<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from ____________ to _____________
COMMISSION FILE NUMBER 0-5610
PAXAR CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 13-5670050
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
105 CORPORATE PARK DRIVE, WHITE PLAINS, N.Y. 10604
(Address of principal executive offices)
(914) 697-6800
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
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 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 / /
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. (June 30, 1999)
Common Stock, $0.10 par value: 46,550,406 shares
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
The financial statements included herein have been prepared by Paxar Corporation
(the "Company"), without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. While certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, the Company believes that the
disclosures made herein are adequate to make the information presented not
misleading. It is recommended that these condensed financial statements be read
in conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998.
In the opinion of the Company, all adjustments, consisting only of normal
recurring accruals and adjustments necessary to present fairly the financial
information contained herein, have been included.
2
<PAGE> 3
PAXAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- -------- ---------
<S> <C> <C> <C> <C>
Sales $ 167.6 $ 156.9 $ 321.8 $ 306.3
Cost of sales 102.3 97.2 198.3 188.0
-------- -------- -------- --------
Gross profit 65.3 59.7 123.5 118.3
Selling, general and administrative expense 44.1 41.4 88.5 84.0
Amortization of intangibles 1.5 1.2 3.0 2.6
Restructuring and other special charges 1.7 -- 5.0 --
-------- -------- -------- --------
Operating income 18.0 17.1 27.0 31.7
Interest expense, net 3.8 5.9 7.5 9.8
-------- -------- -------- --------
Income before taxes 14.2 11.2 19.5 21.9
Taxes on income 5.0 4.0 6.9 7.4
-------- -------- -------- --------
Net income $ 9.2 $ 7.2 $ 12.6 $ 14.5
======== ======== ======== ========
Average common shares outstanding:
Basic 46.5 48.6 47.1 48.5
======== ======== ======== ========
Diluted 46.9 49.8 47.4 49.8
======== ======== ======== ========
Basic earnings per common share $ 0.20 $ 0.15 $ 0.27 $ 0.30
======== ======== ======== ========
Diluted earnings per common share $ 0.20 $ 0.14 $ 0.27 $ 0.29
======== ======== ======== ========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 4
PAXAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
---------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 21.9 $ 14.8
Short-term investments 7.0 4.4
Receivables, less allowances of $5.7 in 1999 and $5.0 in
1998 116.2 99.6
Inventories 92.2 97.0
Other current assets 13.7 13.3
------ ------
Total current assets 251.0 229.1
Property, plant and equipment, at cost 338.9 300.4
Accumulated depreciation (136.8) (106.8)
------ ------
Net property, plant and equipment 202.1 193.6
Long-term investments 3.2 3.2
Goodwill 158.0 157.8
Other assets 11.9 9.5
------ ------
$626.2 $593.2
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Due to banks $ 53.1 $ 1.9
Current maturities of long-term debt 0.4 0.7
Accounts payable and accrued liabilities 92.0 82.8
Accrued taxes on income 5.1 4.5
------ ------
Total current liabilities 150.6 89.9
Long-term debt 183.6 204.5
Deferred income taxes 19.8 20.1
Other liabilities 5.1 5.3
Shareholders' equity:
Preferred Stock, $0.01 par value, 5,000,000 shares authorized,
none issued and outstanding -- --
Common Stock, $0.10 par value, 200,000,000 shares authorized,
46,550,406 and 47,941,696 shares issued and outstanding in 1999
and 1998, respectively 5.0 4.9
Paid-in capital 120.2 116.9
Retained earnings 180.7 168.1
Accumulated other comprehensive loss (9.9) (3.4)
Treasury stock at cost 3,265,100 shares in 1999 and 1,434,400
shares in 1998 (28.9) (13.1)
------ ------
Total shareholders' equity 267.1 273.4
------ ------
$626.2 $593.2
====== ======
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
PAXAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
UNAUDITED
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------------
JUNE 30, 1999 JUNE 30, 1998
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 12.6 $ 14.5
------ ------
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization 18.1 16.8
Deferred income taxes (0.3) 0.5
Changes in assets and liabilities, net of business acquired:
Receivables (7.3) (3.7)
Inventories 10.0 (0.8)
Other current assets (0.3) (0.2)
Accounts payable and accrued liabilities (4.3) 1.6
Taxes on income 0.5 4.3
Other (0.3) (0.7)
------ ------
16.1 17.8
------ ------
Net cash provided by operating activities 28.7 32.3
------ ------
INVESTING ACTIVITIES:
(Increase) in short-term investments (2.5) (1.4)
Purchases of property, plant and equipment (12.5) (16.9)
Acquisition, net of cash acquired (24.2) --
Other 3.9 (2.5)
------ ------
Net cash used in investing activities (35.3) (20.8)
------ ------
FINANCING ACTIVITIES:
Increase/(decrease) in short-term debt 50.7 (8.3)
Additions to long-term debt 285.6 47.6
Reductions in long-term debt (309.0) (50.2)
Purchase of common stock (15.9) --
Exercise of stock options/Stock Purchase Plan 3.3 2.6
------ ------
Net cash provided by/(used in) financing
activities 14.7 (8.3)
------ ------
OTHER ACTIVITIES:
Effect of exchange rate changes on cash (1.0) (0.2)
------ ------
Increase in cash 7.1 3.0
Cash at beginning of year 14.8 13.7
------ ------
Cash at end of period $ 21.9 $ 16.7
====== ======
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT SHARE AND PER SHARE DATA)
NOTE 1: GENERAL
The accounting policies followed during interim periods are in conformity with
generally accepted accounting principles and are consistent with those applied
for annual periods as described in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998. Other than Balance Sheet amounts as of
December 31, 1998, all amounts contained herein are unaudited.
Reclassifications:
Certain reclassifications have been made to prior year amounts to conform to the
current year presentation.
NOTE 2: BUSINESS ACQUISITION
On February 2, 1999, the Company acquired the apparel identification business of
Ferguson International PLC ("Ferguson"). The acquisition price was $24.2,
subject to a final price adjustment based upon the net assets of the business
acquired on the transaction date. The acquisition has been accounted for as a
purchase with assets and liabilities assumed recorded at their estimated fair
values at the date of acquisition. The final purchase price allocation is in
the process of being finalized.
NOTE 3: INVENTORIES
The components of inventories are set forth below:
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Raw materials $37.7 $49.3
Work-in-Process 11.9 11.8
Finished goods 42.6 35.9
----- -----
$92.2 $97.0
===== =====
</TABLE>
NOTE 4: DUE TO BANKS
A summary of amounts due to banks is set forth below:
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Bank overdrafts $ 3.0 $ 1.8
Uncommitted Credit Facility (a) 50.0 --
Other foreign 0.1 0.1
----- -----
$53.1 $ 1.9
</TABLE>
(a) On March 12, 1999, the Company entered into an agreement with a bank under
which the bank provides an unsecured, uncommitted facility for the Company to
borrow up to $50 at negotiated interest rates for defined periods. The agreement
requires the Company to have availability under its revolving credit agreement
equal to the amount borrowed under this facility. There was $50 outstanding
under this facility at June 30, 1999, at an interest rate of 5.25%.
