have the right to terminate this
lease upon giving Lessee not less than ten (10) days' prior written
notice. Lessee agrees to notify Lessor at any time the leased
premises will become unoccupied, so that Lessor may obtain
necessary vacancy permits from Lessor's insurers.
17. SIGNS BY LESSEE. Lessee shall have the right to erect and
maintain signs advertising Lessee's business on the interior and
exterior of the leased premises, provided that the exterior signs
shall be approved in writing by Lessor as to size, design and
location and shall be erected and maintained in accordance with the
rules and regulations of the properly constituted authorities.
Lessee shall remove all signs placed on the interior and exterior
of the leased premises at the expiration of this lease and shall
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repair any damage to the leased premises caused by the erection,
maintenance or removal of such signs.
18. RIGHT OF ENTRY BY LESSOR. Lessor shall have the right to
enter the leased premises at all reasonable times for the purpose
of inspecting the same and for the purpose of making repairs
required to be made by Lessor or which Lessor may desire to make.
19. FOR SALE AND FOR RENT SIGNS; INSPECTION BY PROSPECTS.
Lessor shall have the right to place the usual "For Sale" and "By
Auction" signs on the leased premises at any time during the entire
term of this lease and the usual "For Rent" signs on the leased
premises during the last six (6) months of the term of this lease.
Lessee agrees to allow person authorized by Lessor to inspect the
leased premises during the entire term of this lease with the view
of purchasing the same and during the last six (6) months of the
term of this lease with the view of renting the same, such
inspections to be at reasonable hours. If Lessee is absent from
the leased premises, Lessor shall be notified prior thereto where
the keys may be obtained so that the leased premises may be shown
to prospective purchasers of tenants in accordance with the
foregoing. In the event of failure of Lessee to comply with any of
the provisions of this paragraph, Lessor shall have the option
either to consider this lease automatically extended for a period
of one year, upon giving notice to that effect to Lessee, or to
hold Lessee responsible for any losses suffered by such failure.
20. SURRENDER OF POSSESSION. Upon expiration or termination of
this lease, Lessee shall surrender possession of the leased
premises immediately to Lessor and if Lessee fails to do so, Lessee
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shall be liable for any and all losses or damages suffered by
Lessor, who shall have the right, but shall not be required, to
claim as such losses or damages an amount equal to five (5) times
the rent per day for each day during which Lessee fails to so
surrender possession of the leased premises. If Lessor allows
Lessee to remain in the leased premises after expiration or
termination of this lease, doing so shall not be construed as a
reconduction of this lease.
21. SUBLEASING OR ASSIGNMENT. Lessee shall not have the right to
sublease the leased premises, in whole or in part, or to assign
this lease or grant use of the leased premises to others, without
the prior written consent of Lessor and any such sublease shall
contain all the provisions of this lease to the extent applicable.
Any such subleasing or assignment shall be handled by Leo Fellman
& Co. and Lessee shall pay to Leo Fellman & Co. for such handling,
at Lessee's options, either (a) a cash commission in the amount of
6% of the gross rents payable during the entire term of such
sublease or the remaining term of such assigned lease on rents up
to $100,000.00 and 4% on rents in excess of $100,000.00, which
commission shall be paid in full upon execution of such sublease or
assignment, plus a commission of like amount on any percentage
rents due under such sublease or assigned lease (such figure of
$100,000.00 to apply to the aggregate of all rents), to be paid
when such percentage rents become due, or (b) a commission of 8% of
the gross rents payable during the entire term of such a sublease
or the remaining term of such assigned lease, including any
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percentage, rents payable thereunder, such commission to be paid
if, as and when such rents are actually collected, in which case
such rents shall be collected by Leo Fellman & Co.
22. No auction sales, or other sales not in the ordinary course
of Lessee's business, shall be conducted on the leased premises,
without the prior written consent of Lessor.
23. DAMAGE BY FIRE, ETC. If the leased premises are destroyed, or
damaged to an extent so as to render them wholly unfit for the
purposes for which they are leased, by fire or other perils which
would be covered by fire and extended coverage insurance, this
lease shall automatically terminate, provide such destruction or
damage is not caused by the neglect or design of Lessee. If,
however, the leased premises are damaged by fire or such other
perils and can be repaired within one hundred twenty (120) days
after the date of such fire or other casualty caused by such other
perils, this lease shall not terminate and Lessor shall give notice
to Lessee, within thirty (30) days after such fire or such other
casualty, that Lessor will repair such damage, at Lessor's cost,
within said one hundred and twenty (120) day period, in which case
Lessee shall be entitled to a reduction or remission of rent such
as shall be just and proportionate, but shall not be entitled to
any other damages, provided that if Lessor fails to complete such
repairs within said one hundred and twenty (120) day period,
because of causes not due to the fault or design of Lessor, this
lease shall not terminate and Lessee shall not be entitled to
damages, but shall be entitled only to a further just and
proportionate reduction or remission of rent.