6
<PAGE> 7
NOTE 5: LONG TERM DEBT A summary of long-term debt is set forth below:
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
6.74% Senior Notes due 2008 $150.0 $150.0
Unsecured bank credit facility 25.0 45.8
Economic Development Revenue Bonds due 2011 8.0 8.0
Other 1.0 1.4
------ ------
184.0 205.2
Less current maturities 0.4 0.7
------ ------
$183.6 $204.5
====== ======
</TABLE>
NOTE 6: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES A summary of accounts payable
and accrued liabilities is set forth below:
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Accounts payable $34.4 $34.8
Accrued payroll costs 17.9 19.2
Other accrued liabilities 39.7 28.8
----- -----
$92.0 $82.8
===== =====
</TABLE>
NOTE 7: SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest and income
taxes is set forth below:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1999 1998
------- -------
<S> <C> <C>
Interest $ 8.0 $ 8.5
Income Taxes $ 0.4 $ 1.7
</TABLE>
NOTE 8: COMPREHENSIVE INCOME
Statement of Financial Accounting Standards No. 130, effective in 1998, requires
the disclosure of comprehensive income to reflect changes in equity that result
from transactions and economic events from non-owner sources. Comprehensive
income for the periods presented below includes foreign currency translation
items. There was no tax expense or tax benefit associated with the foreign
currency translation items.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1999 1998
------- -------
<S> <C> <C>
Net income $ 12.6 $ 14.5
Foreign currency translation adjustments (6.5) 0.5
------- -------
Comprehensive income $ 6.1 $ 15.0
======= =======
</TABLE>
7
<PAGE> 8
NOTE 9: EARNINGS PER COMMON SHARE
The reconciliation of basic and diluted per-share computation is as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
---------------------------------
1999 1998
-------- --------
<S> <C> <C>
Net income $ 12.6 $ 14.5
======== ========
Average common shares (basic) 47.1 48.5
Options and warrants 0.3 1.3
-------- --------
Adjusted average common shares (diluted) 47.4 49.8
======== ========
Earnings per common share:
Basic $ 0.27 $ 0.30
======== ========
Diluted $ 0.27 $ 0.29
======== ========
</TABLE>
NOTE 10: BUSINESS SEGMENTS
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," was issued effective for fiscal years ending after
December 15, 1998.
The Company has decided to revise its presentation of business segment
information beginning with reports issued for the period ended June 30, 1999.
Effective June 30, 1999, the reporting for the Printing Solutions segment will
be discontinued. This single segment will be replaced by the following two
segments: (1) Identification and Bar Code Solutions; and (2) Thermal Transfer
Ribbons. The Company believes that the disaggregating of the former Printing
Solutions segment into its constituent parts is appropriate because the new
presentation conforms to the Company's current management and reporting
structure.
The Company operates the following business segments: Apparel
Identification, Identification and Bar Code Solutions, Thermal Transfer Ribbons,
and International. The Company evaluates performance based on operating income
of its business segments before corporate expenses, amortization, non-recurring
charges, interest, income taxes and extraordinary items.
The Company's Apparel Identification operations manufacture products for and
provide services specifically to the apparel and textile industries. A
significant portion of the Company's products are delivered to apparel
manufacturers located in Asia and Mexico whose products are sold in the U.S.
Label systems, consisting mainly of hot-stamp printers and related supplies and
services, are sold to Company customers for in-plant label printing. Bar code
systems, consisting of electronic printers and related supplies and services,
are used by customers to print data on labels and tags to provide accurate
product, inventory and point of sale information for integration with
sophisticated data systems. Labels and tags are attached to apparel by
manufacturers and retailers to identify and promote their products, allow
automated data collection and provide brand identification and consumer
information such as country of origin, size, fabric content and care
instructions. Labels are attached to garments early in the manufacturing process
and must withstand all production processes and remain legible through washing
and dry cleaning by the end user. The Company's products also include tags and
labels for sheets, towels, pillow cases and other white goods. The Company's
Apparel Identification operations are primarily located in North America and
Hong Kong.
The Company's Identification and Bar Code Solutions operations market and
distribute (i) electronic bar code printers, which are used in a wide range of
retail and industrial applications, including inventory management and
distribution systems, and (ii) hand-held, mechanical labeling devices that print
pressure-sensitive (i.e., adhesive-backed) price and other identification labels
and affix them onto merchandise for retailers.
8
<PAGE> 9
The Company's Thermal Transfer Ribbons operation is also the largest
manufacturer in North America of thermal transfer ribbons for numerous diverse
applications. These thermal transfer ribbons are used in bar code printers to
print single-color and multi-color tags and labels for use in manufacturing and
factory automation systems, shipping and distribution systems, retail price tag,
packaging and medical applications. In addition to thermal transfer ribbons, the
Company manufactures and markets other supplies used in both its mechanical
labelers and bar code printers and provides comprehensive service to its
installed base of machines.
Service to the Company's customers requires the Company to manufacture its
goods and services globally. For this reason the Company offers the products of
its Apparel Identification, Identification and Bar Code Solutions and Thermal
Transfer Ribbons operations through its International operation. The Company's
International operation either manufactures or offers for sale items
manufactured by the other business segments. Its customers are those in the
apparel industry and the retail supply chain principally in Europe.
The following table shows the financial information of the Company's
business segments. "Corporate" represents amounts not attributable or allocated
to the business segments, including corporate administrative expenses,
amortization, and restructuring and other special charges.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, FOR THE SIX MONTHS ENDED JUNE 30,
----------------------------------- ---------------------------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers:
Apparel Identification $ 61.8 $ 54.9 $ 112.3 $ 107.2
Identification and Bar Code Solutions 39.2 42.8 78.8 83.4
Thermal Transfer Ribbons 20.2 21.7 40.2 41.3
International 46.4 37.5 90.5 74.4
------- ------- ------- -------
Total $ 167.6 $ 156.9 $ 321.8 $ 306.3
======= ======= ======= =======
Inter-segment sales:
Apparel Identification $ 2.1 $ 4.0 $ 4.9 $ 7.0
Identification and Bar Code Solutions 3.2 3.9 6.7 7.4
Thermal Transfer Ribbons 2.7 2.5 6.1 5.2
International 2.1 1.0 2.8 1.3
------- ------- ------- -------
Total $ 10.1 $ 11.4 $ 20.5 $ 20.9
======= ======= ======= =======
Segment operating income:
Apparel Identification $ 12.6 $ 10.0 $ 20.3 $ 17.6
Identification and Bar Code Solutions 6.9 5.0 11.7 9.5
Thermal Transfer Ribbons 3.0 2.5 5.6 4.7
International 3.6 2.9 5.5 5.6
Corporate and other (8.1) (3.3) (16.1) (5.7)
------- ------- ------- -------
Total $ 18.0 $ 17.1 $ 27.0 $ 31.7
======= ======= ======= =======
</TABLE>
NOTE 11: RESTRUCTURING AND OTHER SPECIAL CHARGES
The Company adopted a plan to streamline its U.S. and U.K. businesses. During
the six months ended June 30, 1999, the Company recorded $5.0 of restructuring
and other special charges. Included in the total charge is severance of $3.3 and
$1.1 of costs associated with the consolidation of certain facilities.
Substantially all these costs had been paid as of June 30, 1999. The Apparel
Identification business segment consolidated its woven and printed label
operations, which resulted in the elimination of approximately 20 managerial and
administrative personnel. The Identification and Bar Code business segment
reduced headcount by approximately 65 salaried positions.
9
<PAGE> 10
NOTE 12: ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
At June 30, 1999, the Company had hedge agreements with notional value of $80.
The fair value of those agreements, based on estimates provided by financial
institutions, was $79.4 at June 30, 1999.
Since the notional value of the agreements exceeds the amount of variable rate
debt outstanding, the fair value of the hedge agreements related to the excess
of notional value of the agreements over variable rate debt is reflected in
earnings. Through December 31, 1998 the amount of loss reflected in earnings was
$0.6; there was no earnings effect in the six months June 30, 1999.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Statement 133 is
effective for fiscal years beginning after June 15, 2000.
The Company has not yet quantified the impacts of adopting Statement 133 on the
financial statements and has not determined the timing or method of its adoption
of Statement 133. However, based on current interest rate levels, and
derivative activity the Company believes that the adoption of this statement
would not have a material impact on the Company's results of operations.
10
<PAGE> 11
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ALL AMOUNTS IN THE FOLLOWING DISCUSSION ARE STATED IN MILLIONS, EXCEPT SHARE AND
PER SHARE DATA.