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24. DEFAULT. If Lessee shall fail to pay any installment of
rent or shall fail to comply with any other provision of this
lease, within ten (10) days after notice by Lessor or Leo Fellman
& Co. to Lessee, provided that notice need not be given with regard
to nonpayment of rent after such notice has been given twice during
the period of this lease, or should Lessee abandon the leased
premises or discontinue the use of the leased premises for the
purposes for which rented or remove any property on which Lessor
enjoys a Lessor's lien or should Lessee make an assignment for the
benefit of creditors or file a voluntary petition in bankruptcy or
be adjudicated a bankrupt in an involuntary proceeding or apply for
any other relief under the laws of the United States relating to
bankruptcy or State laws relating to insolvency or should a
receiver or other custodian be appointed for any of Lessee's
property, then, in any of such events, Lessor shall have the right,
at Lessor's option, without putting Lessee in default and without
notice of default, (1) to cancel this lease effective immediately
or effective as of any date Lessor may select or (2) to proceed one
or more times for past due installments of rent only, without
prejudicing the right to proceed later for additional installments
or to exercise any other remedy, or (3) to declare the unpaid rent
for the whole unexpired term of this lease immediately due and
exigible and at once demand and receive payment of the same or (4)
to have recourse to any other remedy or mode of redress to which
Lessor may be entitled by law. In the event Lessor exercises the
right to cancel this lease, then (a) Lessor shall have the right,
as soon as said cancellation is effective, to re-enter the leased
premises and re-let the same for such price and on such terms as
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may be immediately available, without notice or court proceedings,
Lessee hereby assenting thereto and expressly waiving any notice to
vacate, and (b) Lessee shall be and remain liable not only for all
rent payable to the date such cancellation becomes effective, but
also for all damage or loss suffered by Lessor for the remaining
term of this lease resulting from such cancellation. Failure of
Lessor to exercise the rights granted herein shall not be construed
as a waiver of such rights and no indulgence by Lessor shall be
construed as a waiver of any rights herein granted.
25. ATTORNEY'S FEES. Should an attorney be engaged by Lessor to
enforce payment of the rent due under this lease or to protect any
of the interests of Lessor hereunder, with or without judicial
proceedings, Lessee agrees to pay Lessor the reasonable fee of such
attorney, which fee is hereby fixed, if the collection of money is
involved, at 25% of the amount of such money, such fee in no event
to be less than $100.00, and Lessee also agrees to pay all court
costs and other expenses incurred by Lessor.
26. RELEASE OF LESSOR ON SALE. If Lessor sells or otherwise
disposes of the leased premises and the purchaser or transferee
expressly covenants and agrees to assume all of the covenants,
conditions and stipulations of this lease and to comply with and be
bound thereby, Lessor shall thereupon be released from all
liability thereafter arising under this lease and thereafter all
liability hereunder shall rest upon such purchaser or transferee.
27. NOTICES. Any notice to be given under this lease by Lessor or
Leo Fellman & Co. to Lessee shall be considered as duly given,
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whether received or not, if made in writing, addressed to Lessee
and mailed by registered or certified mail to Lessee at the leased
premises. Any notice to be given under this lease by Lessee to
Lessor shall be considered as duly given, whether received or not,
if made in writing, addressed to Lessor and mailed by registered or
certified mail to Lessor at the place where rent is required to be
paid under this lease as above provided. Either Lessor or Lessee
may change the designated place to which written notice may be
sent, by so advising the other, in writing, by registered or
certified mail, at the place designated in this lease or such place
as may have been subsequently designated in accordance with this
paragraph.
28. COMMISSION. Lessor agrees to pay to Leo Fellman & Co. for
negotiating this lease, at Lessor's option, either (a) a cash
commission of 6% of the gross rents due under this lease up to
$100,000.00 and 4% of such rents in excess of $100,000.00, such
commission to be paid in full upon execution of this lease, plus a
commission of like amount on any percentage rents payable under
this lease (such figure of $100,000.00 to apply to the aggregate of
all rents), to be paid when such percentage rents become due, or
(b) a commission of 8% of the gross rents due under this lease,
including any percentage rents payable hereunder, such commission
to be paid if, as and when rents are actually collected, in which
case such rents shall be collected by Leo Fellman & Co., provided
that if this lease is cancelled or terminated, by mutual agreement
of Lessor and Lessee, without the written consent of Leo Fellman &
Co. and the commission on rents payable during the unexpired term
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<PAGE>
thereof has not been paid in full, Lessor shall immediately upon
such cancellation or termination, pay to Leo Fellman & Co., a
commission of 6% of such rents up to $100,000 and 4% of such rents
in excess of $100,000.00. Lessor further agrees to pay Leo Fellman
& Co. a commission of like amount and payable in like manner and
under like conditions, on the gross rents, including any percentage
rents, due under any and all renewals or extensions of this lease
and any and all new leases hereafter made with Lessee or any
affiliate, nominee or representative of Lessee, covering the leased
premises or any part thereof.
29. MANAGEMENT. If the property covered by this lease is to be
managed by Leo Fellman & Co., a management agreement on the form of
Management Agreement currently in use by Leo Fellman & Co. shall be
executed. If such management agreement is executed, the provisions
of the immediately preceding paragraph hereof shall not apply.
30. PAYMENT OF COMMISSIONS IF PROPERTY IS SOLD. Lessor agrees
that if the property covered by this lease is sold or transferred
during the term hereof or during the term of any renewal or
extension hereof or during the term of any new lease hereafter
entered into as above mentioned, Lessor will either pay any and all
unpaid rental commissions to which Leo Fellman & Co. is entitled as
hereinabove provided or will have the purchaser on transferee
assume the payment thereof. If the purchaser or transferee does
not assume payment of all of said unpaid commissions, Lessor (a)
will, upon the sale or transfer of said property, pay to Leo
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Fellman & Co. a commission of 6% of the rents payable during the
remaining term of this lease or any renewal or extension thereof or
such new lease, as the case may be, up to rents totaling
$100,000.00 and 4% of such rents in excess of $100,000.00 and (b)
will, upon execution of any renewal or extension of this lease
subsequent to said sale or transfer, pay to Leo Fellman & Co. a
commission of 6% of the rents payable under such extension or
renewal up to $100,000.00 and 4% of such rents in excess of
$100,000.00 and (c) will, upon execution of any new lease with
Lessee or affiliate, nominee or representative of Lessee,
subsequent to said sale or transfer, covering the leased premises
or any part thereof, pay to Leo Fellman & Co. a commission of 6% of
the rents payable under such new lease up to $100,000.00 and 4% of
such rents in excess of $100,000.00 provided that as to (a), (b)
and (c), the commission on any percentage rents shall be paid when
such percentage rents become due.
31. COMMISSION ON SALE OF LEASED PREMISES TO LESSEE, SUBLESSEE
OR ASSIGNEE. If the property covered by this lease is at any time
sold to Lessee or any sublessee or assignee of this lease, or any
affiliate, nominee or representative of any of them (including a
sale pursuant to an option or agreement contained in this lease),
Lessor shall pay to Leo Fellman & Co. a commission of 6% of the
sale price up to $100,000.00 and 4% of the sale price in excess of
$100,000.00. Leo Fellman & Co. shall receive in full such
commission and there shall be no participation with regard thereto
with any other real estate agent or broker. The provisions of this
paragraph shall also apply to any exchange of properties made with
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Lessee or any sublessee or assignee of this lease, or any
affiliate, nominee or representative of any of them, involving the
property covered by this lease and said commission shall be based
on the then value of said property.
32. SECURITY DEPOSIT. Lessee has deposited with Leo Fellman &
Co., as agent of Lessor, the sum of $___N/A____ which is pledged to
secure the faithful performance of all obligations of Lessee under
this lease. Said deposit shall be non-interest bearing. Said
deposit shall not be released until this lease has terminated and
it has been determined by Leo Fellman & Co. that Lessee has
complied with all of Lessee's obligations under this lease.
33. Failure of Lessor to require strict performance by Lessee of
any of the covenants, provisions or conditions of this lease, on
one or more occasions, shall not constitute a waiver by Lessor of
the right thereafter to require strict compliance with said
covenants, provisions and conditions.
34. Leo Fellman & Co. shall not be obligated to record this
lease.
35. This lease shall be deemed to be a contract made under the
laws of the State of Louisiana and shall be construed in accordance
with and governed by the laws of the State of Louisiana and
ordinances of the municipality and parish where the leased premises
are situated and the rules and regulations of their duly
constituted authorities.