OPERATING RESULTS
The following table shows each element of the income statement as a percent of
sales for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------- -------------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 61.0 62.0 61.6 61.4
------ ------ ------ ------
Gross profit 39.0 38.0 38.4 38.6
Selling, general and administrative expense 26.3 26.3 27.5 27.4
Amortization of intangibles 1.0 0.9 1.0 0.9
Restructuring and other special charges 1.0 -- 1.6 --
------ ------ ------ ------
Operating income 10.7 10.8 8.3 10.3
Interest expense, net 2.3 3.7 2.3 3.2
------ ------ ------ ------
Income before taxes 8.4 7.1 6.0 7.1
Taxes on income 3.0 2.6 2.1 2.4
------ ------ ------ ------
Net income 5.4% 4.5% 3.9% 4.7%
====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED JUNE 30, 1999 COMPARED WITH JUNE 30, 1998
Sales for the three months ended June 30, 1999 increased to $167.6 compared with
$156.9 in the three months ended June 30, 1998. The increase was due primarily
to the acquisition of the apparel identification business of Ferguson
International PLC ("Ferguson"). (See Note 2 of Notes to Consolidated Financial
Statements.) The Company has decided to revise its presentation of business
segment information beginning with reports issued for the period ended June 30,
1999. Effective June 30, 1999, the reporting for the Printing Solutions segment
will be discontinued. This single segment will be replaced by the following two
segments: (1) Identification and Bar Code Solutions; and (2) Thermal Transfer
Ribbons. The Company believes that the disaggregating of the former Printing
Solutions segment into its constituent parts is appropriate because the new
presentation conforms to the Company's current management and reporting
structure. Sales by the Company's Identification and Bar Code Solutions and
Thermal Transfer Ribbon business segments were down slightly for the three
months ended June 30, 1999 compared with June 30, 1998, while sales of the
Apparel Identification business increased by 12% and the International business
segment increased by 24%. (See Note 10 of Notes to Consolidated Financial
Statements.)
Cost of sales for the three months ended June 30, 1999 increased to $102.3
compared with $97.2 for the three months ended June 30, 1998. As a percent of
sales, such costs decreased to 61% for June 30, 1999 compared with 62% for June
30,1998.
Gross profit increased to $65.3 for the three months ended June 30, 1999
compared with $59.7 for the three months ended June 30, 1998. The gross profit
margin was 39% for the three months ended June 30, 1999 compared with 38% for
the three months ended June 30, 1998.
Selling, general and administrative expense ("SG&A") increased to $44.1 for the
three months ended June 30, 1999, compared with $41.4 for the three months ended
June 30, 1998. As a percent of sales, SG&A was 26.3% for both the three month
periods ended June 30, 1999 and June 30, 1998. The increase in SG&A was due
primarily to the acquisition of the apparel identification business of Ferguson
International PLC ("Ferguson"). (See Note 2 of Notes to Consolidated Financial
Statements.)
11
<PAGE> 12
The Company adopted a plan to streamline its U.S. and U.K. businesses. During
the three months ended June 30, 1999, the Company recorded $1.7 of restructuring
and other special charges. Included in the total charge are $0.8 of severance
and $0.9 of costs associated with the consolidation of certain facilities.
Substantially all these costs had been paid as of June 30, 1999.
Operating income increased to $18.0 for the three months ended June 30, 1999
compared with $17.1 for the three months ended June 30, 1998. The operating
margin was 10.8% for the three months ended June 30, 1998 compared with 10.7% in
the three months ended June 30, 1999. Before restructuring and other special
charges, operating income for the three months ended June 30, 1999 was $19.7 or
11.8% of sales.
Interest expense, net, decreased to $3.8 for the three months ended June 30,
1999, from $5.9 for the three months ended June 30, 1998. Interest expense for
the three months ended June 30, 1998, included a $2.2 non-recurring charge
resulting from an unauthorized interest rate speculation. The increase in
interest expense, net of the speculation loss, resulted from increased average
borrowings during the three months in 1999 attributable primarily to the
acquisition of Ferguson and the repurchase of the Company's common stock, as
well as the higher interest rate related to the $150, 6.74% Senior Notes issued
in August, 1998, offset somewhat by lower rates related to variable rate
borrowings in 1999.
Income before taxes increased to $14.2 (8.4% of sales) for the three months
ended June 30, 1999 as compared with $11.2 (7.1% of sales) for the three months
ended June 30, 1998.
The effective income tax rate was 35% for the three months ended June 30, 1999
compared with 36% for the three months ended June 30, 1998.
Net income for the three months ended June 30, 1999 was $9.2 (5.4% of sales)
compared with $7.2 (4.5% of sales) for the three months ended June 30, 1998.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH JUNE 30, 1998
Sales for the six months ended June 30, 1999 increased to $321.8 compared with
$306.3 in the six months ended June 30, 1998. The increase was due primarily to
the acquisition of Ferguson's apparel identification business. (See Note 2 of
Notes to Consolidated Financial Statements.) The Company has decided to revise
it presentation of business segment information beginning with reports issued
for the period ended June 30, 1999. Effective June 30, 1999, the reporting for
the Printing Solutions segment will be discontinued. This single segment will be
replaced by the following two segments: (1) Identification and Bar Code
Solutions; and (2) Thermal Transfer Ribbons. The Company believes that the
disaggregating of the former Printing Solutions segment into its constituent
parts is appropriate because the new presentation conforms to the Company's
current management and reporting structure. Sales by the Company's
Identification and Bar Code Solutions; and Thermal Transfer Ribbons business
segment were down slightly for the six months ended June 30, 1999 compared with
June 30, 1998, while those of the Apparel Identification business segment
increased by 5% and the International business segment increased by 22% . (See
Note 10 of Notes to Consolidated Financial Statements.)
Cost of sales for the six months ended June 30, 1999 increased to $198.3
compared with $188.0 for the six months ended June 30, 1998. As a percent of
sales, such costs increased slightly to 61.6% for June 30, 1999 compared with
61.4 for June 30,1998.
Gross profit increased to $123.5 for the six months ended June 30, 1999 compared
with $118.3 for the six months ended June 30, 1998. The gross profit margin was
38.4 for the six months ended June 30, 1999 compared with 38.6% for the six
months ended June 30, 1998.
12
<PAGE> 13
SG&A increased to $88.5 for the six months ended June 30, 1999, compared with
$84.0 for the six months ended June 30, 1998. As a percent of sales, SG&A was
27.5% for June 30, 1999 compared with 27.4% for June 30, 1998. The increase was
due primarily to the acquisition of Ferguson's apparel identification business.
(See Note 2 of Notes to Consolidated Financial Statements.)
During the six months ended June 30, 1999, the Company recorded $5.0 of
restructuring and other special charges in connection with its plan to
streamline its U.S. and U.K. businesses. Included in the total charge are
severance of $3.3 and $1.1 of costs associated with the consolidation of certain
facilities. Substantially all these costs had been paid as of June 30, 1999. The
Apparel Identification business segment consolidated its woven and printed label
operations, which resulted in the elimination of approximately 20 managerial and
administrative personnel. The Identification and Bar Code Solutions business
segment reduced headcount by approximately 65 salaried positions.
Operating income decreased to $27.0 for the six months ended June 30, 1999
compared with $31.7 for the six months ended June 30, 1998. The operating margin
declined from 10.3% in the six months ended June 30, 1998 to 8.3% in the six
months ended June 30, 1999. Before restructuring and other special charges,
operating income for the six months ended June 30, 1999 was $32.0 or 9.9% of
sales.
Interest expense, net, decreased to $7.5 for the six months ended June 30, 1999,
from $9.8 for the six months ended June 30, 1999. Interest expense for the six
months ended June 30, 1998, included a $2.2 non-recurring charge resulting from
an unauthorized interest rate speculation. The decrease in interest expense, net
of the speculation loss resulted from lower average borrowing and lower rates
related to variable rate borrowings, offset somewhat by the higher interest rate
related to the $150, 6.74% Senior Notes issued in August, 1998. Average
borrowings for the six months in 1999 were lower than average borrowings in
1998, due to the timing of borrowings related to the Ferguson acquisition and
common stock repurchases during 1999.
Income before taxes decreased to $19.5 (6.0% of sales) for the six months ended
June 30, 1999 as compared with $21.9 (7.1% of sales) for the six months ended
June 30, 1998.