36. If there is a conflict between the printed portions and the
typewritten portions of this lease the typewritten or handwritten
portion shall prevail.
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37. All of the provisions contained herein shall be binding upon
and shall inure to the benefit of Lessor and Lessee, their heirs,
executors, administrators, successors and assigns (as the case may
be), and all of the provisions contained herein granting rights to
Leo Fellman & Co. shall inure to the benefit of any may be enforced
by Leo Fellman & Co., its successors or assigns.
38. The whole agreement between the parties hereto is set forth
in this instrument and they shall not be bound by any agreements,
conditions, understandings or representations otherwise than are
expressly stipulated and set forth herein or in any amendments
hereto.
Dated: 29 October, 1997
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/s/ Toney K. Adkins /s/ Walter R. Sansom
- - ------------------------------ ---------------------------------------------
Lessee Lessee
Tony K. Adkins Walter R. Sansom
Vice President Secretary
/s/ M. Feild Gomila
---------------------------------------------
Lessor
M. Feild Gomila Et Al
IN SOLIDO OBLIGATION AND GUARANTY
For value received and to induce the lessor or lessors
(hereinafter referred to as "Lessor") to enter into the foregoing
lease, the undersigned hereby makes himself or itself a party to
said lease and binds himself or itself in solido with the lessee or
lessees under said lease (hereinafter referred to as "Lessee") for
the faithful performance and fulfillment by Lessee of all of
Lessee's agreements and obligations contained in said lease and
guarantees to Lessor and Lessor's heirs, executors, administrators,
successors and assigns (as the case may be), the punctual payment
of all rents due under said lease and the performance of all other
agreements and obligations of Lessee contained in said lease, the
undersigned consenting to extensions of payment of rent by Lessor
and other indulgences by Lessor to Lessee and amendments and
modifications of said lease entered into between Lessor and Lessee
and waiving any and all requirements of notice of non-payment,
demand, non-performance or dishonor and all other requirements of
law.
Dated:____________, 19____ _________________________________________________
In Solido Obligar and Guarantor
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"RIDER"
To pay punctually all City, State and Federal Taxes, or any
other taxes, except Income and Inheritance Taxes, which may be
levied or assessed against the property, and to deliver to Lessor
all tax receipts for same. Lessee shall, at his option, pay Lessor
as additional rent on a monthly basis 1/12 of the current property
taxes to be escrowed for payment of said property taxes by Leo
Fellman and Company.
To maintain during the term of this lease, at Lessee's
expense, insurance in solvent companies, doing business in the
State of Louisiana, in the joint names of Lessor and Lessee
against:
Fire and extended coverage to the full insurable
replacement value of the building;
O. L. & T. liability in the amount of not less than
$1,000,000.00;
Sprinkler insurance in the amount of as required.
Privilege is hereby granted to Lessee to sub-lease the
premises in whole or in part to party or parties subject to the
approval of Lessor or Lessor's agent, which approval shall not be
unreasonably withheld.
Lessee, at Lessee's own cost and expense, is hereby granted
the right or privilege to make repairs, alterations and/or
improvements to the herein leased premises necessary for the proper
conduct of Lessee's business; however, no structural changes are to
be made without the written consent of Lessor. Said repairs,
alterations and/or improvements are to be done in a thoroughly
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workmanlike manner and in accordance with the City Building Code
and the rules and regulations of the Louisiana Rating & Fire
Prevention Bureau and other similar bureaus that may be in
existence at the time.
Lessee is bound and obligated as a further consideration of
rental under this lease, to pay punctually, any and all City and
State real estate taxes which may be levied or assessed against the
property and to deliver to Lessor or Lessor's agent, all tax
receipts for same.
It is understood and agreed that Lessee is to remain
responsible for any and all damages caused to the roofs of the
buildings known as Nos. 740 and 746, Carondelet Street occasioned
by the installation and maintenance of the air conditioning water
towers.
This is an extension or renewal of a lease, covering a prior
period, bearing on the same premises and it is agreed and
understood by the parties hereto that any default or violation by
Lessee in any obligation or condition of the lease, covering the
prior period, shall constitute a default or violation under the
within lease. And, further, it is agreed and understood that any
default, violation, condition or, circumstance that would terminate
or annul the lease, covering such prior period, bearing on the same
premises would likewise terminate or annul this lease.
Attached to and forming part of lease made by and between M. Field
Gomila, et al, and E. S. Upton Printing, Co.
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<PAGE>
Dated: 29 October, 1997
Bourque Printing DBA: Upton Printing
By: /s/ Toney K. Adkins
--------------------------------------------
Tony K. Adkins, Vice-President
Leo Fellman & Co. Agents for
M. Feild Gomila, Et Al
By: /s/ M. Feild Gomila
--------------------------------------------
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EXHIBIT 10.4
STATE OF NORTH CAROLINA
COUNTY OF BUNCOMBE
DEFERRED COMPENSATION AGREEMENT
-------------------------------
THIS AGREEMENT is made and entered into this 1st day of July,
1993, by and between BLUE RIDGE PRINTING COMPANY, a North Carolina
corporation (hereinafter referred to as "Employer") and GLENN W.
WILCOX, SR. (hereinafter referred to as "Employee");
WHEREAS, Employee has been employed by Employer in various
management capacities and Employee's employment having been deemed
beneficial to the Employer in the past and anticipated to continue
into the indeterminate future; and
WHEREAS, as an inducement to Employee to continue to work for
Employer, Employer desires to enter into this Agreement to provide
deferred compensation benefits to Employee;
NOW, THEREFORE, in consideration of the agreements hereinafter
set forth, it is agreed between Employer and Employee as follows:
1. EMPLOYMENT. Employer agrees to employ Employee and
Employee agrees to remain in the employ of Employer so long as it
is mutually agreeable to the parties hereto. Either party hereto
may terminate this Agreement and such employment at any time.
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2. DEFERRED COMPENSATION. In the event Employee continues to
be employed by Employer until Employee attains sixty-nine (69)
years of age, Employer shall provide to Employee a program of
deferred compensation under which Employee will receive, at
retirement upon attaining said age, an annual retirement benefit of
FIFTY THOUSAND and no/100ths ($50,000.00) per year for ten (10)
years, payable monthly in advance at the rate of FOUR THOUSAND ONE
HUNDRED SIXTY-SIX and 67/100ths ($4,166.67) commencing on the tenth
(10th) day of the calendar month in which Employee retires, less
any withholdings required by law or authorized by Employee. If
Employee dies after retirement and prior to receiving all said
monthly benefits due hereunder, the remaining monthly benefits due
shall be paid as and when due to Employee's surviving spouse or
other beneficiary hereafter designated by Employee in writing, or,
if none, to Employee's estate. In the event Employee leaves the
employ of Employer prior to attaining sixty-five (65) years of age
as the result of Employee's permanent disability which continues
for more than six (6) months and results in a determination by the
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Social Security Administration that Employee is eligible for total
and permanent Social Security disability benefits or if after
Employee attains said age and prior to retiring hereunder his
regular attending physician certifies in writing to Employer that
Employee is no longer able by reason of physical or mental
disability to work for Employer and such disability continues for
more than six (6) months, the Employee shall receive a reduced
percentage of said annual retirement benefit in accordance with
Schedule "A" attached hereto depending upon Employee's attained age
and commencing on the 10th day of the calendar month after Employee
first receives such Social Security disability benefits or
otherwise becomes disabled as defined above, such annual benefit to
continue in the event of Employee's death to Employee's other
beneficiary above provided for the remainder of the ten (10) year
term thereof. The Employer shall have the right at any time to
prepay its obligations to Employee or Employee's designated
beneficiary in whole or in part or over a shorter payout period
than as provided above; provided, however, that annual pension
benefit shall be reduced to the present value thereof applying a
six (6%) percent per annum discount factor. By written agreement
between Employer and Employee entered into before Employee's
attaining age sixty-nine (60), Employee's retirement can be
deferred until such later date as Employer and Employee
subsequently agree and in such event, the amount of such benefit
shall be increased six (6%) percent per annum for each year that
Employee's retirement is deferred after said age.
3. NON-COMPETITIVE ACTIVITY PROHIBITED. The retirement or
disability benefit payable to Employee as provided in the foregoing
Paragraph 2 shall be forfeited in the event Employee during a
period of ten (10) years after termination of his employment with
Employer shall, without Employer's prior written consent, engage as
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an owner, employee, agent, advisor, consultant, representative or
otherwise individually or in association with any person, firm or
corporation other than Employer then engaged in the commercial
printing business (the "Competitor") with any of said Competitors'
business offices or printing facilities located within a radius of
200 hundred miles from the Buncombe County, North Carolina
Courthouse or as to solicitation on behalf of a Competitor of any
customers of the Company which have purchased printing from the
Company during the three (3) years prior to Employee's commencement
of receipt of payments hereunder or while Employee is receiving
payments hereunder, irregardless of the location of any of said
Competitor's business offices or printing facilities or the
business location of such customers of Company, it being hereby
acknowledged by Employee that Employee's performance of such
competitive activities would be sufficiently and materially
injurious to Employer's business so as to justify termination of
all benefits payable to Employee hereunder in the event Employee
should engage in such competitive activities while receiving
payments hereunder.