The effective income tax rate was 35% for the six months ended June 30, 1999
compared with 34% for the six months ended June 30, 1998. The overall effective
tax rate was impacted by many factors including the expiration of tax incentives
in Italy during 1999.
Net income for the six months ended June 30, 1999 was $12.6 (3.9% of sales)
compared with $14.5 (4.7% of sales) for the six months ended June 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The table below presents summary cash flow information for the periods
indicated:
<TABLE>
<CAPTION> Six Months Ended
-------------------------------
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Net cash provided by operating activities $28.7 $32.3
Net cash used by investing activities (35.3) (20.8)
Net cash provided by /(used in) financing activities 14.7 (8.3)
----- -----
Total change in cash (a) $ 8.1 $ 3.2
===== =====
</TABLE>
(a) Before exchange rate effects.
OPERATING ACTIVITIES
Cash provided by operating activities continues to be the Company's primary
source of funds to finance operating needs and internal growth opportunities.
The net cash provided by operating activities was $28.7 for the six months ended
June 30, 1999, compared with $32.3 for the same period in 1998.
13
<PAGE> 14
Depreciation and amortization was $18.1 for the six months ended June 30, 1999
compared with $16.8 for the six months ended June 30, 1998.
INVESTING ACTIVITIES
During the six months ended June 30, 1999 capital expenditures were $12.5
compared with $16.9 in the 1998 period. All new capital projects are carefully
analyzed and, other than projects for employee safety and environmental
improvement, are required to make a positive contribution on a net present value
basis, generating an advantageous internal rate of return on invested capital.
The Company currently anticipates capital expenditures of approximately $31 for
the year ending December 31, 1999.
On February 2, 1999, the Company acquired Ferguson's apparel identification
business. The acquisition price was $24.2 subject to a final price adjustment
based upon the net assets of the business acquired on the transaction date. The
acquisition has been accounted for as a purchase with assets and liabilities
assumed recorded at their estimated fair values at the date of acquisition.
The Company intends to continue its growth, in part by acquisitions of
complementary or related businesses, and believes that further acquisitions
would be of important strategic value.
FINANCING ACTIVITIES
The table below shows the components of total capital for the periods indicated:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
<S> <C> <C>
Due to banks $ 53.1 $ 1.9
Current maturities of long-term debt 0.4 0.7
Long-term debt 183.6 204.5
------ ------
Total debt $237.1 $207.1
Shareholders' equity 267.1 273.4
------ ------
Total capital $504.2 $480.5
====== ======
Total debt as a percent of total capital 47.0% 43.1%
====== ======
</TABLE>
Total debt increased to $237.1 at June 30, 1999, from $207.1 at December 31,
1998. The increase is primarily attributable to the acquisition of the Ferguson
assets and the repurchase of shares under the Company's stock repurchase plan.
At June 30, 1999, total debt as a percent of total capital was 47.0% compared
with 43.1% at December 31, 1998.
On March 12, 1999, the Company entered into an agreement with a bank under which
the bank provides an unsecured uncommitted facility for the Company to borrow up
to $50 at negotiated interest rates for defined periods. The agreement requires
the Company to maintain availability under its revolving credit agreement equal
to the amount borrowed under this facility. There was $50 outstanding under this
facility at June 30, 1999, at an interest rate of 5.25%.
OTHER MATTERS
STOCK REPURCHASE
On July 30, 1998, the Company announced a plan to purchase, from time to time,
up to $25 of the Company's common stock as conditions warrant. The repurchased
shares will be available for issuance under the employee stock option and
purchase plans and other financing activities. On February 12, 1999, the Company
announced it had increased the stock repurchase plan from the initial $25 to
$40. During the six months ended June 30, 1999, the Company repurchased
1,830,700 shares at an average price of $8.675. Since July 30, 1998, the Company
repurchased 3,265,100 shares at an average price of $8.8613.
14
<PAGE> 15
YEAR 2000
The Company is actively addressing the Year 2000 ("Y2K") compliance issue,
which stems from the inability of certain computer programs and embedded
computer micro-controllers to distinguish between the year 1900 and the year
2000 and recognize the year 2000 as a leap year. Each operating entity within
the Company has designated an individual under the general supervision of the
Company President, to ensure that each unit achieves timely Y2K readiness. The
Company's Audit Committee of the Board of Directors reviews progress quarterly.
STATE OF READINESS. The Company began its internal Y2K assessments and upgrades
in 1997. The Company brought nearly all its information technology ("IT")
systems into compliance during the first half of 1999. The Company will devote
the remainder of 1999 to completing remediation of the few non-compliant
applications and testing the readiness of its systems and those major vendors.
The Company has also assessed non-IT systems in the products it sells and
the products it uses in its own manufacturing processes. Non-IT systems are
those with embedded technology such as micro controllers. Non-IT systems in
products the Company sells are Y2K compliant. Manufacturing equipment used by
the Company that contains embedded systems has also been assessed, and any
required remediation has been performed. All systems will continue to be tested
during the remainder of 1999.
COST TO ADDRESS Y2K ISSUES. The Company continues to resolve its Y2K issues
principally through hardware and software system upgrades and the installation
of new computer systems that are Y2K compliant. These upgrades and new systems
were the result of scheduled purchases that the Company has made in the ordinary
course of business to meet its expanding business needs. These upgrades and new
systems have either been expensed or capitalized, and the impact of such costs
is currently reflected in the Company's operating results. The Company believes
that costs specifically relating to Y2K compliance will be less than $0.5, and
such costs are not deemed material.
RISKS TO THE COMPANY AND CONTINGENCY PLANS. The Company is conducting inquiries
regarding Y2K compliance programs of its key customers and suppliers, including
power and telecommunications utilities. No assurance can be given at this time
that the Company's customers and suppliers will be Y2K compliant. However, the
Company has a contingency plan to qualify alternative vendors, including their
Y2K readiness, for those key vendors who cannot demonstrate Y2K readiness. The
Company is also developing contingency plans relating to its ability to
communicate with its customers. The Company will rely on its existing business
continuity plans as a contingency plan for its internal information processing
systems.
EURO CONVERSION
As part of the European Economic Monetary Union (EMU), a single currency
("Euro") will replace the national currencies of most of the European countries
in which the Company conducts business. The conversion rates between the Euro
and the participating nations' currencies were fixed as of January 1, 1999, with
the participating national currencies scheduled to be removed from circulation
over the next three years. During this transition period, the Euro and the local
currencies will jointly circulate. The Company's European operations are
preparing to be fully Euro compliant by the end of calendar year 1999, well in
advance of the conversion date of January 1, 2002. To the extent that certain
customers request Euro invoices, before the full phase-in of the Company's Euro
compliant systems, these individual requests can be accommodated by the Company
under its existing IT system. The cost to convert the Company's software and
business processes to become Euro compliant is not expected to be material.
15
<PAGE> 16
CAUTIONARY STATEMENT PURSUANT TO "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
Except for historical information, the Company's reports to the Securities and
Exchange Commission on Form 10-K and Form 10-Q and periodic press releases, as
well as other public documents and statements, contain "forward-looking
statements" within the meaning of the federal securities laws. Forward-looking
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those expressed or implied by the statements,
regarding, among others:
- rate of migration of garment manufacturing industry moving from
the United States and Western Europe
- worldwide economic and other business conditions that could
affect demand for the Company's products in the United States or
international markets
- the mix of products sold and the profit margins thereon
- order cancellation or reduced bookings by customers or
distributors
- competitive product offerings and pricing actions
- the availability and pricing of key raw materials
- productivity improvements in manufacturing
- the current economic situation in Asia
- completion dates of Y2K compliance activity
- the ability of the Company to complete the upgrades of its IT
systems
- the ability of suppliers and customers to be Y2K compliant
- the accuracy of Y2K information provided by suppliers and
customers
Readers are cautioned not to place undue reliance on forward-looking statements.