4. DEATH BENEFITS. In the event Employee dies while employed
by Employer and prior to commencement of payment of benefits to
Employee hereunder, Employee's estate or other designated
beneficiary will receive death benefits in accordance with the
provisions of a Split-Dollar Life Insurance Agreement dated July 1,
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1992, between Employer and Employee. In such event, there shall be
no benefits payable to Employee, Employee's estate or other
designated beneficiary by way of disability benefits or deferred
compensation as provided in the foregoing provisions of this
Agreement.
5. TERMINATION OF AGREEMENT. In the event Employer ceases to
engage in its current business or for any other reason elects to
terminate this Agreement in its sole discretion prior to
commencement of payments to Employee hereunder, Employee shall
receive an annual pension benefit as designated in Schedule "A"
attached hereto, depending upon Employee's attained age as of the
date of termination of this Agreement; subject, however, to
Employer's right to prepay said benefit as provided in Paragraph 2
above.
6. CONSTRUCTION OF AGREEMENT. This Agreement shall be
interpreted and construed pursuant to the laws of the State of
North Carolina and shall be binding upon Employer and Employee and
their respective heirs, successors and assigns. This Agreement
shall not be interpreted as a contract of continuing employment
between Employer and Employee. To the extent permissible by law,
the rights of Employee to receive benefits hereunder shall not at
any time be assignable or alienable to any person, firm or
corporation, except to Employee's designated beneficiary as
provided in the foregoing Paragraph 2, nor shall the same be
subject to attachment, levy or other legal process for the debts of
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Employee or Employee's designated beneficiary. The rights of
Employee or Employee's designated beneficiary to receive payments
hereunder shall be no greater than the rights of any other
unsecured creditor of Employer. For purposes of application of
this Agreement, Employee was born on December 16, 1931 and
accordingly has attained sixty-one (61) years of age as of the date
of this Agreement. This Agreement constitutes the entire
understanding of the parties hereto with reference to the matters
covered hereby. This Agreement may not be amended except in
writing. The parties hereto further acknowledge that the
obligations of Company hereunder are exempt from ERISA requirements
under Section 401 of the Internal Revenue Code as amended.
IN WITNESS WHEREOF, Employer and Employee have hereunto set
their respective hands and seals, Employer doing so by its duly
authorized officers, the day and year first above written.
BLUE RIDGE PRINTING COMPANY
/s/ Glenn W. Wilcox, Sr. (SEAL) By:/s/ Glenn W. Wilcox, Sr.
- - ------------------------------ -----------------------------------
GLENN W. WILCOX, SR. President
(Employee)
ATTEST: /s/ Molly M. Byrd
------------------------------
Secretary
(CORPORATE SEAL)
(Employer)
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BLUE RIDGE PRINTING COMPANY/GLENN W. WILCOX, SR.
------------------------------------------------
DEFERRED COMPENSATION AGREEMENT
-------------------------------
SCHEDULE "A"
------------
Disability
Attained Age Annual Pension Benefit
- - ------------ ----------------------
68 $ 42,000.00
67 $ 34,000.00
66 $ 26,000.00
65 $ 19,000.00
64 $ 12,000.00
63 $ 6,000.00
62 -0-
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EXHIBIT 10.5
STATE OF NORTH CAROLINA
COUNTY OF BUNCOMBE
SPLIT-DOLLAR LIFE
INSURANCE AGREEMENT
This Agreement is made and entered into this the 1st day of
July, 1992, by and between BLUE RIDGE PRINTING COMPANY, a North
Carolina corporation, having its principal place of business in
Asheville, North Carolina (hereinafter called the "Employer"), and
GLENN W. WILCOX, SR., of Buncombe County, North Carolina
(hereinafter called the "Employee"):
WHEREAS, the life of Employee is insured under Policy No.