The Company undertakes no obligation to republish or revise forward-looking
statements to reflect events or circumstances after the date hereof or to
reflect the occurrences of unanticipated events.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company experiences market risk relative to interest rates. A 10% change in
interest rates affecting the Company's floating rate debt instruments would have
an insignificant impact on the Company's pretax earnings and cash flows over the
next fiscal year. Such a move in interest rates would have no effect on the fair
value of the Company's floating rate debt instruments. A 10% increase in
interest rates over the life of the interest rate derivatives would cause the
fair value of the derivatives to decrease from a liability of $0.6 to a
liability of $0.3. A 10% decrease would cause the fair value to increase from a
liability of $0.6 to a liability of $0.9.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 7, 1999 the Company held its Annual Meeting of Shareholders to elect five
Directors to serve a two-year term; to amend its Restated Certificate of
Incorporation to permit it to make loans to directors who are also officers as
permitted by Section 714 of the New York Business Corporation Law; and to ratify
the appointment of Arthur Andersen LLP as its independent public accountants for
the year ending December 31, 1999. The nominees for election to the Board of
Directors received the following votes cast:
<TABLE>
<CAPTION>
FOR ELECTION WITHHOLDING AUTHORITY
------------ ---------------------
<S> <C> <C>
Victor Hershaft 42,256,416 538,516
Craig O. Morrison (1) 42,235,471 559,461
Jack Becker 41,815,997 978,935
Leo Benatar 42,265,374 529,558
David E. McKinney 42,260,774 534,158
</TABLE>
(1) Craig O. Morrison resigned as an officer and director of the Company
effective June 4, 1999.
Holders of 29,513,166 shares voted for the amendment of the Company's Restated
Certificate of Incorporation to permit it to make loans to directors who are
also officers as permitted by Section 714 of the New York Business Corporation
Law, 3,432,263 were voted against, and there were 234,806 abstentions.
Holders of 42,640,855 shares voted for the ratification of Arthur Andersen LLP
as the Company's independent public accountants for the year ending December 31,
1999, 109,132 were voted against, and there were 44,944 abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit Index
10.1 Change of Control Employment Agreement
10.2 Uncommitted Credit Facility
10.3 Omitted Exhibit to Uncommitted Credit Facility
10.4 Promissory Note from Registrant to Centric Capital Corporation
27.1 Financial Data Schedule
b) Reports on Form 8-K
None
17
<PAGE> 18
PAXAR CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Paxar Corporation
Registrant
By: /s/ John Fitzgerald
----------------------------------
John Fitzgerald
Vice President and Controller
(Principal Accounting Officer)
August 11, 1999
----------------
Date
18
<PAGE> 1
EXHIBIT 10.1
CHANGE OF CONTROL EMPLOYMENT AGREEMENT
AGREEMENT by and between PAXAR CORPORATION, a New York corporation (the
"Company"), and Jack Plaxe, dated as of the 20th day of April 1999.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined in Section 2 below) of the Company. The Board believes it is imperative
to diminish the inevitable distraction of the Executive by virtue of the
personal uncertainties and risks created by a pending or threatened Change of
Control and to encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits
arrangements upon a Change of Control that ensure that the compensation and
benefits expectations of the Executive will be satisfied and that are
competitive with those of other corporations. Therefore, in order to accomplish
these objectives, the Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) The "Effective Date" means the first date during the
Change of Control Period (as defined in Section 1(b)) on which a Change of
Control occurs. Anything in this Agreement to the contrary notwithstanding, if
(A) a Change of Control occurs, (B) the Executive's employment with the Company
is terminated prior to the date on which the Change of Control occurs, and (C)
such termination of employment (i) was at the request of a third party who has
taken steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of Control, then
for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" means the period commencing
on the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the first anniversary of this Agreement,
and on each anniversary of such date (each such anniversary being referred to
herein as the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless at least 60 days prior to the Renewal Date the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.
19
<PAGE> 2
2. DEFINITION OF CHANGE OF CONTROL. "Change of Control" means:
(a) The acquisition by any individual, entity, or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 30% or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions of stock shall not result in a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the Company, or
(iv) any acquisition by any corporation pursuant to a transaction that complies
with clauses (i), (ii), and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election, by the Company's shareholders was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Consummation of a reorganization, merger, or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock and the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation resulting from
such Business Combination, including, without limitation, a corporation that as
a result of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries (any such
corporation being referred to herein as a "Resulting Corporation"), in
substantially the same proportions as their ownership of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be,
immediately prior to such Business Combination, (ii) no Person (excluding any
employee benefit plan (or related trust) of the Company or a Resulting
Corporation) beneficially owns, directly or indirectly, 30% or more of,
respectively, the outstanding shares of common stock of the Resulting
Corporation or the combined voting power of the then outstanding voting
securities of such Resulting Corporation except to the extent that such
ownership existed prior to the Business Combination, and (iii) at least a
majority of the members of the board of directors of the Resulting Corporation
were members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
20
<PAGE> 3
4. TERMS OF EMPLOYMENT.
(a) POSITION AND DUTIES.
(i) During the Employment Period, (A) the Executive's
position (including status, offices, titles, and reporting requirements),
authority, duties, and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised, and
assigned to the Executive at any time during the 120-day period immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or at any office or location less than 35 miles from such
location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote his full attention and time during normal business
hours to the business and affairs of the Company and its affiliate companies
and, to the extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities.
(b) COMPENSATION.
(i) BASE SALARY. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as used in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling, or under common control with the
Company.
(ii) ANNUAL BONUS. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus in cash at least equal to the Executive's
highest award or awards for any fiscal year under the Company's plan or plans
which provide for the grant of annual cash bonuses or other short-term cash
incentive awards during the last three full fiscal years prior to the Effective
Date (any such award shall be annualized for any fiscal year in the event that
the Executive was not employed by the Company for the whole of such fiscal year)
(the "Annual Bonus"). Each such Annual Bonus plus unpaid but due amounts from
prior awards shall be paid in accordance with the terms of the applicable plan
but in no event later than the last day of the Employment Period.
In the event the Executive has not received
an Annual Bonus during the period of three fiscal years prior to the Effective
Date, the Annual Bonus shall be the maximum amount of the bonus or award the
Executive could earn for the fiscal year during which the Effective Date occurs
under any plan or arrangement in which the Executive participates or is eligible
to participate and assuming: (1) the attainment of any performance goals or
similar criteria applicable to the Executive ("Bonus Criteria") to the extent
necessary for the Executive to qualify to receive the maximum award; and (2) the
Executive's employment by the Company for the full fiscal year.
21
<PAGE> 4
(iii) INCENTIVE, SAVINGS, AND RETIREMENT PLANS.
During the Employment Period, the Executive shall be entitled to participate in
all incentive (including stock option or similar incentive plans), savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but in no event
shall such plans, practices, policies, and programs provide the Executive with
incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies, and programs as in effect at any time during
the 120-day period immediately preceding the Effective Date or if more favorable
to the Executive, those provided generally at any time after the Effective Date
to other peer executives of the Company and its affiliated companies.
(iv) WELFARE BENEFIT PLANS. During the Employment
Period, the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies, and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life, accidental
death, and travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies, and programs
provide the Executive with benefits that are less favorable, in the aggregate,
than the most favorable of such plans, practices, policies, and programs in
effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer executives
of the Company and its affiliated companies.
(v) EXPENSES. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most favorable
policies, practices, and procedures of the Company and its affiliated companies
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(vi) FRINGE BENEFITS. During the Employment Period,
the Executive shall be entitled to fringe benefits, including, without
limitation, if applicable, tax and financial planning services, use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs, and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) OFFICE AND SUPPORT STAFF. During the Employment
Period, the Executive shall be entitled to an office or offices of a size and
with furnishings and other appointments, and to exclusive personal secretarial
and other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as provided generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
(viii) VACATION. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs, and practices of the Company and its
affiliated companies as in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
22
<PAGE> 5
5. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in accordance with
Section 12(b) of this Agreement of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the 30th day after receipt of such notice by the
Executive (the "Disability Effective Date"), provided that, within the 30 days
after such receipt, the Executive shall not have returned to full-time
performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive days as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive's legal representative.
(b) CAUSE. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the Company or
one of its affiliates (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief Executive
Officer of the Company that specifically identifies the manner in which the
Board or Chief Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct that is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or omitted to
be done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) GOOD REASON. The Executive's employment may be terminated
by the Executive for Good Reason. For purposes of this Agreement, "Good Reason"
means the breach by the Company of its obligations under Section 4(a), 4(b) or
11(c) of this Agreement, including, without limitation, any requirement for the
Executive to travel on Company business to a substantially greater extent than
required immediately prior to the Effective Date or any purported termination by
the Company of the Executive's employment otherwise than as expressly permitted
by this Agreement, and the failure of the Company to cure such breach promptly
after notice thereof by the Executive. For purposes of this Section 5(c), any
good faith determination of "Good Reason" made by the Executive shall be
conclusive.
23
<PAGE> 6
(d) NOTICE OF TERMINATION. Any termination by the Company for
Cause, or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated, and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) DATE OF TERMINATION. "Date of Termination" means (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination, and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. OBLIGATIONS OF THE COMPANY UPON TERMINATION.
(a) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY.
If, during the Employment Period, the Company shall terminate the Executive's
employment other than for Cause, death or Disability or the Executive shall
terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the Annual Bonus that the Executive would have received had the
Company achieved 100% of the Bonus Criteria for the current fiscal, and (y) a
fraction, the numerator of which is the number of days in the current fiscal
year through the Date of Termination, and the denominator of which is 365, and
(3) any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon), any awards under any other compensation
or award plan based on the Executive performance or any comparable or successor
plan and any accrued vacation pay, in each case to the extent not theretofore
paid (the sum of the amounts described in clauses (1), (2), and (3) shall be
hereinafter referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1) 2.99 and
(2) the sum of (x) the Executive's Annual Base Salary and (y) the Annual Bonus
that the Executive would have received had the Company achieved 100% of the
Bonus Criteria for the current fiscal year;
(ii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the terms of the
appropriate health insurance plan, practice, policy, or program, the Company
shall continue health insurance benefits to the Executive and/or the Executive's
family at least equal to those that would have been provided to them in
accordance with the health insurance plans, programs, practices, and policies
described in Section 4(b)(iv) of this Agreement if the Executive's employment
had not been terminated or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and its affiliated companies and their families; provided, however, that
if the Executive becomes reemployed with another employer and is eligible to
receive health insurance benefits under another employer provided plan, the
health insurance benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility;
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<PAGE> 7
(iii) the Company shall, at its sole expense as
incurred, provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in his or her sole
discretion;
(iv) all options to purchase the Company's securities
granted to the Executive under any Company employee stock option plan shall
become immediately exercisable, it being understood by the Executive that such
immediate vesting may cause the characterization of such options under the
Internal Revenue Code of 1986, as amended (the "Code"), to be changed from
incentive stock options to non-qualified stock options with attendant tax
consequences; and
(iv) to the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided generally to employees of the Company
upon termination of employment under any plan, program, policy, or practice or
contract or agreement of the Company and its affiliated companies (such other
amounts and benefits shall be hereinafter referred to as the "Other Benefits").
(b) DEATH. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as used
in this Section 6(b) shall include, without limitation, and the Executive's
estate and/or beneficiaries shall be entitled to receive, benefits at least
equal to the most favorable benefits provided by the Company and affiliated
companies to the estates and beneficiaries of peer executives of the Company and
such affiliated companies under such plans, programs, practices, and policies
relating to death benefits, if any, as in effect with respect to other peer
executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
(c) DISABILITY. If the Executive's employment is terminated by
reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum
in cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as used in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the most favorable
of those generally provided by the Company and its affiliated companies to
disabled executives and/or their families in accordance with such plans,
programs, practices, and policies relating to disability, if any, as in effect
generally with respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive and/or the Executive's family, as in effect at any
time thereafter generally with respect to other peer executives of the Company
and its affiliated companies and their families.
(d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's
employment shall be terminated for Cause during the Employment Period or if the
Executive voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, this Agreement shall terminate without
further obligations to the Executive other than the obligation to pay to the
Executive (x) his or her Annual Base Salary through the Date of Termination, (y)
the amount of any compensation previously deferred by the Executive, and (z)
Other Benefits, in each case to the extent theretofore unpaid. In such case, all
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination.
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<PAGE> 8
7. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
practice, policy, or program provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts that are vested benefits or that the Executive
is otherwise entitled to receive under any plan, policy, practice, or program of
or any contract or agreement with the Company or any of its affiliated companies
at or subsequent to the Date of Termination shall be payable in accordance with
such plan, practice, policy, or program or contract or agreement except as
explicitly modified by this Agreement.
8. FULL SETTLEMENT. The Company's payment of the amounts payable under
Section 6 hereof upon termination of the Executive's employment shall be in full
settlement of all claims of any nature whatsoever that the Executive may have
against the Company. The Company's obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense, or other claim,
right, or action that the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and such amounts shall not be reduced
whether or not the Executive obtains other employment. The Company agrees to pay
as incurred, to the full extent permitted by law, all legal fees and expenses
that the Executive may reasonably incur as a result of any contest (regardless
of the outcome thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Code.
9. EXCISE TAX. The Executive and the Company acknowledge that the
payments specified in this Agreement and in any other agreements between the
Executive and the Company may be subject to the tax (the "Excise Tax") imposed
by Section 4999 of the Code (or any similar tax that may hereinafter be imposed)
because of "excess parachute payments," as defined in Section 280G of the Code
and that it is their intention that the Company shall have no obligation to make
any payment to the Executive upon termination of his employment that would
result in the requirement to pay the Excise Tax. The Executive and the Company
agree that the amounts payable pursuant to this Agreement and any such other
agreements shall be reduced by such amount as shall be necessary to avoid the
imposition of the Excise Tax.
10. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge, or data relating to the Company or any of its affiliated companies,
and their respective businesses, that shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and that shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, use or communicate or divulge
any such information, knowledge, or data to anyone other than the Company and
those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
11. SUCCESSORS.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
26
<PAGE> 9
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
herein before defined and any successor to its business and/or assets as
aforesaid.
12. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: Jack Plaxe
10 Victoria Lane
Morristown, NJ 07960
If to the Company: Paxar Corporation
105 Corporate Park Drive
White Plains, NY 10604
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under
this Agreement such federal, state, local, or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c) of this Agreement, shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date and after the
third anniversary of the Effective Date, the Executive's employment and/or this
Agreement may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date and until the
third anniversary of the Effective Date, this Agreement shall supersede any
other agreement between the parties with respect to the subject matter hereof.
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<PAGE> 10
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
PAXAR CORPORATION
By: /s/ Arthur Hershaft
-------------------------
Arthur Hershaft
/s/Jack Plaxe
-------------------------
Jack Plaxe
28
<PAGE> 1
EXHIBIT 10.2
PAXAR CORPORATION MARCH 12, 1999
105 CORPORATE PARK DRIVE
WHITE PLAINS, NY 10604
ATTENTION: MR. JOHN P. JORDAN
Dear Mr. Jordan:
We are pleased to make available to you an uncommitted credit facility
for general corporate purposes on the terms set forth in this letter.
1. We agree to consider from time to time, in our sole discretion, your
requests that we make Advances (as hereinafter defined) to you, on a
discount basis in an aggregate Stated Amount (as hereinafter defined)
not to exceed at any one time outstanding the amount set forth on
Schedule I hereto as the "Facility Amount, " on the terms and
conditions set forth below. This letter is not a commitment to lend but
rather sets forth the procedures to be used in connection with your
requests for our making of Advances to you from time to time on or
prior to the termination hereof pursuant to Paragraph 11 hereof and, in
the event that we make Advances to you hereunder, your obligations to
us with respect thereto. The Advances shall be evidenced by the "grid"
promissory note executed by you in an amount equal to the amount set
forth on Schedule I hereto as the "Facility Amount", such promissory
note to be in substantially the form of the promissory note attached
hereto (the "Note").