8,707,412 (the "Policy") issued by Massachusetts Mutual Life
Insurance Company (the "Company"), which Policy is now owned by
Employee; and
WHEREAS, Employer wishes to help Employee provide insurance on
Employee's life for the benefit and protection of such
beneficiaries as may be designated from time to time by Employee,
by contributing toward payment of the premiums as and when due on
said Policy; and
WHEREAS, the Policy will be assigned by Employee to Employer
as security for the repayment of all amounts which Employer will
contribute toward payment of the premiums due on the Policy, as
hereinafter provided;
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<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, it is agreed between the Parties hereto as
follows:
1. Ownership of Policy. Employee shall own and may exercise
all the rights of ownership with respect to the Policy except as
otherwise provided herein and except as denoted in the assignment
of the Policy to Employer as hereinafter provided for.
2. Election of Dividend Option. All dividends declared by
the Company on the Policy shall be applied to purchase additional
paid up insurance on the life of Employee; provided, however, that
this election may be hereafter from time to time modified by
Employee or his assignee.
3. Payment of Premiums on Policy. On or before the date of
each premium hereafter becoming due on the Policy, the Employer
will pay to the Company the full amount of said premiums.
4. Employee's Obligation to Employer. Employee shall be
obligated to repay to Employer the amount which Employer has
heretofore paid or hereafter pays to the Company as premiums on the
Policy under Paragraph 3 above, less that portion of each year's
premium taxable to Employee under the lower of (i) Internal Revenue
Service Table PS-58 or (ii) the cost of a one-year term insurance
policy on Employee assuming non-rated insurability as being taxable
income to employee. The obligation of Employee to Employer shall
be payable as provided in Paragraph 7 and 9 of this Agreement.
5. Assignment or Termination of Policy. Employee will
execute an Assignment, in form attached hereto as Exhibit "A", of
the Policy in favor of Employer as security for the repayment of
the amount which Employer will pay to the Company under Paragraph
3 above. This Assignment will not be altered or changed without
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the consent of Employer. Employer shall not be entitled to charge
Employee with interest for premiums paid by the Employer pursuant
to Paragraph 3 of this Agreement nor for interest on any loans
obtained by Employer against the cash value of the Policy.
6. Additional Policy Benefits and Riders. Employee may, at
his expense, add any available rider to the Policy for his own
benefit.
7. Death Claims. When Employee dies, Employer shall be
entitled to receive a portion of the death benefits provided under
the Policy. The amount to which Employer will be entitled shall be
the amount specified in Paragraph 4 above. The receipt of this
amount by Employer shall constitute satisfaction of Employee's
obligations under Paragraph 4 of this Agreement.
When Employee dies, the beneficiary or beneficiaries named by
Employee or his assignee shall be entitled to receive the amount of
the death benefit provided under the Policy in excess of the amount
payable to Employer as set out above. This amount shall be paid
under any settlement option elected by Employee or his assignee
under the terms thereof.
8. Termination of Agreement. This Agreement shall terminate
on the occurrence of any of the following events;
A. Cessation of Employer's business;
B. Written notice given by any Party hereto to the other
Parties;
C. Termination of the employment of Employee;
D. Bankruptcy, receivership or dissolution of Employer;
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E. Upon the election of Employee if Employer fails for
any reason to make the contribution required by Paragraph 3 of this
Agreement toward payment of any premium due on the Policy, provided
that any election to terminate this Agreement under this clause
must be made within 90 days after the failure to make the required
contribution occurs; or
F. Repayment in full by Employee of the amounts due
Employer under Paragraph 4 above, provided that upon receipt of
such repayment Employer shall release the Assignment of the Policy
made by Employee pursuant to Paragraph 5 of this Agreement.
9. Disposition of Policy on Termination of Agreement. If
this Agreement is terminated pursuant to Paragraph 8 of this
Agreement, Employee shall have ninety (90) days in which to repay
Employer the amount provided in Paragraph 4 above. Upon receipt of
this amount, Employer shall release the assignment of the Policy.
If Employee does not repay said amount within said ninety (90) days
period, Employer may enforce any rights which it has under the
assignments of the Policy.
10. Amendment of Agreement. This Agreement shall not be
modified or amended except by a writing signed by the Parties
hereto. This Agreement shall be binding upon the heirs,
administrators or executors and the successors and assigns of each
Party to this Agreement.
11. Governing Law. This Agreement shall be subject to and
shall be construed under the laws of the State of North Carolina.
-189-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement at Asheville, North Carolina, the day and year first
above written, the Employer by its duly authorized officers.
BLUE RIDGE PRINTING COMPANY
/s/ Glenn W. Wilcox (SEAL) By: /s/ Glenn W. Wilcox, Sr.
- - ------------------------- ----------------------------------------
GLENN W. WILCOX, SR. President
(Employee)
ATTEST: /s/ Molly M. Byrd
------------------------------------
Secretary
(CORPORATE SEAL)
(Employer)
-190-
<PAGE>
EXHIBIT 11
----------
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31,
1997 1996 1997 1996
---------------------------------------------------------
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 8,384,930 8,382,683 8,383,391 8,323,518
Net effect of dilutive stock options - based on
treasury stock method using the average market price 62,176 34,449 57,692 32,514
---------------------------------------------------------
Totals 8,447,106 8,417,132 8,441,083 8,356,032
=========================================================
Net income $1,145,832 $1,070,700 $3,766,781 $3,372,368
=========================================================
Per share amount $0.14 $0.13 $0.45 $0.40
=========================================================
Fully diluted:
Average shares outstanding 8,384,930 8,382,683 8,383,391 8,323,518
Net effect of dilutive stock options - based on
treasury stock method using period end market
price, if greater than the average market price 62,176 51,246 60,618 51,246
---------------------------------------------------------
Totals 8,447,106 8,433,929 8,444,009 8,374,764
=========================================================
Net income $1,145,832 $1,070,700 $3,766,7814 $3,372,368
=========================================================
Per share amount $0.14 $0.13 $0.45 $0.40
=========================================================
</TABLE>
-191-
EXHIBIT 21
----------
SUBSIDIARIES OF THE REGISTRANT
The Registrant, Champion Industries, Inc., a West Virginia corporation,
does business under the trade name "Chapman Printing Company". Its wholly
owned subsidiaries are:
1. The Chapman Printing Company, Inc., a West Virginia corporation.
2. Stationers, Inc., a West Virginia corporation (doing business in Ohio as
"Garrison Brewer").
3. Bourque Printing, Inc., a Louisiana corporation.
4. Dallas Printing Company, Inc., a Mississippi corporation.
5. Carolina Cut Sheets, Inc., a West Virginia corporation.
6. U.S. Tag & Ticket Company, Inc., a Maryland corporation.
7. Donihe Graphics, Inc., a Tennessee corporation.
8. Smith & Butterfield Co., Inc., an Indiana corporation.
9. The Merten Company, an Ohio corporation.
10. Interform Corporation, a Pennsylvania corporation.
11. CHMP Leasing, Inc., a West Virginia corporation.
12. Blue Ridge Printing Co., Inc., a North Carolina corporation.
-192-
<PAGE>
EXHIBIT 23
----------
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Annual Report (Form 10-K) of Champion
Industries, Inc. of our report dated January 23, 1998, with respect to the
consolidated financial statements of Champion Industries, Inc. and
Subsidiaries for the year ended October 31, 1997.
We also consent to the incorporation by reference in the Registration
Statement pertaining to the 1993 Stock Option Plan (Form S-8, No. 33-76790) of
Champion Industries, Inc. of our report dated January 23, 1998, with respect
to the consolidated financial statements of Champion Industries, Inc. and
Subsidiaries included in the Annual Report (Form 10-K) for the year ended
October 31, 1997.
/s/ Ernst & Young LLP
Charleston, West Virginia
January 27, 1998
-193-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> OCT-31-1997 OCT-31-1997
<PERIOD-END> OCT-31-1997 OCT-31-1997
<CASH> 912290 912290
<SECURITIES> 0 0
<RECEIVABLES> 20215180 20215180
<ALLOWANCES> 1140000 1140000
<INVENTORY> 11576651 11576651
<CURRENT-ASSETS> 33129382 33129382
<PP&E> 37100695 37100695
<DEPRECIATION> 13825053 13825053
<TOTAL-ASSETS> 60345713 60345713
<CURRENT-LIABILITIES> 14194210 14194210
<BONDS> 0 0
0 0
0 0
<COMMON> 8384930 8384930
<OTHER-SE> 18464842 18464842
<TOTAL-LIABILITY-AND-EQUITY> 60345713 60345713
<SALES> 30141445 108384638
<TOTAL-REVENUES> 30141445 108384638
<CGS> 19568280 73138999
<TOTAL-COSTS> 19568280 73138999
<OTHER-EXPENSES> 8060672 28079009
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 444705 1586418
<INCOME-PRETAX> 1820135 6337425
<INCOME-TAX> 674303 2570644
<INCOME-CONTINUING> 1145832 3766781
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1145832 3766781
<EPS-PRIMARY> .14 .45
<EPS-DILUTED> .14 .45
</TABLE>