2. As used herein, the following terms shall have the following meanings
(terms defined in the singular to have the corresponding meanings when
used in the plural, and vice versa):
"Advance" means any advance that we shall make to you
hereunder pursuant to your request as provided herein. Unless
otherwise required by the context, any reference herein or in
the Note to the amount of an Advance shall be construed to
refer to the Discounted Proceeds thereof actually remitted to
you or to your account as proved herein.
"Discounted Amount" of any Advance means the amount by which
the Stated Amount of such Advance exceeds the Discounted
Proceeds of such Advance.
"Discounted Proceeds" of any Advance means the net proceeds of
such Advance transferred or wired to you or to your account in
accordance with the last sentence of Paragraph 3 hereof.
"Stated Amount" of any Advance means the full stated or face
amount of such Advance, which in all circumstances shall be
equal to the sum of (x) the Discounted Proceeds of such
Advance plus (y) the Discount Amount of such Advance.
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<PAGE> 2
3. The Stated Amount of each Advance shall be equal to the amount set
forth on Schedule I hereto as the "Minimum Stated Amount" or any
integral multiple of $1,000 in excess thereof. Each Advance shall be
made upon (a) your request to us by telephone, telecopy or letter,
given by any of the persons listed on Exhibit A hereto or otherwise
designated by you in writing ("Designated Persons") that you wish to
borrow money on a specified date, in a specific amount and for a
specified term (which shall, in no event, be longer than the number of
days set forth on Schedule I hereto as the "Maximum Term"), and (b) our
mutual agreement as to such date and as to the term, the Discount
Amount and Stated Amount applicable to any such Advance. On the date of
any such Advance, we will make such Advance available to you in same
day funds by directing our administrative agent to transfer or wire the
net proceeds of such Advance to the account designated by you in item
(C) of Schedule I attached hereto or to such other account as may be
designated from time to time by a Designated Person pursuant to written
notice to us.
4. Our agreement and acceptance of this letter, together with your
furnishing us certified copies of resolutions of your board of
directors authorizing Designated Person(s) to execute this letter and
any documents delivered pursuant hereto and to request Advances,
together with specimen signatures of such Designated Persons, shall
constitute a representation and warranty by you that (a) the execution,
delivery and performance of this letter has been duly authorized by all
necessary corporate action and does not contravene any law, or any
contractual or legal restriction, applicable to you and (b) no
authorization or approval or other action by, and no notice to or
filing with, any government authority or regulatory body is required
for such execution, delivery and performance or for the making of any
Advance.
5. Each request by you for an Advance shall constitute a representation
and warranty by you, as of the making of such Advance and giving effect
to the application of the proceeds therefrom, that (a) no payment
default has occurred and is continuing under any agreement or
instrument relating to any of your indebtedness, (b) such Advance when
made will constitute your legal, valid and binding obligation, (c) such
Advance is being incurred, and will be repaid at maturity in its full
Stated Amount, in the ordinary course of your business out of the cash
flow generated in the normal day-to-day conduct and operations of your
business (to include refinancings), and (d) no event has occurred and
no circumstance exists as a result of which the information which you
have provided to us in connection herewith would include an untrue
statement of a material fact or omit to state any material fact or any
fact necessary to make the statements contained therein, in light of
the circumstances under which they were made, not misleading. In no
event shall an Advance be made if any of your representations in
Paragraph 4 hereof or in this Paragraph 5 shall fail to be true and
correct in all respects on the date of such Advance.
6. You shall repay the full Stated Amount of each Advance in accordance
with the terms hereof and of the Note. You shall have no right to
prepay all or any portion of any Advance or the Stated Amount thereof
prior to its stated maturity.
7. You shall make each payment hereunder and under the Notes on or before
12:00 noon (New York City time) on the day when due in lawful money of
the United States of America to our account,*. All computations of
interest shall be made on the basis of a year of 360 days, for the
actual number of days (including the first day but excluding the last
day) elapsed.
8. Whenever any payment to be made hereunder shall be otherwise due on a
Saturday, a Sunday or other day of the year on which banks are required
or authorized to close in New York City, New York, Winston Salem, North
Carolina or Chicago, Illinois (any other day being a "Business Day"),
such payment shall be made on the next succeeding Business Day.
9. You agree that you will not apply the proceeds of any Advance to
purchase or carry margin stock within the meaning of Regulation G
issued by the Board of Governors of the Federal Reserve System.
- ------------
* The Company will furnish this information to the Securities and Exchange
Commission on request.
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<PAGE> 3
10. We shall incur no liability to you in acting upon any telephone,
telecopy, telex or letter request or communication which we believe in
good faith to have been given by a Designated Person or in otherwise
acting in good faith under this letter. Further, all documents required
to be executed in conjunction with Advances under this letter may be
signed by any Designated Person.
11. This letter shall remain in effect until terminated by either you or us
by giving prior written notice of termination hereof to the other party
hereto, but no such termination shall affect your obligations with
respect to the Advances hereunder outstanding at the time of such
termination.
12. All communications hereunder shall be in writing (other than the
communication provided for in the second sentence of Paragraph 15
hereof) and mailed, telecopied or delivered to the address specified on
Schedule I hereto for you and for us, or as to each party, to such
other address as may be designated by such party in a written notice to
the other party. Written communication shall be effective upon receipt
unless such communication is mailed in which case it shall be effective
three Business Days after deposit in first class mail.
13. We may assign to one or more banks or other entities all or any part
of, or may grant participations to one or more banks or other entities
in or to all or any part of, any Advance or Advances hereunder and
under the Note. You may not assign your rights or obligations hereunder
or any interest herein.
14. You agree to pay on demand all costs, expenses including, but not
limited to, legal fees and losses, if any, incurred by us in connection
with the enforcement of this letter or the Note.
15. You agree to furnish us with such financial statements or other
information as we may reasonably request. You shall immediately notify
us of any change in the short term or long term ratings assigned by any
statistical rating organization to any of your outstanding
indebtedness.
16. If any of the following events shall occur and be continuing:
(a) you shall fail to pay any amount due hereunder or under the Note
when the same becomes due and payable; or
(b) any representation or warranty made by you (or any of your
officers) in connection with any Advance or otherwise in connection
with the Note shall prove to have been incorrect in any material
respect when made; or
(c) you shall, without our prior written consent, merge or consolidate
with or into, or convey, transfer, lease or dispose of (whether in one
transaction or in a series of transactions) all or substantially all of
your assets to, any person or entity; or
(d) you shall fail to perform or observe any other material term,
covenant or agreement in connection with any Advance or otherwise in
connection with the Note on your part to be performed or observed; or
(e) you shall fail to pay any principal of or premium or interest on
any indebtedness, which we deem to be material (excluding indebtedness
evidenced by the Note), when the same becomes due and payable (whether
by scheduled maturity, required prepayments, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to
such indebtedness; or any other event shall occur or condition shall
exist under any agreement or instrument relating to such indebtedness
and shall continue after the applicable grace period, if any, specified
in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the
maturity of such indebtedness; or any such indebtedness shall be
declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated
maturity thereof; or
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<PAGE> 4
(f) you shall generally not pay your debts as such debts become due, or
shall admit in writing your inability to pay your debts generally, or
shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against you seeking to adjudicate
you as bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or
composition of you or your debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for you or any substantial part of
your property; or you shall take any corporate action to authorize any
of the actions set forth above in this subparagraph (f);
then, and in any such event, we may declare the Note and all amounts
payable thereunder to be forthwith due and payable, whereupon the Note
and all such amounts shall become and be forthwith due and payable,
without presentment, demand, protest or further notice of any kind all
of which you hereby expressly waive; provided however, that in the
event of an actual or deemed entry of an order for relief with respect
to you under the Federal Bankruptcy Code, the Note and all such other
amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which
are hereby expressly waived by you.
17. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
18. You agree that you will not institute against or join any other
person in instituting against us any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding, or other proceeding
under any federal or state bankruptcy or similar law, for one year and
a day after the latest maturing commercial paper note issued by us is
paid in full.
19. At our option, we may, upon notice that either Standard & Poor's
Ratings Services, a division of The McGraw-Hill Companies, Inc., or
Moody's Investors Service, Inc. has (i) lowered or downgraded its short
term commercial paper or corporate bond or other short term ratings of
you, or (ii) placed your securities on a watch list of securities
singled out for surveillance, with either negative or developing
implications in a Rating Category, amend Schedule I hereof to provide
for an amended "Facility Amount" and amended "Maximum Term."
20. As long as you shall have any Advances outstanding, you agree that
you will maintain a separate line of credit with a commercial bank, in
an unutilized aggregate amount equal to the aggregate Stated Amount of
all such outstanding Advances.
21. The obligations under this Agreement are solely our corporate
obligations. No recourse shall be had for the payment of any amount
owing by us hereunder or any other obligation or claim of or against us
arising out of or based upon this Agreement against any of our
stockholders, employees, officers, directors or incorporators.
22. You irrevocably agree that any legal action, suit or proceeding
against us arising out of this Agreement may be brought in the United
States District Court for the Southern District of New York, or in the
courts of the State of New York and hereby irrevocably accept and
submit to the non-exclusive jurisdiction of each of the aforesaid
courts in personam, generally and unconditionally with respect to any
action, suit or proceeding for you and in respect of your properties,
assets and revenues. You further irrevocably agree to the service of
any legal process, summons, notices and documents out of any of the
aforesaid courts by mailing copies thereof by registered or certified
air mail, postage prepaid, to you at your address designated pursuant
to this Agreement. Nothing herein shall in any way be deemed to limit
our ability to serve any such legal process, summons, notices and
documents in any other manner, as may be permitted by applicable law or
to obtain jurisdiction over you, or bring action, suits or proceedings
against you in such other jurisdictions, and in such manner, as may be
permitted by applicable law.
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<PAGE> 5
If the terms of this letter are satisfactory to you, please indicate your
agreement and acceptance thereof by signing a counterpart of this letter and
returning it to us.
Very truly yours,
CENTRIC CAPITAL CORPORATION
By: /s/ John C. Coffin, SVP
-----------------------------------
3/12/99
Wachovia Bank, N.A.
Referral Bank for Centric Capital
Corporation
Agreed and Accepted:
Paxar Corporation
By: /s/ Daniel S. Bishop V.P. and
----------------------------------------------
/s/ John Jordan, Vice President & Treasurer
----------------------------------------------
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<PAGE> 6
SCHEDULE I
to
Loan Agreement dated as of March 12, 1999
between Centric Capital Corporation and Paxar Corporation
(A) For the purposes of Paragraphs 1 and 3 of this Loan Agreement:
The "Facility Amount" is $50,000,000
The "Minimum Stated Amount" is $5,000,000
The "Maximum Term" is 180 days.
(B) For the purpose of Paragraph 12 of this Loan Agreement:
The address for written communications to you is:
Attention:
Telephone:
Fax Number:
The address for written communications to us is:
Centric Capital Corporation
c/o Wachovia Bank, N.A.
191 Peachtree Street, NE
Atlanta, GA 30303
Attention: John Dillon
Mail Code: NC-37031
Telephone: (336) 732-2690
Fax Number: (336) 732-5021
(C) For purposes of this Loan Agreement, instructions for wire transfer of funds
to you are:
*
-------------
* The Company will furnish this information to the Securities and
Exchange Commission upon request.
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<PAGE> 1
EXHIBIT 10.3
OMITTED EXHIBIT TO THE UNCOMMITTED CREDIT FACILITY
The Company will furnish to the Securities and Exchange Commission a copy of
Exhibit A to the Uncommitted Credit Facility upon request.
35
<PAGE> 1
EXHIBIT 10.4
PROMISSORY NOTE
DATE: MARCH 12, 1999 $ 50,000,000
FOR VALUE RECEIVED, the undersigned (hereinafter called the "Borrower"), HEREBY
PROMISES TO PAY to the order of Centric Capital Corporation (hereinafter called
the "Lender") the entire Stated Amount (as such term is defined in the Loan
Agreement hereinafter referred to) of each Advance (as defined below) on the
date mutually agreed to by the Lender and the Borrower at the time of such
Advance as the maturity date thereof. Any overdue amount hereunder and any
overdue amount of fees or other amounts payable under the Loan Agreement
referred to below shall bear interest, payable on demand, at a fluctuating
interest rate per annum equal to the Prime Rate plus 2%. As used herein, "Prime
Rate" shall mean the prime rate of U.S. money center commercial banks as
published in the Wall Street Journal. Changes in the Prime Rate shall be
effective as of the day of each such change.
The Borrower shall have no right to prepay all or any portion of any
Advance or the Stated Amount thereof.
The Borrower shall make each payment of principal and interest
hereunder prior to 12:00 noon (New York City time) on the day when due in lawful
money of the United States of America to the Lender's account, *. Whenever any
payment to be made hereunder shall be otherwise due on a day other than a
Business Day (as defined in the Loan Agreement) such payment shall be made on
the next succeeding Business Day, and such extension of time shall in such case
be included in the computation of payment of interest.
The Borrower hereby authorizes the Lender to endorse on the grid
attached hereto the date and Stated Amount of each Advance made by the Lender to
the Borrower hereunder, the maturity date thereof, the rate of discount
applicable thereto, the Discounted Proceeds and the Discount Amount (as such
terms are defined in the Loan Agreement referred to below) thereof, and all
payments made on account thereof, provided that the failure to do so shall not
affect the obligation of the Borrower to the Lender.
The Borrower also agrees to pay on demand all costs and expenses
(including fees and expenses of counsel) incurred by the Lender in enforcing
this Promissory Note.
THIS PROMISSORY NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF GEORGIA.
This Promissory Note is the "grid" promissory note referred to in, and
is entitled to the benefits of, the Loan Agreement dated March 12, 1999 (the
"Loan Agreement" ), between the Borrower and the Lender, which Loan Agreement,
among other things, sets forth procedures to be used in connection with the
Borrower's periodic requests that the Lender make advances on a discounted basis
(the "Advances") to the Borrower from time to time in an aggregate Stated Amount
not to exceed at any time outstanding the amount first above mentioned.
IN WITNESS WHEREOF, the Borrower has signed this Note by its
undersigned officer duly authorized to do so, the day and year first above
written.
PAXAR CORPORATION
By:/s/ Daniel S. Bishop V.P.
----------------------------------------------
and
/s/ John P. Jordan, Vice President & Treasurer
----------------------------------------------
- ------------
* The Company will furnish this information to the Securities and Exchange
Commission on request.
36
<PAGE> 2
GRID
<TABLE>
<CAPTION>
Date of Stated Maturity of Rate of Discounted Discounted Date Payment
Advance Amount Advance Discount Proceeds Amount Received
======================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 21,900
<SECURITIES> 0
<RECEIVABLES> 116,200
<ALLOWANCES> 0
<INVENTORY> 92,200
<CURRENT-ASSETS> 251,000
<PP&E> 338,900
<DEPRECIATION> 136,800
<TOTAL-ASSETS> 626,200
<CURRENT-LIABILITIES> 150,600
<BONDS> 0
0
0
<COMMON> 5,000
<OTHER-SE> 262,100
<TOTAL-LIABILITY-AND-EQUITY> 626,200
<SALES> 321,800
<TOTAL-REVENUES> 321,800
<CGS> 198,300
<TOTAL-COSTS> 198,300
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,500
<INCOME-PRETAX> 19,500
<INCOME-TAX> 6,900
<INCOME-CONTINUING> 12,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,600
<EPS-BASIC> 0
<EPS-DILUTED> 0.27
</TABLE>
